The Battle for Petersburg

[This article has been updated since publication in our January 2017 print issue.]

Rodney Whitaker wants you to try all the beers. Behind the bar at Petersburg’s Trapezium Brewing Co., he’s a one-man cheerleader for the brewery, not allowing a party of three to overlap in their choices.

“You get the lemon-honey ginger ale because she already has the session,” he tells a customer in the former industrial space in Old Towne Petersburg. Whitaker assumes the patrons knew each other well enough to share beers, and his enthusiasm wills that into existence.

Trapezium is a project by developer Dave McCormack, head of Waukeshaw Development Inc., who overhauled an adjacent building into several apartments. Similar rehabilitation projects are steadily attracting millennials such as 27-year-old Whitaker and people in search of affordable properties with antebellum charm. McCormack has arguably had the biggest influence on the transformation of Petersburg’s downtown. His renovations of derelict industrial properties have yielded hundreds of apartment units, the Demolition Coffee shop, a small movie production studio and spaces for other businesses. McCormack estimates that the investments, which represent eight years of growth, total nearly $50 million.

“It was a ghost town. Nobody was living down here, which was interesting and cool in its own way,” McCormack says. “It’s great when I look out and all of the barbed wire is gone and you see people walking their dogs, and going into their businesses and stuff.”

But as Petersburg’s business climate grew more robust, its public sector spiraled into financial meltdown. The city of about 32,000 has made headlines for amassing more than $18 million in debt, which brought the government to the brink of insolvency and made Petersburg the target of lawsuits by unpaid vendors. It’s a situation that at one point resulted in talk of a government shutdown, threatened basic services to residents and caused a ripple effect on businesses owed money by the city.

Linwood Christian, an active participant in Petersburg’s political scene, says he’s sickened by the financial woes. He accuses officials of covering up red flags that signaled disaster, such as the tendency to consistently borrow from one budget line item to offset losses on another.

“You can only sweep dirt under the rug for so long before there’s a mound,” he says. “You can only hide trash so much before it stinks.”

A civic watch group, Clean Sweep Petersburg, called for the removal of leaders who they say have done little to improve transparency or fiscal management. On Election Day, the group circulated a petition to remove city Treasurer Kevin Brown, Mayor Howard Myers, and Vice Mayor Samuel Parham (whom the council elected as mayor Jan. 3 in a 4-3 vote).

“You can only sweep dirt under the rug for so long before there’s a mound.” —Linwood Christian, PTA president

To close a $12 million budget gap for the current fiscal year, Petersburg City Council slashed $3.4 million in schools funding, temporarily closed historical attractions and extended a 10-percent pay cut for city employees another year. Cuts to schools are especially troubling in a district fighting to turn around its reputation as one of the lowest performing in the state. A short-term, $6.5 million loan announced in December will help fund city operations and debt financing for the rest of the fiscal year.

Since 2014, city officials have also faced frustration after a move to install new water meters left residents with exorbitant fees or no bill at all. Acting city spokeswoman Stephanie Harris says that the Robert Bobb Group, one of a cadre of consultants through which the city has sought a way out of its problems, is working to get to the bottom of how much money was lost in the billing fiasco.

Numerous leadership and staff changes underscore cries for accountability in the midst of the crisis. In March, the council fired City Manager William E. Johnson III as the depth of Petersburg’s money woes came to light. City Attorney Brian Telfair resigned soon afterward. In an eight-month span, the city has seen three new faces at the helm of its finance department. As of October, 146 employees have resigned, losing the city roughly $200,000 in payouts for unused vacation and sick time, consultants say.

In a desperate move in search of a solution, council voted in October to hire the Washington-based Bobb Group to temporarily oversee city government and implement measures to get the city on its feet. The firm, headed by a former Richmond city manager, promised results in as little as six months. But the decision has been called into question for its $350,000 price tag, when city workers have been asked to take a 10 percent pay cut.

The move also ousted Interim City Manager Dironna Moore Belton, who is largely credited for bringing the scope of the crisis to the city’s attention, and who sought assistance from the state. She returned to her former job as head of Petersburg Area Transit, and the Bobb Group installed as interim city manager Tom Tyrrell, a retired Marine Corps colonel and founder of a Connecticut-based financial services firm who worked with the Bobb Group as chief operating officer for Chicago Public Schools.

As the city heads into a new year, there’s no doubt that how Petersburg fares in 2017 and beyond will largely depend on whether the city administration sticks to a solid financial plan moving forward. Some hope that recent elections — which yielded two new council members — will bring change. The election of Charles Cuthbert, a Petersburg lawyer who stressed a platform of fiscal austerity, points to a desire to bring the city into the black, even if it means painful service cuts.

The financial situation has even led to talk of unincorporation as a city, which could divide Petersburg among neighboring localities. City Council voted in June to appoint a committee of residents, including former Petersburg Mayor Annie Mickens — to explore the option of township. In December, the committee recommended against pursuing town reversion. A memorandum noted that parceling Petersburg into more than one county would dilute its residents’ influence, the process could take up to three years and cost at least $1.5 million, and the city would still be responsible for its debts.

While many agree that cuts have to be made, some say that city services shouldn’t fall victim to the crunch. Christian, who is head of the citywide PTA, recently stood before Council to question its decision to pay newly hired city attorney Joseph Preston $4,500 more than his predecessor.

“He is getting a salary that is $1,000 or more shy of what [the] recreation [department] could have had to keep the summer program in place,” Christian said.

Christian and others also took to the podium to criticize a recent council vote to hire a search firm to put in place a permanent city manager. City officials estimated in September that the services would cost $20,000 to $25,000. Council voted to hire the firm after a former Savannah, Georgia, city manager, thought to be a leading candidate for the job, withdrew her application when her financial management record was questioned. However, Myers says the search firm’s hiring has been delayed until the city can better deal with its financial crisis.

“It is a very important position, but we have people who are making six figures in the city. If they are not competent enough to put together a committee to choose a city manager, then this is where the savings should be: Get rid of these people,” said city resident Talibah Majeed.

While Richmond may watch her sister city south of the James in shock, the municipalities do have some similar challenges, such as a high poverty rate, low-performing schools and insufficient tax revenue. Petersburg became a punch line in a September mayoral forum when Joe Morrissey slammed opponent Jack Berry’s support for a Shockoe Bottom baseball stadium.

“What if we’d spent $80 million on the stadium in the Bottom?” Morrissey said. “We’d be looking up at Petersburg.”

One Petersburg business owner described a scenario where a fondness by former mayors and city managers for large, expensive capital projects — such as the Dogwood Trace Golf Course and the Petersburg Public Library — was a key factor in the financial crisis. It has a familiar ring to criticism of Richmond government: the Chinese finger trap of shiny projects pulling against basic services and a balanced budget.

CLEAN-UP CREW

Dozens of uncashed checks made out by the city to vendors, some dated to the beginning of 2016, have languished for months in a drawer in City Hall. That’s what consultants from the Robert Bobb Group came across in their first few weeks on the job in October — yet another sign of the financial mismanagement and disorganization that has plagued Petersburg. And it gave the consultant group one of its first tasks: a complete listing of outstanding invoices from the current fiscal year and years prior.

The Bobb Group isn’t the first consulting group hired to bring Petersburg into the black. In August, the PFM Group worked with state officials on recommendations to bridge Petersburg’s 2016-2017 budget shortfall. Davenport, a Richmond-based consulting company, had worked with the city since before the crisis. As far back as 2012, the firm cautioned that spending consistently exceeded revenues.

Myers, who was elected to City Council in 2011 and became mayor in 2015, points to tough economic times and a lack of financial oversight by city administrators, who also failed to provide council with what he terms “qualified information.” Did he see any warning signs? “We did see some and we tried to make some changes, adopting certain criteria to avert some damages,” he says. “It may have been a little too late.”

The city is also stuck in a spiral of borrowing short-term loans — called revenue anticipation notes — to fill the gap when funds fall short in the middle of a budget cycle. Borrowing the notes is actually a fairly common practice of municipalities. The amount borrowed is based on anticipated tax revenues, but this becomes a problem when revenue projections continually exceed actual revenue.

“We also have got to remember that Petersburg is not a particularly well-off community and it’s impacted by that,” says Richard “Ric” Brown, the state’s secretary of finance. “Certainly overspending didn’t help at all, but a lot of the anticipated revenue they thought would come in didn’t because of economic problems.”

The lack of tax revenue isn’t only due to residents who can’t afford to pay. Petersburg’s rate of homeownership, 44.6 percent in 2014, trailed behind the state’s rate of 68.7 percent. The city’s housing vacancy rate of 17 percent of units — or 2,692 units out of 16,326 —  is also the highest in Central Virginia, according to the 2010 Census. As if to make up the difference, Petersburg’s tax rate is also among one of the highest in the state, at $1.35 per $100 of assessed value.

In April, the treasurer’s office announced that Petersburg residents and businesses owed as much as $10 million in back real estate and personal property taxes, a number that dropped to $7.5 million in November. Robert Bobb indicates that the city first began running a deficit in 2009, which continued to increase until the current fiscal year.

The Petersburg City Council hired the Bobb Group after the state finance team and two consultants had already suggested measures to cut Petersburg’s budget and to improve operations. Councilwoman Treska Wilson-Smith, the lone member to vote against the hire, added that the money could be spent to pay past-due invoices to vendors.

“It’s a slap in the face to the people we already owe money to,” she says.

But Bobb, who served as emergency city financial manager for the city of Detroit, where he had a reputation for firing people and slashing budgets, says that localities need his services to make the hard decisions. As an outsider, Bobb says, he’s “someone who can take the hit. Someone not part of the political process.”

As for the prospect of firing personnel, he points out that city staff levels are lean as it is, and morale is low after the pay cuts. He charges anyone who doubts his services are needed to question why the city didn’t drastically cut spending as early as March, when a consultant report warned officials to take immediate action to avoid insolvency.

“That report says, in effect, your house is on fire and action on your budget should not have been done in August or September, but four months ago,” he says.

Bobb also says that an exodus of Petersburg employees and a revolving door at the top levels of leadership leave few people to implement new measures. Part of his mission is to put a plan in place to fill vacancies. He says that the transit system and municipal golf course have been financial drains for the city. Many Petersburg residents regard the golf course as a frivolous pet project, located across the road from the aging Petersburg High School, which has long been in need of capital improvements. Bobb says that the group will review city operations to consider whether some services may be consolidated with the school division or other localities. He also suggested consideration of the sale of certain city assets, but says that a more detailed plan for Petersburg will be revealed in the coming months.

Not everyone agrees with Bobb’s methods. Kim Gray, a former Richmond School Board member who was recently elected to City Council, served with Bobb on the Mayor’s School Accountability and Efficiency Task Force, appointed in 2012 with the goal of finding solutions to fill a $23.8 million shortfall in the Richmond school division’s budget.

Mayor Dwight C. Jones praised the group for sparing the jobs of teachers who were currently working and said its recommendations “illustrate what can happen when fiscal issues are addressed with a sense of innovation and urgency.”

But Gray says that Bobb put too much emphasis on the privatization and consolidation of services. She criticized a Bobb Group recommendation to privatize bus transportation that was never adopted by the school system. She compares the proposal to the city’s decision to take over grass cutting and outsource cafeteria services, which she called “disastrous.”

“We got really, really bad service and grass that’s growing over a foot high at the schools,” she says. “A lot of what they say sounds good on paper, but when it’s implemented, you are left holding the bag for services.” Cafeteria services reverted back to the school division, but this spring, residents issued multiple complaints to the city about tall grass on the grounds of Richmond Public Schools.

Gray offers Petersburg officials a word of caution. “I think they’re in a desperate situation, but that doesn’t mean desperate decisions should be made. Everything is due careful consideration, and every action has a consequence, and there’s lots of long-term consequences that are hard to turn around,” she says. “I wouldn’t just rely on the consulting firm for the answers. I think there are a lot of capable and bright citizens in Petersburg that have things to say about money woes and solving problems.”

LIMITED BUREAUCRACY

Terry Ammons sits in his light-filled brewery on Market Street, largely unperturbed by the city’s financial struggles. “Well, we don’t like the bad press,” he says. “But, at the same time, every time someone comes down here and goes back they say, ‘Hey, it’s kind of cool down there.’ ”

Ammons is wearing a straw hat and a T-shirt that reads “Rebuilding Together, Petersburg.” He and his wife, Ann, moved to the city in 1996 and ran their architecture firm out of the converted factory and auto sales lot. Before renovating it to include Ammo Brewing, Terry had designed other brewpubs and was a home brewer.

As an architect, Ammons acknowledges he had a leg up on the minutiae of converting the space and getting the various federal, state and city licenses in order. But he commends the city staff in charge of inspection, zoning and planning.

“There’s people like Howard Hines in building inspection, Kim Miles, these people who’ve been really dedicated in the trenches for many years,” he says, “a core group of folks who know all these problems going on, but they also know that what they need to do is be facilitators to businesses.”

Andrea Huntjens walks into the brewery. She and her husband, Frits, traded Henrico County living and the Richmond culinary scene for a house on High Street, a small grocery store, Petersburg Provisions in Old Town, and the Farmer's Market Restaurant & Bar in the historic, renovated farmers market.

“I’ve opened two businesses in the city of Richmond,” says Huntjens, taking a pregnant pause. “And this was very, very easy. Really what we needed to do, as far as the business license process, and going through that from soup to nuts, didn’t involve the City Council and all the things that are going on right now.”

Ammons says that Petersburg businesses learn to be resourceful. “The flip side of it is, there’s never been a big bureaucracy constantly in your way. For the most part, unless you’re getting really off track, people leave you alone.”

His optimism is rooted in the small-business community’s spirit. “I’ve never been anywhere where there’s such a strong sense of community amongst a small group of people who are all working really hard to build businesses,” he says.

Ann Ammons points to the frequent filming of period movies and television shows, such as “Ithaca” and “Mercy Street,” that often greet residents in Petersburg’s historic neighborhoods, where someone can turn a corner to discover straw on the streets and gospel music. “Those surreal moments of deep beauty and awesomeness that are profoundly ridiculous in a way, that’s part of the charm of Petersburg,” she says.

“I’ve never been anywhere where there’s such a strong sense of community.” —Terry Ammons, Ammo Brewing

A little way down the street, not far from Virginia State University, Rick Jenkins echoes Ammons’ and Huntjens’ sense of removal from the city’s problems. Jenkins, a Henrico County resident who owns Mo’s restaurant and bar, received a water bill of $800, much higher than the usual $200-something. “I went over to the city, and, when I presented them with the issue of it being too high and everything, they looked at the bill and did what they were supposed to do in that situation.”

HOPEFUL SIGNS

While small businesses like those of Jenkins and the Ammonses are thriving, more jobs are needed to help boost the economy. Unemployment has mirrored national and regional trends, but in percentage, Petersburg’s unemployed residents have numbered consistently higher than those of the state and nearby counties. The U.S. Department of Labor reported an unemployment rate of 6.9 percent in Petersburg as of October 2016. In comparison, the statewide rate was 4.1 percent, Chesterfield County’s was 3.9 percent, Colonial Heights was at 4.4 percent and Hopewell was 6.3 percent.

The 1980s saw the decline of industry and manufacturing jobs, and in 2010, the last tobacco manufacturing company left Petersburg. As of the 2010 census, 27 percent of residents were employed in health care and social assistance, the top employer by industry. Local government is the second largest at 16 percent, though that figure has likely decreased with recent cuts to city staff.

There is some good news on the manufacturing front: In 2014 Boehringer Ingelheim, a German-based pharmaceutical company had announced the end of its 30 years of operation at a 180-acre site just off Interstate 95. A Chinese company, UniTao, purchased the facility later that year, investing $22.5 million and intending to employ 376 people there. But UniTao idled its plans in 2015 citing “business conditions” as a reason. In October, AMPAC Fine Chemicals of Rancho Cordova, California, announced its purchase of the facility; resumption of operations is expected this year.

With some investment, Petersburg’s tourism economy could also offer a lift. Council voted in September to shutter its three museums — the Siege Museum (which was already closed for renovation), Blandford Church and the 193-year-old Centre Hill mansion — to address the cold reality of the city’s finances. Officials also closed Petersburg’s two visitor centers.

Downtown business owners believe that their proximity to both Centre Hill and the Siege Museum could increase traffic through their doors. The Huntjenses’ gourmet grocery is across West Bank Street from the Siege Museum.

“What we need to think about is all of these people come down here to go to those places and eat in those restaurants, and it broadens the tax base,” Andrea Huntjens says.

Consultants suggested closure due to low visitation, noting the museums received an average of just 36 visitors a day. But this number doesn’t take into account special events and rentals. Brian Little, the city’s former director of cultural affairs, says that movie and television crews were charged $1,000 to $2,500 a day to rent Centre Hill. Little, who was tasked with networking with production companies, stepped down in October when his job was phased out with the closure of the museums.

But as sometimes happens, when one door closed, another opened. In November, Council voted to enter into negotiations to turn over the management of the three museums to the Petersburg Preservation Task Force. The group of roughly 40 people with backgrounds in historic preservation, marketing and nonprofit management was awaiting approval of 501(c)(3) status and is formulating plans for funding sources. In December, the task force reopened Blandford Church and Centre Hill several days a week, and a visitor center is now open Thursday to Sunday in the Historic Farmers Bank building, owned by Preservation Virginia and staffed by Friends of the Historic Farmers Bank.

H. Edward “Chip” Mann, who served as the chairman of the Virginia Board of Historic resources, heads the task force. “When I heard my hometown was getting out of the tourism business, I stepped up,” Mann says. “Citizens rose up and said we can take over and do a good job, so this is a very grassroots action the local people want to take.”

SLOW PACE, SOUTHERN CHARM

It’s a quiet October night at Trapezium Brewing. Patrons of all ages, including soldiers from nearby Fort Lee, line the bar for beer and pizza. Some huddle outside around heaters for a smoke.

Rodney Whitaker has worked at the 18,000-square-foot space since it opened in June and has a unique tie to the building’s history: His 83-year-old grandmother, Wilma Whitaker, used to come here with her father to pick up ice.

“The fact that the same building where my grandmother came to get ice is now a very lucrative, multimillion-dollar business, and I work here, that’s pretty amazing,” the bartender says. Dating back to 1890, City Ice and Coal operated in the same space where Whitaker now pulls wood-fired pizzas from a giant brick oven behind the bar.

When there’s a lull in drink orders, Whitaker sneaks away to rest his feet at a picnic table with friends. Seated across from Whitaker is 26-year-old Hannah Martin, who recently moved downtown from nearby Prince George County with her husband. Martin says that the neighborhood combines the charm of a slow-paced Southern city with downtown amenities.

“People know your name when you walk down the street. I know what’s going on in their lives and I can say, 'See you later,' and I know that I probably will,” she says.

The couple says that their parents and others stigmatized Petersburg and tried to talk them out of moving to the city. Now their family is quick to join them for dinner downtown.

They’re part of an energy and heart in Petersburg that continues despite institutional dysfunction and financial hardships. It’s that force that new residents, small-business owners, school administrators and even city officials will draw from to navigate the coming year.

Whitaker agrees that transformation lies ahead for the city, as it did for the industrial ruins of an icehouse that his grandmother once frequented.

“As a kid, this was the slums,” he says. “This was the part of the 804 nobody wants to come to, but there’s so much character here. There’re so many great people.”