Washington says team owes $3.5 million in back rent

WASHINGTON (Reuters) - The Washington Nationals baseball team owes the District of Columbia $3.5 million in rent for the new stadium it moved into in March, a city official told Reuters on Friday.

But John Ross, Washington, D.C.'s senior advisor for economic development finance, said the team it is withholding its rental payment because it does not consider the ballpark's construction complete.

It is also invoking part of its contract requiring the city to pay $100,000 in damages for each day after March 1 until building is finished.

The Nationals, a Major League Baseball franchise owned by Maryland developer Theodore Lerner, would not comment.

According to Ross, the team and the district are in the middle of a 10-day period to resolve their differences. If they do not reach a deal, the dispute will go to judicial arbitration, where Washington will seek interest and back fees on the rent.

One likely area of contention is whether the city owes damages for days between March 1-28, when Washington officially notified the team construction was done, Ross said.

"The issue is what's on time. There is no question -- we believe the stadium was substantially complete by the first game and we believe that is what the contract said," he said. "Now for the time between March 1 and March 28, we don't believe we owe money for that either."

On Friday, The Washington Post reported the two sides are also fighting about ticket sales taxes intended to help pay off the $611 million in bonds issued to build the ballpark.

The city's privacy laws bar discussing tax cases with the press, but Ross said the district will meet the yearly debt service requirements of $32 million. It expects revenue of $47 million from tax payments, rent and other payments, he added.

The city must start paying interest on the debt on August 1.

"The ballpark was completed on time and in a manner that everyone in the District can be proud," said D.C. Sports and Entertainment Commission Spokeswoman Chinyere Hubbard.

"We continue to work closely with the Nationals as we close out the project," she added, noting there are some features that still need to be finished in the next few months.

(Reporting by Lisa Lambert; editing by Gary Crosse)