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Navy Hill ship sinking?

Scrutiny of Coliseum replacement plan reveals major gaps

Jeremy M. Lazarus | 10/31/2019, 5:56 p.m.
The grand plan Mayor Levar M. Stoney is pushing to replace the Richmond Coliseum with $1.5 billion in new Downtown ...
Richmond Coliseum

Including interest, the cost of repaying the debt on the new Coliseum could run between $480 million and $600 million, depending on how quickly or slowly the payments are made.

Mr. Gerner told the commission he employed the same framework that he would use in assessing projects by government and private clients of his consulting business. He is the first to quantify the size of the investment the city would need to make to support the project. That does not include the cost of additional police, firefighters and other employees that would be required if the development takes place.

Under the plan introduced by Mayor Stoney, the city would continue to receive the same amount of real estate tax from an 80-block area of Downtown that currently goes into the city’s general fund, but any new income from real estate taxes generated by growth in valuations of the property would be shifted to a fund to pay off the Coliseum debt.

Mr. Gerner’s analysis also confirmed that the city government would not see any financial return during the first five years of the project and might have to wait up to 20 years to see any real return, assuming the development lives up to projections.

Meanwhile, at the Oct. 14 briefing, the city’s financial adviser, Davenport & Co., told the council members that the financial projections for repaying the debt on the new Coliseum could be upended if Dominion Energy does not build a second office tower near the Downtown riverfront.

The company has completed one tower on Canal Street and vacated its former Virginia headquarters next door, One James River Plaza, which is to be razed. However, Dominion Energy has not committed to building the second tower.

The energy company, led by Thomas F. Farrell II, has said that any decision would not be influenced by the Navy Hill project that Mr. Farrell also is spearheading.

According to Councilman Parker C. Agelasto, 5th District, council members were told that in order to sell the bonds to build a new arena, investors would need assurances and financial projections showing the city would maintain 1.5 times the annual repayment amount in the special fund and that may not be possible if the second tower is not built.

The minutes of the council meeting show that representatives of Navy Hill and its development arm sought to downplay the problem, noting that interest rates, and thus the cost of repayment, could go down as a result of the Federal Reserve cutting the interest rate. They also cited the likelihood that other developments could be built in the 80-block area that could reduce the reliance on Dominion’s second tower.

Still, Mr. Agelasto said he found it unsettling that the Navy Hill development is dependent on whether Dominion adds a second building.

And there are questions about the project proponents’ continuing assurances that the city government and Richmond taxpayers would face no future risk.

Justin Griffin, a small business attorney who has emerged as a key opposition leader to the Navy Hill development, reported that at 4th District Councilwoman Kristen N. Larson’s monthly meeting, representatives of Navy Hill backed away from the no risk claim, saying that no one had ever promised that the project would be risk-free.

Mr. Griffin also published on Facebook a new analysis of Virginia Commonwealth University’s projection that the Navy Hill development would generate 12,500 construction jobs and 9,000 permanent jobs.

He noted that the VCU figures are projected estimates of the number of jobs that the giant development would create across the Richmond region, and not just within the city.