by Jessee Perry
Before we all dive into evaluating the pros/cons of the Navy Hill Development proposal, I believe it is important for everyone to understand what the components are and how the deal works at least in theory or concept. To assemble the information here, I heavily relied on the Hunden Strategic Partners analysis so be sure to check out all ~180 pages. Something to keep in mind when evaluating this proposal is that this project was the only project submitted in response to the RFP call from the City for the North of Broad development. The Hunden Strategic Partners analysis is just a review of that singular submitted proposal and does not compare it to any alternative except for the absence of the project since there are no additional proposals. In addition, this analysis only evaluates the 280 affordable housing units in the project blocks because the other 400 were added later on.
One last note before diving in: nothing contained herein should be interpreted as statement of position on the project. This solely seeks to explain for the goal of further understanding before we get too bogged down in the details. I already have some questions I submitted for answers and I am sure those will not be the last but I will update as I get more information.
Basic Project Components
680 affordable housing units
280 within the 10 project blocks (183 are 80% AMI and 97 are 60% AMI)
200 within the TIF (increment financing) district via charitable donation
200 within the TIF district via a portion of surplus TIF fund
Renovated historic Blues Armory to include a ballroom, food market, and music hall
New Convention Center Hotel
Raising of Leigh Street to Grade
Reestablishment of Clay Street from 5th to 10th Street
Re-opening 6th Street from Marshall to Clay as a public pedestrian plaza
Commercial retail and office space
Project and Financing Structure
At risk of getting too lost in the numbers, this is a plain English explanation of how the project is designed to work. If you want to supplement this with more numbers, please check out the HSP analysis or this article from RTD that gives a solid breakdown.
There are ten “project blocks” where new development of the arena, housing, retail space, hotel space, will take place. The majority of the project is concentrated north of Broad Street there are 3 blocks that are south of Broad Street. Within this project there are both private and public dollars being invested in the downtown area. The public investment of the Arena, Blues Armory, and raising Leigh Street will be paid for by earmarking future revenue from both the 10 project blocks and the “TIF district.”
There are three “funding sources” of how the project will be paid. Instead of general obligation bonds that are taken out based on the taxing authority of the city, the bonds paid by public funds are non-recourse revenue bonds based on projected revenue coming into the city. While both types of bonds are contingent on future dollars materializing, a key difference with non-recourse revenue bonds is that the city does not have a legal obligation to pay the bondholder if the revenue is not available.
Private Investment- these are private dollars from investors that will go to start building housing and the Hyatt Regency hotel at GRCC.
New Revenue generated by the Project- any increase in revenue within the 10 project blocks will go toward paying the public portion of the project. What this means is that the city would effectively look at what revenue (sales tax, meals tax, admissions tax, BPOL, parking revenue, arena revenue, and lodging taxes) is generated today in the 10 project blocks and set aside anything generated on top of that for 30 years or until the project is paid off. Two things to keep in mind: using sales tax will require General Assembly approval and GRCCA has first dibs on lodging tax up to the amount that they need to operate.
Incremental real estate revenues of the TIF district- any real estate revenue above and beyond today’s levels within the TIF district will go toward paying the public portion of the project.
If the Project Blocks and TIF District generate more revenue than is needed to pay the public bond in any year, that money is considered a surplus. A requirement of the non-recourse revenue bond is for 50% of the surplus to go toward early payment of the bonds. This means that while the debt is financed at 30 years, the project calls for it to be paid off in 18-20 years (by 2036-2038) which would save the city $125M. The other 50% of the surplus gets directed back into the city’s General Fund.
Chronological Block-by-Block Development
To start understanding the theory behind how the dollars and cents make sense, here is a year by year listing of what is to be built across the project blocks. Since the city is choosing to use revenue bonds, think of it similar to a snowball effect. It seems that as an almost-completed new project, the Dominion Tower opening would be the first large chunk of increased assessment that the city could start bonding off of to get the arena underway. Then the private investment into the hotel and residential market should spark new revenue (real estate tax increase, people who work downtown living downtown impacts sales and meals tax, etc) that would continue to grow allowing for the necessary bonding to be acquired and paid.
Project Block A3: ~150,000 square feet of multi-tenant office space (this is 60% what is planned that will be six floors in total
Project Block D: ~357,000 square feet of single tenant office space for the Neuroscience program of VCU (66% of planned) and ~5,000 square feet retail space (33% of planned)
Project Block F: ~132 new hotel rooms at the Hyatt Regency GRCC headquarters (25% of planned)
Project Block A2: 163 residential apartments and 20,000 square feet of retail space
Project Block B: 250 residential apartments and 25,000 square feet of retail space
Project Block C: ~120 residential apartments (20% of planned)
Project Block D: ~183,000 square feet of single tenant office space for the Neuroscience program of VCU (33% of planned) and ~10,000 square feet of retail space (66% of planned)
Project Block E: 150 residential apartments and 15,000 square feet of retail space
Project Block F: 16,354 square feet of retail space (Blues Armory) and 395 rooms at Hyatt Regency GRCC headquarters
Project Block C: ~423 residential apartments (80% of planned)
Project Block D: 150 limited-service hotel rooms for tax exempt Doorways Hospitality House that will move from Project Block F
Project Block I: 411 residential apartments (student housing) and ~50,000 square feet of retail space (50% of planned)
Project Block N: 512 residential apartments and 15,000 square feet of retail space
Project Block P: 422 residential apartments and ~6,000 square feet of retail space (50% of planned)
Project Block P: ~6,000 square feet of retail space (50% of planned)
Project Block U: ~225 residential apartments (66% of planned) and 35,000 square feet of retail space
Project Block U: ~127 residential apartments (33% of planned)
What Happens Now?
At this point, the project has been evaluated and endorsed by Mayor Levar Stoney. The next step is for Stoney to introduce the project officially to Richmond City Council which should happen Tuesday November 13th. From there it would have to go to committee, pass through committee, and go before Council for a final vote. For the project to pass, 7 councilpersons would need to vote in favor.
Between now and then, take the time to understand the project and ask questions. We will keep putting information, perspectives, and questions out there and hope all Richmond residents do as well. Your voice matters. With every differing opinion, projects and ideas can only improve so speak up!