Fredericksburg, Va. officials on fast track to enticing Hagerstown Suns to move south

August 25, 2013|By C.J. LOVELACE |
  • Hagerstown's Municipal Stadium as seen from the first base side.
File photo

The movement has been swift.

Without the need to negotiate a lease or seek additional private funding sources, officials in Fredericksburg, Va., have been on the fast track in recent weeks. They have laid out a package of incentives to the Hagerstown Suns and the organization’s private partners to attract the team south.

“Our hope is to be way out in front ahead of the Hagerstown council offer, and I think we have achieved that,” Fredericksburg City Councilman Fred Howe said Friday. “We have a unique opportunity for the team and Diamond Nation.”

Fredericksburg officials on Thursday unveiled a concept proposal crafted by a team of city negotiators, detailing a performance-based incentive package that could be worth $22 million or more over 20 years to the Suns and its private partners, which includes New Jersey-based Diamond Nation.

The seven-member Fredericksburg City Council is set to finalize details of the proposed incentive plan Tuesday night during a work session. The council could vote to approve it during its regular session later that evening, sending it back to Suns ownership for final approval, Howe said.

“We’ve got some rough edges yet,” Howe said, calling the proposal a “cutting-edge deal” for a minor-league baseball stadium through the public-private partnership model.

While the stadium complex would be built with upfront private money under the current proposal, much of the initial investment would be offset by public funding and tax breaks over the following 20 years.

Suns majority owner Bruce Quinn announced the team’s partnership with Diamond Nation on Aug. 13, and proposed a $29 million sports complex, including a 5,000-seat stadium for the Suns, that would be privately financed and built in Fredericksburg’s Celebrate Virginia South development.

The private partnership would own the sports complex.

The city’s incentive package would provide “back-end” reimbursement depending on performance, Fredericksburg City Manager Beverly Cameron said, meaning “after selling tickets, hot dogs and beer.”

Minimizing the city’s upfront contribution, the incentive package is a custom proposal that the city only entertains for businesses geared toward tourism or technology, Cameron said.

The roughly 45-acre sports complex, which also would include a half-dozen artificial turf fields for amateur softball and baseball, is expected to draw more than 230,000 player visits as well as lead to the booking of 25,000 local hotel rooms annually on top of minor-league baseball fan traffic, according to estimates.

Estimates for the incentive package are based on anticipated paid attendance of 4,100 to 4,600 people per Suns game in a stabilized year, meaning after the initial “honeymoon period” wears off.

In addition to the estimated $22 million worth of incentives, Fredericksburg would spend about $7 million to purchase about 10 acres of land and construct a 1,800-space parking lot adjacent to the facility. The lot would be owned by the city, but the revenue generated by it would be split 50/50, resulting in about $150,000 each for both parties, according to city officials. The team ownership would be expected to maintain the parking lot.

What are the incentives?

Fredericksburg officials heard a resounding “no” from taxpayers when the Suns presented an initial proposal to move to the city, specifically in requesting a publicly financed facility costing about $33 million.

The city’s negotiating team, consisting of Cameron, Howe and Vice Mayor Brad Ellis, since has developed an alternative plan with team officials, who brought along significant private financing with Diamond Nation and other investors.

“This is a fundamental change,” Howe said. “In this particular case, we have struck the proper balance between a private and publicly funded project.”

According to the proposed package of economic-development incentives, released by the city Thursday, the team, Diamond Nation and other investors would provide a capital investment of $29 million to build, own and operate the sports complex.

To “incentivize” the group’s investment, the city plans to finance the $7 million for the parking lot, and fund incentives estimated to reach the $22-million range by the 20-year mark.

Under a 20-year tourism zone incentive, the group would receive all money generated by local taxes on meals, admissions and business licenses at the facility, as well as an annual city-provided grant equal to a 3.5-percent sales tax “clawback” authorized by Virginia state law, according to the proposed package.

Those two incentives alone would provide an estimated $685,000 per year, amounting to an estimated $13.7 million over two decades.

The city also would create a “tax increment finance district” for the property on which the complex is built, which would contribute 100 percent of real-estate taxes collected on the property for 20 years back by way of a grant — estimated at about $6 million total.

Additionally, the city would raise a citywide admissions tax from 6 percent to 7 percent, providing about $37,500 per year, or $750,000 over the course of 20 years. The city justifies this action due to the fact that the minor-league baseball facility would be one of the largest producers of tax revenue for the city over the long term, according to officials.

The city also would waive all building permit, site development and water and sewer hookup fees for the project, a value of about $410,000, as well as reimburse the group for all expenses incurred for police and EMS services for Suns home games, up to $75,000 annually, which would equate to another $1.5 million.

A 10-year performance grant for a portion of meals and lodging taxes generated citywide from the project remains under negotiation, officials said. Under that incentive, the city would grant a yet-to-be determined percentage of meals and lodging taxes generated — after adjustment for inflation — back to the group.

Facing a budget shortfall of about $4 million in 2016, the allure for Fredericksburg in this approach is the added tourism traffic that the new facility is expected to generate, as well as ancillary development around the complex in Celebrate Virginia, officials said.

“The city is in bad need of revenue,” Howe said. “We need the team. The team needs us, so we struck the proper balance” to benefit both parties.

“We need revenue,” he said. “The team brings that in large part.”

Heading for home?

Howe said he feels 85 percent confident that a majority of the Fredericksburg City Council will endorse the proposed incentive plan Tuesday.

“Nothing’s a given ... because I’m only one vote,” he said. “... I need three other council folks of seven to agree to do this.”

The “real deal swing” for the city came in the form of the private investment garnered by Quinn’s partnership with Jack Cust of Diamond Nation, Howe said.

“That significantly changed the ballfield, literally — what the concept plan was and what it’s impact is to this deal,” he said. “It’s a very exciting opportunity.”

Some differences in Hagerstown are clear: There’s never been private investment of that magnitude ever proposed, aside from a possible anonymous $15-million donor whose donation never materialized.

Also, while Quinn and his partners would own the stadium in Fredericksburg, Hagerstown discussions always centered on a city-owned stadium that would be leased to the Suns.

The Hagerstown City Council reached a majority consensus last week that the downtown site near the corner of West Baltimore Street and Summit Avenue is the chosen place to build a stadium and a parking deck, estimated to cost around $36 million.

But it still is unknown how the city would pay for a stadium that would require purchasing multiple existing properties, including a portion of The Herald-Mail Co. parking lot.

Funding models previously proposed included about one-third of the cost each coming from local sources, meaning the city and Washington County, along with contributions from the state and private-sector sources.

Washington County leaders last year gave an initial nod to a formula where the commissioners would absorb the city’s $400,000-per-year payment to the county 911 center, freeing up the city to contribute $800,000 annually for 20 years toward the debt service of a stadium.

Commissioner William B. McKinley said Friday the county likely would consider renewing its pledge if the city comes forth with a plan that shows favorable return on investment as well as redevelopment opportunities for the city.

However, as Councilman Lewis C. Metzner points out, the $16 million freed up using that formula only would equate to about $12 million over two decades available on debt service due to interest accrued on the borrowed money.

Coupled with $10 million from the state, which is not guaranteed, that only would make up $22 million of the $36-million price tag for a multiuse ballpark and an adjacent parking deck.

“It certainly appears we’re eight figures short on the funding model, which is, by the way, where we were a year ago,” Metzner said.

Months ago, Quinn publicly pledged $3 million up front to a project in Hagerstown, plus annual lease payments of $100,000 for 30 years to play in a new stadium, regardless of where it’s built.

Again, factoring interest rates and future inflation over two decades, that $6 million investment from the team would be lessened, Metzner said, leaving a hole of about $10 million that the city still needs to fill.

The team has rejected the current East Memorial Boulevard site of Municipal Stadium, mainly due to flooding concerns and overall site limitations.

‘Here you go, public’

With the upfront infusion of private capital and without needing to negotiate a lease, Fredericksburg has moved quickly in its attempt to lure the Suns.

Meanwhile, Hagerstown has been almost paralyzed in trying to navigate mountains of complicated lease terms and deal with the uncertainty of funding sources outside of city bond financing.

Throughout the process, Councilman Kristin B. Aleshire has spoken several times about wanting to see more transparency, saying it would help wipe away the public’s negative perception of the stadium being a back-door deal.

“It makes me so mad because Fredericksburg’s down there doing everything like, ‘Here you go, public.’ ... ‘Here are the numbers,’” Aleshire said Friday. “Us, we’re like, ‘Don’t tell anybody anything.’”

It’s been nearly a year since the city has put any concrete facts or figures out to the public about its negotiations with Quinn.

Mayor David S. Gysberts and Quinn both have said stadium talks have been ongoing, but few other details have been made public by either.

With the downtown site again at the forefront of stadium talks, Gysberts said at the five-member council’s Aug. 20 meeting that he hopes to meet with Quinn in closed session Sept. 6 to continue negotiations.

A new team?

Although Hagerstown officials haven’t abandoned getting a deal done in light of the momentum in Fredericksburg, Metzner said they would be “foolish” if they didn’t start searching for a new team.

Metzner said that the city now is in the position that if the Suns sign a deal to head to Fredericksburg, Hagerstown would need to immediately seek requests for proposals from independent league clubs to gauge the interest of playing at Municipal Stadium.

One solution — which has been the position of Councilwoman Penny Nigh and many city residents throughout the process — would be to renovate Municipal Stadium for an independent team that is not governed by Major League Baseball, Metzner said.

“I know there are plenty of independent league teams that would play in a facility that’s housed minor league baseball” for decades, he said, adding the city would be able to execute a 90-day termination clause in the current lease with the Suns that expires at the end of the 2014 season.

“I think it’s pretty clear the Suns have been looking for a new place for a long time, and if they’ve found one, then I’d assume they would be playing in Fredericksburg,” Metzner said.

It’s become clear that Quinn no longer seriously considers Hagerstown a long-term option for the club, Metzner said, noting the team could have gone before the Washington County Commissioners to propose a complex similar to what the team is proposing in Fredericksburg on rural land near the interstates here.

“I think that’s a very obvious sign of what their desires are,” he said. “They’re business people. I’m not criticizing them.”

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