16 March 2005

The DC Deal and how it affects Oakland

In a previous post I mentioned how I thought the Washington Nationals new ballpark deal would provide an example for how a ballpark would be built in the new, post-boom era. The combination of community redevelopment and ballpark are being pitched by the proponents, and it is no coincidence that the public financing deal was put together by former Oakland City Manager (and A's stadium proponent) Robert Bobb.

DC's CFO, Natwar Gandhi, just completed his review of 8 alternative "private" funding proposals. Of the 8, only 2 were approved by Gandhi. One involves a large loan from Deutsche Bank in exchange for some portion of ballpark-related revenues, and the other creates revenues to fund the project from the creation of a parking district around the ballpark. At first I didn't think the latter option would be feasible in Oakland, but the more I think about it, it's more of a possibility. In short, it's a way of diverting funds as parking revenue would pay off the stadium instead of going to the team. Whether that becomes a popular proposal is another story.

Washington Post columnist Steven Pearlstein went on to analyze Gandhi's analysis, posing a question that these days does not have a clear-cut answer: What defines "public" and "private" funding? Pearlstein also just finished a web Q&A session which illuminates among other things, his own opinion (ambivalent? balanced? He does support it, warts and all) on the DC ballpark. I got there in time to pose a question:

San Jose, Calif.: What happens if there are cost overruns in the ballpark construction phase? Are there agreements (guarantees) in place that would shelter the DC taxpayer?

Steven Pearlstein: No, that is one of the big risks that council members were hoping to mitigate. Some of the developer proposals would have done that, but, as I say, at too high a cost. Remember,the question isn't whether you want to minimize risk, but what people will charge you for the privilege. There is no free lunch.

Both are good reads if you're interested in such matters.