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Among the many complications of the deal to build a new D.C. United soccer stadium, one has received virtually no notice. It involves a parcel of land far from Buzzard Point, where the stadium is set to be constructed, on a site currently occupied by, of all things, a farm.
Until recently, the District planned to redevelop the Farm at Walker Jones, an urban garden on city-owned land at First and K streets NW, into a mix of residences and retail. But with the stadium deal came a change in plans: As part of the complex web of land swaps that comprised the deal, the farm site would be traded to Pepco for land the utility owns near the stadium, to become a substation.
That’s an unpleasant enough transition for a space currently occupied by squash, greens, and beehives. But it’s all the more problematic in the context of what the site was previously slated to become.
The First and K parcel is part of Northwest One, one of four projects that comprise New Communities, the city’s ambitious affordable-housing redevelopment initiative. Under the Northwest One development plan, the site was to become 232 apartments and townhouses, including 82 deeply subsidized units for low-income residents. Ground-floor retail there would anchor a new K Street “main street” connecting nearby Mount Vernon Triangle and NoMA, with “neighborhood retail services such as restaurants, dry cleaners, bookstores and drugstores.”
Now, instead of residences and shops, the neighborhood will get a street-deadening electrical facility. And New Communities, which has already suffered from major delays, will lose a chunk of land that should have been among the more promising components of the troubled Northwest One project.
This is just one wrinkle among many that have arisen out of the stadium plan, one whose lack of public attention shows just how complicated and little-understood the overall stadium deal is. The terms “New Communities” and “Northwest One” don’t appear in the 406-page report commissioned by the D.C. Council and released last week that addresses the pros and cons of the D.C. United arrangement.
But items that do appear in the report and in the discussion surrounding it have raised plenty of concern on their own. Chief among them: the report’s contention that the city is overpaying for the land it’s acquiring and receiving less than it should for the land it’s trading—to the tune of a $25 million deficit—and the assertion by the office of the D.C. chief financial officer that the tax breaks the city’s offering to D.C. United are unnecessary.
There’s something for everyone in the report, produced by Conventions, Sports and Leisure International, Integra Realty Resources, and the Robert Bobb Group. Stadium-plan backers point to the report’s finding that the plan will bring $109 million in net financial benefits to the city. Critics seize on the $25 million figure to argue that the city’s getting a bad deal.
There’s room for both to be right. Buzzard Point is an industrial wasteland, and the construction and facilities that the stadium would bring, directly and indirectly, would surely help the city economically and the neighborhood developmentally. But that doesn’t imply that any deal to create the stadium is a good one, regardless of its use of taxpayer dollars.
The trouble is that, as the administration presents it, the stadium plan is a fait accompli, leaving the hamstrung Council with just two options—accept it as is or reject it outright—when some members are hoping for a middle road that allows the deal to be improved.
At a Council hearing last week on the plan, Chairman Phil Mendelson told City Administrator Allen Lew, who negotiated the deal on the city’s behalf, that he was “offended” to hear Lew dismiss the report’s contention that the city was overpaying. Mayor Vince Gray has urged the Council to approve the deal by year’s end, before he cedes the mayoralty to Muriel Bowser, who reiterated last week that she’s “troubled” by the proposed land swaps. Mendelson was frustrated by Lew’s implication that the deal was good enough to merit swift approval without amendment.
“I think it’s thumbing the nose at the legislative branch,” he told Lew.
There are three areas where the deal is coming under some stress from the Council. The first, and biggest, is the land swaps. Lew disputes the methodology the report’s authors used to come up with the $25 million figure, and while he concedes that the city is overpaying for a couple of parcels, he says that’s well worth it to complete the swaps and avoid the lengthy and costly process of taking the land by eminent domain. But it’s not clear to members of the Council or the public what the various components of the mega-deal—the stadium site, the Frank D. Reeves Municipal Center at 14th and U streets NW, the planned new D.C. government building in Anacostia, and the farm/substation site at First and K—have to do with one another, or why they couldn’t be more profitably (for the city, that is) decoupled and tackled separately. City officials’ arcane explanations of budget structures and debt caps have done little to persuade.
Second, there are the tax abatements the city will give D.C. United as part of the deal, which will grant the team a five-year reprieve on sales and property taxes and a gradual phase-in thereafter. The CFO’s office has determined that the tax breaks, expected to cost the city $75 million over the next 32 years, aren’t necessary for the team’s viability at the new stadium. The team has pointed to its recent annual losses to argue that it’ll struggle to secure financing for the stadium, the most expensive in Major League Soccer, without the abatements. But given that other teams have built stadiums while incurring losses, and that United’s value doubled between 2007 and 2012, while its co-owner recently led a group of investors in buying a majority share of the Italian club Inter Milan for more than $300 million, the CFO’s office determined that the team would have no trouble obtaining financing without city assistance—or at least that a few million dollars in annual taxpayer-funded subsidies wouldn’t make a meaningful difference.
Finally, there’s the question of where the city will find the money to cover its part of the stadium contribution. According to the CFO’s office, the plan will cost D.C. $75.6 million in the current fiscal year in capital and operating costs. Yet the budget for the fiscal year sets aside no such funds. Lew conceded at last week’s hearing that the city has yet to determine where it’ll come up with the money.
“A Christmas tree?” Mendelson suggests when asked where the $75.6 million might come from. “We have an $11 billion budget. Maybe if we bought $11 billion of lottery tickets we could do it that way.”
More realistically, it’ll have to come out of other programs—unless there’s a major budget windfall, in which case, some advocates argue, there are better ways to spend it than on a poorly structured stadium deal.
“There are a lot of competing priorities in the District and a lot of high needs,” says Wes Rivers, who has analyzed the deal for the progressive D.C. Fiscal Policy Institute, which has been critical of the stadium plan. “And given that we’re having trouble housing homeless families, that puts it in perspective. $75 million could do a lot.”
Officials with D.C. United and Akridge, the developer that would take over the Reeves Center in exchange for a Buzzard Point parcel, say it’s too late to alter the deal substantially.
“We’ve been working on a new stadium for a decade now, so the notion of pushing it back another six months—for us, we’ve been saying since the stadium deal was delivered to the councilmembers that it’s critical that we get the vote this year,” says Tom Hunt, the team’s chief operating officer. “We think this study absolutely validates this deal. As a businessperson, how do you look at the notion of $110 million and say it’s not a good deal?”
Akridge President Matt Klein says the deal has been “inspected and appraised and reviewed and consulted upon at great length,” and been shown to be fair. He argues that his company has already proven responsive to community concerns, agreeing to include offices and public space in the Reeves Center replacement to promote daytime and neighborhood use.
“The Council has to decide whether this is the deal that they want,” Klein says. “If they decide this is not the deal they want, it has to get deconstructed and put back together again. That’s a two-year process. I don’t know how you do that and keep D.C. United confident this is going to get done.”
This is the threat that’s been held over the Council’s head: If it doesn’t accede to an imperfect deal, and quickly, then it’ll all fall apart and the team will leave the District. But Mendelson, who says the deal “has got a lot of problems,” may not play ball.
“I subscribe to the theory that life is a negotiation,” Mendelson says. “And similarly, a legislative proposal is a negotiation as well. Often the city does not negotiate from the position of strength that it holds. The reality is that there’s no soccer stadium if the city doesn’t agree. We can choose to be afraid that the team will walk, but it’s unlikely they’ll walk if we still offer a substantial contribution.”
Photo by Darrow Montgomery