'Fuzzy math' detracts
from Navy Hill potential
In a recent column, "New arena? Don't think big," Sports Editor Michael Phillips misrepresents the Navy Hill deal’s economic pillars. Despite suggesting “the promises the Navy Hill group is making about the arena are mostly true,” Phillips goes on to state that “building a $620 million arena to generate a guaranteed $900 million in development in Navy Hill seems economically foolish.” His assertion is based on fuzzy math. The new arena is projected to cost $350 million. Phillips inflates that figure to $620 million to show what the bond payback would be over 30 years. To be fair, he should apply the same time value of money principle to the $900 million of immediate investment from the equity partners of Navy Hill. Depending on the interest rate, that figure is worth several billion dollars over the same 30 years. Moreover, the $350 million price tag does not fall on the shoulders of Richmond’s taxpayers. The bondholders bear the financial risk, not the taxpayers.
Even more misguided is Phillips' suggestion that that an art center would be a viable economic engine for downtown Richmond. He cites two successful projects, one in Miami and one in Alexandria, metro areas whose populations eclipse Richmond’s by a multiple of six. As a commercial real estate professional, I’ve tracked deals in Richmond’s downtown for 20 years and can guarantee the chances of landing the uses that wish to co-exist with an art center vs. an arena (500-room Hyatt Hotel, CoStar office complex, 2,500 apartments, VCU multibuilding complex) are about 0.00%. If you want to compare cities that have benefited from a publicly funded project, in addition to Kansas City, check out Allentown, Pa., and Columbus, Ohio, whose city centers have been completely transformed by new arenas.
Navy Hill is a once-in-a-generation opportunity for Richmond’s downtown to compete with cities like Charlotte and Raleigh-Durham. Fuzzy math and impractical alternatives like an art center take the focus off of a thoroughly vetted, economically viable plan.