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Roadblock: Mayor’s $1.4B Coliseum plan hits a financing snag

Jeremy Lazarus | 1/4/2019, 6 a.m.
The plan to replace the Richmond Coliseum with a new arena in Downtown appears to be running afoul of the ...
Richmond Coliseum

At this point, city officials are keeping mum about the Coliseum development and its status.

Paul Goldman, an expert on municipal finance who has led the Put Schools First campaign that is pushing Mayor Stoney to focus on modernizing the city’s public schools, was the first to spot the legal problem and report it in Facebook posts.

The Free Press confirmed his findings.

The city learned months ago that the new arena and development proposed for the city property around the arena could not generate enough money to satisfy bond buyers.

Mr. Farrell and his team at Navy Hill District Corp. stated so in a May 9 report the Free Press has obtained.

According to the report, the project might not be viable unless the real estate taxes to be generated by the new buildings Dominion Energy is erecting at 7th and Canal streets, eight blocks south of the Coliseum site, could be included in the TIF and used for repaying the arena loans.

“This ultimately is a business decision for the city to make through weighting and measuring its best interests,” the report states. “The exclusion of the two Dominion Energy properties negatively impacts the arena plan of finance.”

Without the real estate tax dollars from the Dominion Energy buildings, the project would have to raise the interest rate it offered on bonds to attract buyers, essentially ballooning the cost of debt to a point that it could be unaffordable.

Essentially, the project has to generate 1.5 times the debt repayment, the report states. Without the Dominion Energy properties, the debt service coverage ratio would never reach 1.5 times the debt, which would restrict “the willingness of bond buyers to enter into this kind of investment.”

The report also notes that all of the sales taxes created by the hotel and other businesses in the project also would need to be used to support the financing plan. Without the sales tax money, the project also could fall short of generating enough coverage for the bond debt to satisfy buyers, the report states.