Wednesday, March 16, 2005

DC Council's Learning Curve

Wait... Maybe private financing schemes might not be such a good idea?
Council members said they are concerned that both plans amount to the private companies' giving the city money upfront in exchange for greater revenue in the long term. In both cases, the city would be better served funding the stadium itself and keeping control of those revenue streams, members said.

For example, under the Gates Group's plan, the city could get a $100 million upfront payment in exchange for $10.6 million per year for 30 years. That amounts to paying back the Gates Group at an interest rate of more than 7 percent. Council members said the city could get a far lower rate by going to Wall Street and issuing bonds, which is what administration officials recommended originally.

"It's always cheaper for the city to borrow money on its own," said council member Sharon Ambrose (D-Ward 6)

Other than as a sop to the public, private financing doesn't really make sense. You're getting up-front money at a higher price down the road. Yes, there's slightly less risk, but the decrease in long-term revenue probably is too steep a price to pay.

The good news, is that the ballpark legislation only required the city to get bids. It doesn't mandate that the city take up any of the offers.
As the ballpark legislation currently stands, the mayor must recommend one or both of the ratified bids to the council within 15 days for formal approval. Bobb and Williams will conduct a secondary review of the Gates Group and Deutsche Bank bids to mirror Gandhi, within the next week. It is possible Williams and the council will agree to not move forward on either bid.

If the city knows what it's doing, inaction is exactly what they'll do.

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