Offers of revenue-sharing are rarely taken up by municipalities, so it will be interesting to see if the offer by Diamond Nation to share revenues on a Fredericksburg, Va., baseball complex in exchange for upfront financing actually happens.
Diamond Nation, a New Jersey firm seeking to develop a baseball complex in Fredericksburg that includes a new Hagerstown Suns (Low Class A; Sally League) ballpark, has an $18-million funding gap in its $61-million development plan. Efforts to identify alternative sources of funding have apparently fallen short, so Diamond Nation officials are pitching the city on a new plan: Fredericksburg would front the $18 million and waive all property taxes, and in return Diamond Nation would pay 3 percent of gross revenues for the first 10 years the complex is open, and 1.5 percent after that, until the $18 million is paid back. This would come on top of the $22 million in tax breaks and direct spending already promised by city officials. From Fredericksburg.com:
The owners of Minor League Baseball’s Hagerstown Suns and Diamond Nation, a New Jersey-based training and tournament facility, are offering to return 3 percent of the gross revenues from the entire complex for the first decade of operations and 1.5 percent of the gross revenues thereafter.
In exchange, they are asking for $18 million more in financial assistance from the city and to be exempt from real estate taxes for the life of the project, according to a letter emailed to the city Thursday morning by Jack Cust, owner of Diamond Nation.
Cust justified the request for tax-exempt status by stating that no other minor league team associated with Major League Baseball pays taxes on its stadium. Most stadiums are government owned.
Of course, some teams do indeed pay property taxes, depending on their lease; just this week the New Britain Rock Cats (Class AA; Eastern League) paid back property taxes on New Britain Stadium. Other developers have offered to exchange revenues for financing, but typically the offers aren’t accepted; municipalities usually need to see some sort of guaranteed funding in order borrow money at a reasonable rate. If revenues fall short and there’s not enough to cover bond payments, then the municipality is on the hook to cover the shortfall — not the developer. Now, there are ways around this — a special tax district could be set up to cover bond payments — but the proposal by Diamond Nation asks Fredericksburg to assume a lot of the risk and no guaranteed reward.
The proposed ballpark complex would also include several youth-baseball fields; the Diamond Nation business plan calls for plenty of youth tournaments in addition to minor-league baseball. The team has a lease at Hagerstown’s Municipal Stadium through 2016.
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