Days after clearing a procedural hurdle, the $1.5 billion plan to redevelop downtown Richmond around a new arena is facing renewed scrutiny for its reliance on a special tax zone.
The Richmond Planning Commission last week unanimously endorsed six ordinances pertaining to zoning, right-of-way changes and the sale of city-owned land for the massive project, helping it move through a multi-pronged review process that will end with a final vote by the City Council.
But the deal Mayor Levar Stoney’s administration has billed as a “no risk” proposition for the city faced a new round of questions from the council-appointed panel tasked with vetting it, which met Saturday.
At issue was a special zone covering a broad swath of downtown that is integral to the deal’s financing. If established, the zone would divert future real estate tax dollars from development and assessment growth in the area over a 30-year period to finance a replacement for the Richmond Coliseum.
In the first five years, the city would commit an estimated $17 million worth of downtown tax growth to repay investors in the arena portion of the project, said John Gerner, vice chairman of the Navy Hill Development Advisory Commission. That money would otherwise go to the general fund, used to pay for basic city services.
Over the 30-year bond repayment period, the amount — a calculation based on an estimated property assessment growth of 2% annually within the special zone — totals more than $300 million.
“It’s our responsibility to the council to let them know that this is what’s being committed to the project if they approve this plan,” Gerner said.
NH District Corp., the developer that submitted the plans to the city, disputed the contention in a statement.
“We will correct the record soon so that the City Council can make its ultimate decision based on accurate information,” said Jeff Kelley, an NH District Corp. spokesman.
Gerner said he stood by the figures , which he pulled from a report made public by the Stoney administration and generated by a firm NH District Corp. hired. Representatives from the administration and NH District Corp. did not dispute the numbers at the meeting, nor have they sought any clarification from him in the days since, Gerner said.
Jim Nolan, a Stoney spokesman, said Gerner’s presentation “reflects an inaccurate understanding of the financing structure of the project.”
“The city’s financial advisors, as well as our third-party consultant, have shown that the project could perform at less than half of our current projections and the city would still come out ahead.”
The zone, called a tax-increment financing district, encompasses an area eight times larger than the publicly owned parcels where the mixed-use development and new arena would rise. Under the plan, NH District Corp. would pay the city $15.8 million for that property.
City leaders and NH District Corp. representatives have said the project would net $1 billion in new tax revenue, or more than three times what the city would stand to collect in new taxes by not moving forward with the deal — a scenario they have repeatedly termed “do nothing.”
Stoney has said his administration negotiated legal protections that would keep the project from hurting the city’s bond rating, debt capacity or financial health.
But Gerner said there is “no guarantee” money pledged to repay bondholders would ever return to the city’s general fund coffers, which he said demonstrates risk .
A replacement for the existing coliseum is the centerpiece of redevelopment plans submitted by NH District Corp., the entity led by Dominion Energy CEO Thomas F. Farrell II.
Its plan calls for a 17,500-seat arena; a high-rise hotel ; 2,500 apartments, with 480 reserved for people earning less than the region’s median income; 1 million square feet of commercial and office space; 260,000 square feet of retail and restaurant space; renovation of the historic Blues Armory; a new transfer plaza for GRTC Transit System bus riders; and infrastructure improvements.
The city would owe more than $600 million over the course of 30 years for the new arena, which NH District Corp. would lease and operate. The Stoney administration has said it wants to repay the debt faster to save money in the long run.
Investors with which NH District Corp. is working would spend $900 million on the first wave of privately owned development and $1.3 billion total.
Taxes generated by the private investment alone — estimated at $718 million over 30 years — are enough to cover the debt payments on the arena bond, Nolan said.
The Stoney administration, the city’s financial advisers and representatives from NH District Corp. have said a larger zone is necessary to make the project an attractive investment opportunity for prospective bondholders. To do that, they have said the city must show it will have at least $1.50 to pay back each $1 it owes on the arena bond.
Future real estate taxes account for 60% of the revenue needed to pay back investors under the current plan. Additionally, all taxes NH District Corp. would owe the city for admissions, meals, lodging, sales and business licenses would go to pay back bondholders, not to the general fund, until the bonds are repaid.
The commission is inspecting the figures as a part of its council-ordered review of the deal. It must produce a report of its recommendations before Christmas. Its next meeting is scheduled for Nov. 2.
The council is also in the process of hiring a consultant to review the project. Its request for proposals closed Thursday. Ordinances advancing the project are listed on the Nov. 12 council agenda.