Title Insurance Issues

In addition to resolving issues raised by the lender relating to title insurance, to be under construction by Labor Day, a number of legal steps must be taken. I will discuss these later in this testimony.

The WDC Baseball Partners proposal offers approximately $61 million for the development rights on the north side of the stadium. Of the $61 million, $34.7 million will be used to create affordable housing on the site, and $2.9 million will be spent on community benefits such as LSDBE mentoring programs. That will leave about $23.5 million for parking. However, about $41.4 million will be needed to build stadium parking, construct the team store and box office, and cover costs of coordination with Clark Construction, as they are building the adjacent stadium. This leaves a gap of $17.9 million.

Funds from the Sports Commission stadium parking budget may be used to pay a portion of the parking costs – that amount has not yet been negotiated. For purposes of providing an estimate, we are assuming that at least $14 million will be needed for the south parking and, therefore, at most $7 million – the balance of the $21 million budget – could be available to the developers. Additionally, $2.1 million could also be available from the construction budget for a total of $9.1 million. There would still be a budget shortfall of $8.8 million. All of these figures are still subject to negotiation.

Based on our analysis, the proposed funding sources for the private development and the stadium parking will not be sufficient to build 20 percent of the residential units as affordable, 925 parking spaces on the north side of the stadium, and 300 parking spaces on the south side of the stadium within the budget. Given the identified sources and uses of funds, the budget gap would be approximately $8.8 million.

Since May, additional inspections have uncovered more fuel tanks and asbestos in the building formerly owned by the Architect of the Capitol. Although the structure was built to be asbestos-free, refrigeration units were brought in and asbestos was found in the insulation. The removal of this additional oil and asbestos will cost approximately $3 million, which increased environmental remediation costs further to approximately $14.4 million. These higher costs will be paid from the project contingency fund.

The exact square footage of development rights to be transferred may change. If the square footage is reduced for any reason, the results could vary: (1) the agreement with the developer may be terminated, (2) the number of parking spaces to be provided by the developer could decline, or (3) the amount of money paid by the developer could be reduced (thus increasing the budget gap). A key issue is set-back requirements from the stadium. In particular, the Construction Administration Agreement states that any development on the baseball site must be set-back at least 50 feet from the stadium, but the developer’s proposal does not comply with that requirement. As a result, the square footage of development rights available could change if, for example, the development must be on a smaller footprint that complies with the set-back requirements.