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Tax exemption off table in baseball negotiations

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Fredericksburg Mayor Mary Katherine Greenlaw said this week’s initial meeting with representatives of the group seeking to build a stadium complex in the city was “productive” and one issue has been resolved.

During Wednesday’s negotiations, the group’s request for a real estate tax exemption was taken off the bargaining table, Greenlaw said.

“We had a productive meeting and some ideas are being pursued that will come back to the council,” the mayor said.

Greenlaw and City Manager Bev Cameron are leading the latest round of negotiations with representatives of Diamond Nation and the Hagerstown Suns.

The Suns, a Class A affiliate of the Washington Nationals, seek to relocate to Fredericksburg from Maryland, hopefully in time for the opening of the 2016 season.

The team’s owners are partnering with Diamond Nation, which operates an amateur baseball and softball complex in Flemington, N.J., that hosts training and tournaments much of the year.

The plan for Fredericksburg is twofold: to build a 4,750-fixed-seat stadium that would host the Suns’ home games and other events, and a complex with five artificial turf fields for the Diamond Nation operation.

Diamond Nation’s part of the project is seen by the city as the greater revenue-generator since it would operate about nine months of the year and bring in athletes and their families from outside the Fredericksburg region.

Jack Cust, managing partner of Diamond Nation, told the City Council on Tuesday that athletes from 42 states visit the New Jersey facility, which brings in an average of 500,000 people per year—including the players and family members.

Cust estimated the Fredericksburg site could see 900,000 visitors per year at both the stadium and the training complex.

He estimated those new visitors would bring $51 million in additional spending to the area annually.

Fredericksburg’s City Council supports the idea of being home to a Minor League Baseball team and sees Diamond Nation as a business that could generate economic benefits through its site in Celebrate Virginia South and to Central Park and other surrounding retail areas.

The issue is how much the city is willing to invest to make the project a reality.

Last September, the council unanimously agreed to a 20-year deal with a myriad of tax incentives worth roughly $1.4 million per year, plus $8 million to buy land and then build an 1,800-space parking lot to serve the complex.

But at the council’s Aug. 12 meeting, Cameron announced that the team needed help covering a cost overrun of up to $18 million in order to move forward with the deal.

The debt service on an $18 million bond would be roughly equal to the $1.8 million in annual revenue an economist hired by the partners expects to be generated at the site.

The initial estimate on the construction cost for the complex was about $35 million, which the partners would finance. However, construction bids raised the price tag to as high as $63 million, not including the city’s $8 million contribution.

In an Aug. 21 letter to Cameron, Cust said the partners wanted permanent tax-exempt status on the site in addition to the $18 million, but would give the city 3 percent of gross revenues from the project for the first 10 years of operation and 1.5 percent thereafter.

While Greenlaw said the tax exemption was no longer part of the proposed deal, she did not provide additional details about the negotiations.

Cust, his son Jack Cust III and Diamond Nation President Keith Dilgard attended Tuesday’s council work session and meeting, at which the baseball project was the primary topic.

The council expects a report on a newly negotiated deal at its next meeting on Sept. 9.

The goal is also to have the city’s bond counsel and financial advisor review the partners’ business plan and financial standing by then so the council better understands the risks.

Mayor Greenlaw said the negotiating group is now working on a schedule for the next steps in the process.

Attempts to reach a representative of the partners were unsuccessful on Wednesday and Thursday.

Pamela Gould: 540/735-1972