Central Park Ownership: Baseball Will Not Improve Retail Trade Area

Based on my understanding of currently available information, we are not in a position to support any baseball stadium proposal that includes the establishment of a special taxing district (to include a narrowly defined special taxing district focused solely on Central Park and Celebrate Virginia commercial properties).  Big picture, our ownership is not against the idea of baseball in Fredericksburg.  That said, discussion regarding who will materially benefit from a baseball team, how said risk is shared and how to pay for a stadium are important questions that require significant analysis and discussion.

My ownership’s position in this regard is currently grounded in a number of important considerations, including:

1)     Based on our cursory evaluation we do not believe a baseball team will substantially improve the existing Central Park retail trade area - in terms of both additional population growth and/or increase in trade area sales productivity.  As a result, any additional property taxes are expected to have the impact of reducing property values – which will ultimately result in lower base property tax receipts.

2)     The overall retail landscape continues to change, as same is influenced by a number of current retail market trends including the continued growth of e-commerce and showrooming.  These market trends continue to threaten the basic market position and economic viability of Central Park as a major retail hub.  The take-away here – there is no guarantee that the next +30 years at Central Park will meet or exceed historical performance metrics and contribute the kind of tax revenue necessary to both support the city’s general fund goals and a baseball stadium bond issue.

3)     The basic assumption that any new tax can be simply “passed through” to commercial tenants is a slippery slope.  Prospective tenants have a choice and may ultimately elect to forego Central Park retail leasing opportunities in favor of retail properties that have lower overall expense burdens.  Assuming a new tax burden of $0.32/$100, Central Park retailers would need to generate new retail sales of approximately 17 times the additional tax expense (or $9.83 psf) to maintain a similar level of profitability.  Failure to generate such a sales increase would result in reduced profitability and ultimately weaken the already fragile Central Park retail tenant base.

4)     Any special taxing district should incorporate all commercial properties in Fredericksburg and should not be limited to properties in Central Park and Celebrate Virginia.  In short, if the stadium is intended to truly be a multi-purpose venue then all taxpayers in Fredericksburg should share in its cost and risk.  Furthermore, to exempt unimproved properties from the new tax obligation is both arbitrary and unfair, as said property owners will be positioned to benefit from any accelerated economic development activity resulting from a new stadium while sharing in only a fraction of the total stadium cost. 

Defining a narrow taxing district will introduce a number of questions, including but not limited to the general legality of such a narrowly defined tax district and how same may negatively impact the competitive position and value of properties located in Central Park and Celebrate Virginia.  While we remain hopeful that a diligent public process will lead to the best possible decision regarding a stadium deal, our ownership group has asked the Central Park property owners association to take all reasonable actions necessary to preserve long-term property values. 

Other questions that require careful consideration:

·       If Central Park property owners are ultimately going to assume the financial risk of a new stadium then any stadium profits realized over and above annual debt service obligations should be used to retire the stadium debt early, versus using said surpluses to fund other general city obligations. 

·       Based on The PFM Group memo dated 6/27/13, a Revenue Bond issue will include a revenue covenant requiring a tax rate that is materially higher than the $0.32/$100 tax rate currently being discussed.  Bottom line – if the city wants to solicit tangible feedback from the public regarding its interest in supporting a stadium proposal then a complete stadium financing and operations plan should be presented to the public for consideration.  

·       How can the city consider the establishment of a new taxing district to support a stadium bond issue while bonds to support adjacent tax districts remain in default?

·       The proposal will require the city to amend its comprehensive plan to provide for the development of a stadium.  Is such a development really one that “…best promotes the health, safety, morals, order, convenience, prosperity and general welfare of the inhabitants” of the city, and does said stadium commitment represent an appropriate prioritization of city goals and overall financial resources?

·       Will the stadium produce revenues necessary to support the overall financial obligations associated with the stadium?  Who pays the bill if it does not?  A recent study of the new Nationals Park in DC indicates that in 2006 the city had counted on the stadium generating $24 million a year in miscellaneous revenue from taxes on tickets, parking and concessions.  In summary, current revenue has come up short of said estimates, as in FY12 the stadium only generated $12.6 million in tax revenue. 

While the above does not outline all of ownership’s concerns in detail, it does provide a brief introduction regarding our evaluation of this important topic.  We welcome the opportunity to expand upon the thoughts as outlined herein and look forward to working with the City of Fredericksburg to further evaluate this important subject matter.

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