Navy Hill Development Advisory Commission Vice Chairman John Gerner details his preliminary review of the city's proposed arena bond financing model at a meeting Saturday morning. (Photo by Rodrigo Arriaza)
The Navy Hill Development Advisory Commission, assembled by Richmond City Council to vet the large-scale downtown redevelopment proposal, weighed possible risks associated with the project's funding plan at a meeting Saturday morning.
John Gerner, the commission vice chairman and managing director of consulting group Leisure Business Advisors, walked the panel through his preliminary review of the bond financing model for a new 17,500-seat arena downtown that would replace the now-defunct Richmond Coliseum as part of the Navy Hill redevelopment project, if approved by City Council. As he explained it, repaying those bonds would take priority for new tax revenue generated in a proposed 80-block tax increment financing (TIF) district for years, and it could come at the expense of funding to essential city services. Representatives of Davenport & Co., financial advisors to the city, have said that the project will generate more money for Richmond schools and other city-funded services in the long run.
Though private funds would be used to pay for the majority of the Navy Hill project, which includes renovations to the historic Blues Armory, a GRTC transit center, and new mixed-use retail and residential buildings throughout 10 blocks of downtown Richmond, more than $300 million in bonds would pay for the arena's construction, existing debt on the Richmond Coliseum and other arena costs.
The bonds would be repaid using new revenues from the 80-block tax increment financing district. If approved by City Council, the bonds would be issued in April 2020, Gerner said. (Real estate and other taxes currently collected in that district would continue to go to the city's general fund, but increased real estate tax and parking revenue would be used to repay the bonds. Also going toward paying off the bonds would be sales, lodging, business and professional license taxes, and meals taxes from new businesses that open as part of the development, except for 1.5% of the meals taxes from new restaurants, which would be directed toward schools.)
According to Gerner's estimates, existing businesses in the 80-block area would generate $17 million in additional tax revenue during the first five years of the bond plan. Over the entire 28-year bond period, those revenues would reach $316 million, according to his presentation — funds that would funnel into the arena repayment plan and away from the city's general fund, used for government services including education and public safety.
"From the plan’s perspective, they’re saying that this is justified as a city investment in the ultimate benefit of this plan, but my job as an advisor is to point out that there is an investment, and that is millions of dollars during the first five years, and the risk of all of the incremental tax revenues from existing properties which go into the fund, in which there’s no guarantee that they come out," he said. "If there are unexpected changes that we don’t know about, ultimately, that money’s at risk, too."
Though some city residents said during the meeting's public comment period that committing revenues from the special tax district to the arena would be an investment in greater funds over time, others disagreed, saying new tax revenues from existing businesses in the district should instead come back to the city. Ginter Park resident Birk Becker said Richmond shouldn't commit public money to the arena project instead of the city's general fund, and should instead leave its financing to a private corporation.
"We have got to think about what are we doing to commit for 30 years to a project that [is] not going to benefit the individuals of this city all that much, but is going to take revenues out of our pockets for five years and put it further down the line," he said. "What the city should do is they should get out of this business; this is not a government business."
Gerner also warned that although the total bond amount has been set, the finer points of the bond plan — such as its size, interest rate, duration and security — wouldn't be worked out until after City Council approves the plan. That's because the current agreement on the table states that the bonds will be determined by the Richmond Economic Development Authority after Council signs off on the plan.
"I was a little troubled by the fact that we would be considering, as a city, signing a contract that has so many details to it that won’t be finalized until after you make the agreement to do it," city resident Arthur Burton said.
The Navy Hill Development Advisory Commission will meet again on Nov. 2, and is expected to deliver a final report on its findings to City Council in late December. For more information about commission meetings, visit navyhillcommission.org.
