Big Projectitis

Diagnosing the economic affliction the city just can’t seem to shake

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Features

Richmond’s cheerleader in chief can’t help himself.

The callout comes about an hour into Mayor Danny Avula’s high-energy, bass-thumping State of the City address at Southside Community Center in late March — his first, because last year’s speech was canceled due to the water crisis.

“I’m so excited about the progress that we’re making, I feel like we should celebrate,” Avula tells the audience. Donning a headset on a makeshift stage in a half-filled gymnasium, standing near a couch flanked by giant ferns, the mayor then tosses it back to his co-host for the night, NBC 12’s Andrew Freiden. “Andrew, you got any good ideas about how we can celebrate?”

He did, but first, a little context: The event is a departure from the staid State of the City addresses delivered by Avula’s predecessors, which were typically agenda- setting affairs held in City Council chambers. Dr. Danny opted instead for mini “fireside chats” to address housing affordability and economic development and tell the story of Richmond’s brutally oppressive history (hence the couch). It was decidedly evangelistic, featuring the Virginia Union University gospel choir and Richmond pastor Don Coleman, all intended to offer a variety of voices and elevate “interpersonal healing work that I think our city and our society so sorely needs,” Avula told reporters afterward.

The festivities aligned with Avula’s mayoral action plan, which outlines seven “pillars” for a thriving city. “A thriving Richmond must be inclusive and must create opportunities — within housing, education, and the economy — for everyone,” Avula writes in the prelude. “It must have a city government that gets the basics right, delivers services efficiently, and engages authentically with residents and businesses.”

But making Richmond more inclusive and accessible to all residents, regardless of income level, social standing or geography, is often difficult, thankless work. Delivering a government that’s efficient and functional, one that doesn’t continue to overtax its citizens and leave tens of thousands trapped in poverty, has already proven enormously challenging for the new administration.

So, what’s a city to do?

Andrew?

“The spring weather’s got us thinking about this great new ballpark that’s going to open,” Freiden offers in his broadcaster’s cadence. “So how about we invite Nutzy and Nutasha out from the Flying Squirrels, and we have fun and go nuts!”

RVA’s bushy-tailed mascots come out, arms waving, tossing T-shirts into the crowd and gyrating to “Uptown Funk” by Mark Ronson and Bruno Mars. In a flash, Avula’s party is in full swing, pillars and policy temporarily forgotten.

A Diamond a Dozen

Therein lies the power of the big, shiny object. After 23 years of hemming and hawing over where to build, and how to pay for, a replacement for the aging Diamond on Arthur Ashe Boulevard, the city’s new, $140 million CarMax Park has finally arrived.

The ballpark is unquestionably beautiful, even if it gets lost amid a sea of ongoing construction. There’s wraparound seating, an open-air concourse, a playground in the outfield and numerous upper-level luxury suites, all of which make the stadium feel both enormous and intimate at the same time.

It also represents something else — Richmond’s infatuation with big, taxpayer- funded construction projects that generate next to no economic impact. CarMax Park is at once the new gold standard for minor league ballparks and a monument to publicly financed boondoggles. Despite the promise of generating millions in tax revenue, the Squirrels’ new home does the opposite, drawing money out of the local economy to pay off city-backed general obligation bonds for the next 30 years. While the Squirrels are picking up the cost overruns (an extra $10 million), that $130 million in city bonds eats up debt capacity in a cash-strapped city with some of the highest tax rates in the commonwealth.

And it keeps happening. From Sixth Street Marketplace in the mid-1980s to the Greater Richmond Convention Center (2003), the Washington Commanders training camp facility (2013), the rejected Navy Hill proposal (2017-2020) and the new riverfront amphitheater (2025), all have one thing in common: a promise to generate millions in economic activity by siphoning money out of taxpayers’ pockets.

But why?

“Well, it’s because it is a lot easier for elected officials to look like they’re doing something by building some big, shiny object than it is for them to do the sort of difficult blocking and tackling grunt work of actually creating an environment where economic growth happens,” explains John Mozena, president of the Center for Economic Accountability in Grosse Pointe Woods, Michigan.

When it comes to publicly financed stadiums like CarMax Park, the bill usually comes due well after the political leaders who negotiated the deal leave office. “It’s a lot easier to spend money that you’re not going to have to worry about because it’s going to come due in 30 years than it is to have to make difficult, unpopular decisions about things like tax rates or fixing local education problems or dealing with zoning and land use restrictions that keep anybody from building anything,” Mozena says. “Richmond is far from alone in dealing with this. Everywhere across the country, you see all sorts of cities, of all sizes, where, ‘Oh, it’s this convention center or that stadium, or this new office building or whatever — it’s going to change everything.’ And it never does.”

Academics call the phenomenon “big projectitis.” It’s an affliction that stems from nearly a century of economic development graft, which started in the 1930s, explains Michael Farren, assistant director and policy fellow at the Hoover Institution at Stanford University. To create job growth during the Great Depression, Mississippi began luring new manufacturing facilities to the state by publicly financing their relocation expenses. Other states soon followed suit. Eventually, just about every locality of any size and ambition had its own economic development offices. Financial subsidies and tax giveaways became the norm.

“In the vast majority of situations, you’re going to have policymakers in City B trying to copy the success of policymakers in City A,” Farren says. “Let's use Silicon Valley as an example. Everyone is trying to create their own Silicon Valley, but Silicon Valley, like Detroit, emerged as an economic cluster for very specific reasons.” In most cases, the successful clusters had more to do with broad investments in infrastructure and research than the government tossing financial incentives at specific businesses.

In a 2018 review of 30 national studies on the effects of economic development incentives, Timothy Bartik, a senior economist at the Upjohn Institute for Employment Research, found that in at least 75% of cases, businesses would have relocated or expanded without public subsidies.

“So, we’ve gone through 90 years now of economic development programs, and arguably the vast majority of that spending has not been better than what it might otherwise been. There have been a lot of bad bets,” Farren says. “From over a decade of researching these programs, in most cases these are politicians trying to create get-rich-quick schemes. Except it’s not get rich quick — it’s grow the economy quick. But that’s generally the wrong way to go about it. Instead of picking winners and losers, you want to fertilize the economy broadly and let whatever works for your local economy grow as a result.”

Pushing the Limits

Richmond has some defining characteristics that make tax giveaways especially problematic.

Virginia is the only state in the country where the law requires cities to be separate from counties, forcing Richmond to remain landlocked. This policy — codified in the state constitution in 1971, shortly after Richmond annexed 23 square miles and 47,000 mostly white residents from Chesterfield County — has slowly suffocated the city’s economy.

Unlike the much larger surrounding counties, both in physical size and population, Richmond is home to large swaths of untaxable real estate. More than 22% of the city’s tax base is tax-exempt; the lion’s share is state-owned property, including the ever-expanding Virginia Commonwealth University. Real estate taxes are the city’s primary revenue source.

Thanks to the exemptions, including those for nonprofits and churches, the city lost $131 million in real estate tax revenue in 2024, according to the state tax commissioner. In comparison, Henrico’s property tax exemptions represent just 8% of its overall tax base, or $44 million in lost taxes, and Chesterfield 6%, or $36 million in lost taxes. Both suburban jurisdictions have ample room for growth — Chesterfield is 423 square miles and Henrico 245 square miles — while Richmond, trapped within 62 square miles, does not.

All of which means the city can ill afford to float bonds for nonessential capital projects. In January 2024, Michael Nguyen, deputy director of Richmond’s debt and investment management division, delivered a sobering message to City Council’s Finance and Economic Development Committee. If the city moved forward with building a much-needed replacement for the John Marshall Courts Building, a roughly $350 million project, along with $200 million in planned school construction, it would likely push Richmond to its self-imposed debt capacity limit by 2030, he told the committee. To keep the city’s bills in check, policy dictates that borrowing can represent no more than 10% of general fund expenditures.

This was a few months before former Mayor Levar Stoney and City Council decided to switch gears and finance the ballpark using $130 million in general obligation bonds, paid for out of the general fund. The shift in financing was significant: For years, developers and city officials proposed building a new stadium using tax-increment financing, which would have paid off the loan with tax revenue from new development around the ballpark.

In a presentation to City Council in March 2024, the Stoney administration explained that the interest on the TIF-backed bonds would likely exceed 8%. Because the ballpark itself wouldn’t generate enough tax revenue to cover the bonds, it needed the tax revenue from the surrounding residential, commercial and retail development to make the numbers work. In other words, without city-backed bonds the ballpark would have to wait.

The only problem? Minor League Baseball was pressuring Richmond to build a new stadium by 2025 or risk losing the team.

City Council unanimously approved the new financing plan in May 2024. Compared to the previous approach, the new plan adds to the city’s debt but saves $215 million in interest over the life of the 30-year bonds. Because Richmond essentially agreed to back the debt service with the “full faith and credit” of the city’s general fund, bondholders assume less risk. The interest rate dropped to 4%.

Meanwhile, the courthouse, which would also be paid for using general obligation bonds, has been deemed unaffordable and pushed to the back burner.

“Is it more important to have a functioning courthouse or a nice, new, shiny ballpark?” posits Richard Meagher, a political science professor at Randolph-Macon College and host of “RVA’s Got Issues,” a podcast on VPM. “The functioning courthouse, who are the people who go in there? Yeah, a couple of lawyers, but it’s mostly people who are having legal trouble, and they’re not the constituents you’re trying to win over. The political logic is different from the financial and maybe even the moral logic.”

And replacing the stadium has been on the city’s to-do list for more than 20 years. By 2024, the public had grown “exhausted” by the seemingly never-ending ballpark debate, Meagher says, but they didn’t want the Flying Squirrels to leave.

The Squirrels’ ownership group also invested heavily in Richmond. The team spent millions upgrading The Diamond after moving from Norwich, Connecticut, in 2009, and for years vowed to pay a quarter of the construction costs for a new facility. In 2024, the Squirrels ponied up again, agreeing to pay approximately $66 million in lease payments to cover a separate $33.7 million bond issue by the city’s economic development authority to pay for additional infrastructure improvements in the district.

“I think that people recognize this [public financing] is kind of a scam, and we shouldn’t have to pay for it, but we still want this thing in our town,” Meagher says. “We still want this amphitheater because it’s cool and we like to go see music, and we complain all the time that people aren’t coming to Richmond. It’s like there’s a cognitive dissonance between the actual costs and the complaints about the problems and then the projects themselves, and how they are financed.”

‘Millions in Revenue’

That cognitive dissonance was on full display during Avula’s State of the City address. Shortly after Nutzy and Nutasha boogied their way offstage, Avula called up Rebecca Street, general manager of the new Allianz Amphitheater, and Angie Rodgers, the city’s economic development director, to tout the city’s taxpayer- funded giveaways.

During the “fireside chat” with Avula, Street discussed the amphitheater’s success drawing 200,000 music fans in the first year. (The city agreed to give the amphitheater’s owners tax breaks worth up to $37 million over two decades, more than covering the venue’s $30 million price tag.)

And Rodgers gushed over the new $2.4 billion Diamond District development. The ballpark is part of the sprawling, 67-acre residential, commercial and retail project led by Richmond-based Thalhimer Realty Partners.

“The most exciting thing, I think, about the Diamond District is that Richmond is doing this right,” Rodgers explained. “Cities that are doing new stadiums these days aren’t just doing new stadiums, they’re doing stadium districts.”

Indeed, developers and cities pitching new publicly financed stadiums now often wrap them in broader developments. The idea is to leverage a stadium or arena as part of an entertainment district that developers then pitch as necessary to make the overall project a financial success.

When Richmond issued its initial “request for interest” to developers in late 2021, that was the primary argument. AECOM, an infrastructure consulting firm hired by the city to perform a market analysis of the area, concluded, “Without the ballpark to anchor the development, the site may not be able to attract the same level of retail/commercial and office development that it would with a new ballpark serving as an anchor, and therefore generate less overall fiscal and economic impact to the City and greater region.”

At the State of the City address, Rodgers took it a step further: “That new stadium is, you know, going to return hundreds of millions of dollars, over 300 millions of dollars, in revenue back to the city of Richmond.”

Except it won’t. While the development around the stadium will certainly generate tax revenue as it comes online over the next decade, the city has offered no evidence that the ballpark itself will generate “hundreds of millions” in economic impact. In fact, the city didn’t perform a fiscal impact study weighing the cost of publicly financing the new stadium (roughly $280 million, according to the city’s financial adviser, Davenport & Co.) against the cost of expanding public services — police, fire, schools, water and sewer, roads, etc. — to meet the needs of the large new residential and commercial district.

Is it more important to have a functioning courthouse or a nice, new, shiny ballpark?”

—Richard Meagher, political science professor at Randolph-Macon College

The ballpark is far likelier to be a financial drain — not just on the Diamond District, but the city as a whole. Among academics and sports economists, it’s generally accepted that publicly financed arenas, ballparks and stadiums don’t produce economic windfalls for their locales. Shortly after the Squirrels arrived in Richmond, during an earlier iteration of the city’s ballpark saga, developer Highwoods Properties even proposed relocating the stadium from the Boulevard to Shockoe Bottom in order to “unlock” the economic potential of what is now the Diamond District.

“Virtually any other use other than just bare, unused land would be better than a sports stadium,” Mozena of the Center for Economic Accountability says. “The defining characteristic of a stadium is that they spend most of their entire lives just dark, empty and silent with nothing happening. Even on the days when there is something going on, it’s only for a couple hours at a time. The rest of the time they just sit there — this giant economic black hole, doing nothing, accomplishing nothing, employing virtually nobody.”

For John Gerner, a Richmond-based financial consultant who served as vice chair on the Navy Hill Development Advisory Commission, created by City Council in 2018 to study the $1.5 billion downtown development proposal, what’s often overlooked is the opportunity cost. How much did the ballpark, or any of Richmond’s big, publicly financed projects, really cost the city?

“What the city has lost is the opportunity cost, the opportunity cost of the $120 million-plus in general obligation bonds that could have been used to buy another school or other city benefits, because the city has a debt limit,” Gerner says of CarMax Park. “Even in the best situation, the city is still at a loss. Even if the [Diamond District] is fully developed, it loses the potential tax revenues from the property that the new ballpark sits on.”

So, is there a cure? Gerner suggests basic consensus building and better due diligence. Too often, the big projects come by way of unsolicited proposals that skip over financial and economic analysis. Take the Navy Hill development, pitched by the business community and former Mayor Stoney nearly a decade ago.

“None of that was done with Navy Hill. It came out of the blue,” Gerner says of the proposed development, ultimately rejected by City Council in 2020 after years of back-and-forth. “Just like in the past, it was based on the assumption that we, the people of Richmond and its elected government, are, let’s face it, too dumb to know what’s best, that we need to rely on the business community or outside developers to give us that once-in-a-lifetime opportunity to do something wonderful for the city. That was the approach that’s been used time and time again. And, sadly, it will happen in the future.”