Hampton Roads Ventures, created by the Norfolk Redevelopment and Housing Authority, is headquartered in this office building in Norfolk. (Jim Morrison/ For the Virginia Mercury)
NORFOLK — When they posed for a picture in an empty field 18 years ago, Robert K. Jenkins and other Norfolk Redevelopment and Housing Authority officials were confident that a new subsidiary would bring a much-needed shopping center to Norfolk’s Berkley neighborhood by pioneering the use of a fledgling federal tax credits program.
Hampton Roads Ventures, a for-profit subsidiary of the housing authority founded in 2003, had been created to administer a $15 million allocation from the New Markets Tax Credit Program during the initial funding round. It was the first Virginia entity to win an award for a subsidy designed to attract investors to distressed areas by offering them a 39 percent income tax break over seven years.
Jenkins, the housing authority’s deputy executive director and the founding head of Hampton Roads Ventures, said that investments from the tax credits would fill a gap caused by declining federal and state funding for community development. In addition to building a shopping center in Berkley, he said, the $15 million would support other low-income areas by backing a shopping center in Old Dominion University’s Village, developing a family fitness and recreation center in Broad Creek and offering a hand to small businesses, according an article NRHA placed in a Virginia Municipal League publication.
“We’re in the business of building neighborhoods, not just houses,” Jenkins said. “So the question we were asking was, how do we continue to serve our neighborhoods well with fewer public dollars?”
Four years after posing for that picture in Berkley, Jenkins toured the Church Street neighborhood with a New York Times reporter and upped the ante. Hampton Roads Ventures had funded the restoration of the historic Attucks Theatre on the street. Now, HRV would expand outside Norfolk and use the fees from brokering those deals to invest back into the city, he said.
Since then, HRV has won another $345 million in the highly competitive tax credit allocation process, including $50 million announced in September.
But the promise that tax credits would spur investment in lower-income Norfolk neighborhoods has been a mirage. So has the idea that investing elsewhere will yield fees to fill the housing authority’s s coffers.
Investing everywhere but Norfolk
Of the $250 million Hampton Roads Ventures had invested by the end of 2019, the last year federal records are complete, only $35.2 million was in Norfolk. Meanwhile, the housing authority’s subsidiary has funded projects in at least 15 states and the District of Columbia — grocery stores, health clinics, senior housing, a cotton mill, an aluminum plant and a hair gel company — everywhere, it seems, but Norfolk.
Those projects also haven’t created a windfall for the housing authority. Records obtained through the Virginia Freedom of Information Act show that by 2016, Hampton Roads Ventures claimed it had only $2.3 million in profits to offer NRHA. As of September, just $1.3 million of that has been transferred to the housing authority. A records request to find if more has been transferred since then is pending.
Brett Theodos, a senior fellow and director of the Community Economic Development Hub at the Urban Institute, has studied new markets tax credits for more than a decade and serves on the public housing authority of Prince George’s County in Maryland. NRHA’s use of Hampton Roads Ventures, he said, raises good governance questions.
“A public housing authority’s raison d’etre is to provide safe and affordable housing to the most vulnerable residents where it operates,” he added. “It’s not clear to me why we are subsidizing a public housing authority to operate in other states where it has no unique insights. It is all the more in question if this effort is not generating much financial return for the public housing authority.”
NRHA has twice refused requests under the Freedom of Information Act to release the complete financial records of Hampton Roads Ventures, claiming it receives no public funds.
Donald Musacchio, the chair of NRHA’s board of commissioners, and Alphonso Albert, the vice chair, refused requests for interviews, through the authority’s lawyer, Delphine G. Carnes (who is also HRV’s longtime lawyer). So did NRHA’s executive director, Ronald Jackson. In an email, Carnes wrote: “each of them has declined the request and does not wish to add anything to the information you have already requested and received from NRHA.”
While Jenkins boasted in 2003 about his plans for Norfolk, none of those projects moved forward. A Farm Fresh store did open two years later in Berkley, but it was supported by the city with a donation of 6.5 acres and $1.4 million for infrastructure. That store closed in 2018. A new one opened this year, again subsidized by $900,000 in grants and loans from the city government, not NRHA.
Of that original $15 million allocation in tax credits, $6.7 million went to the Attucks Theatre renovation. Another $3.5 million funded the then Harrison Dry Storage Boatel (now Morningstar Marina) on Shore Drive near East Beach, NRHA’s upscale waterfront development. The remaining $3.1 million was joined with a later allocation to invest $13.3 million in the Marriott Springhill Suites at Old Dominion University. Later, HRV made an $11.6 million investment in the Fort Norfolk Medical Center off Brambleton Avenue, according to Treasury Department records.
The last Hampton Roads Ventures project funded in Norfolk began in 2008. The last projects funded in Virginia — $6.5 million for luxury condominiums in Culpeper and $9 million for the renovation of an historic retail building in Roanoke — began in 2011.
Other housing authorities have created entities like Hampton Roads Ventures. But they focus on funding projects in their cities or regions, often plowing the millions of dollars in administrative fees they earn back into local projects.
Where new markets tax credits are invested matters because they can serve as a catalyst uplifting an area, bringing jobs and increasing the tax base. According to the Treasury Department, every dollar of tax credit investment generates more than $8 of private investment.
Over the past 13 years, a federal database of new markets tax credits reveals that the NRHA subsidiary has backed projects as far away as Nebraska, Idaho and Texas. While some Norfolk neighborhoods have been searching for solutions to their food deserts, HRV has invested $5.8 million for a grocery store in Decatur, Illinois, $8.7 million for a grocery store in Columbus, Ohio, $4.9 million for a grocery store in Tulsa, Oklahoma, and $5.9 million for a retail complex including a grocery store, in Grambling, Louisiana.
“Our town was a food desert. This grocery gives residents convenient access to healthy food. It is also a signal of Grambling’s progress and growth,” Mayor Edward Jones said when the development opened in 2018.
Companies like Hampton Roads Ventures are called community development entities. They may be offshoots of banks, nonprofits, public agencies or other financial institutions. They apply for new markets tax credits from the Treasury Department and, if they prevail in the highly competitive process, they match projects and investors who earn that big tax break.
Jenkins once said HRV would help rebuild distressed neighborhoods, but that’s no longer how the corporation bills itself. The NRHA offshoot has transformed from a corporation that attracts “private sector investment capital for innovative real estate projects in lower income neighborhoods, particularly inner city and rural communities” to one that now defines itself as a “rural community development entity committed to attracting private investment capital into innovative economic community development projects primarily in severely distressed rural areas.”
Among the other HRV investments over the years are:
- $16.5 million to build a mixed-use senior apartment complex in Illinois.
- $11.8 million to construct a peanut shelling plant in Georgia.
- $5.9 million to acquire new property and expand a grain terminal business in Mississippi.
- $12.1 million to expand an aluminum company in Alabama.
- $5.9 million to modernize a livestock feed company in Nebraska.
- $4.9 million to expand a hair gel company in Tennessee.
- $8 million to build a cotton mill in Louisiana.
- $5.9 million for a health care clinic in Idaho.
‘Neither obligated nor willing to turn over its records’
Since Hampton Roads Ventures last backed a Virginia project, other community development entities have invested nearly $327 million in 86 projects in the state, including one in Norfolk, one in Portsmouth, two in Newport News, and seven in Richmond, according to the Treasury Department database. Meanwhile, Hampton Roads Ventures has pumped more than $100 million into projects outside the state.
Ironically, Virginia Democratic Sens. Tim Kaine and Mark Warner in September issued a joint news release praising the renewal of the program and the awarding of $50 million more in credits to HRV. “We look forward to seeing these dollars at work, spurring new investments and strengthening communities across Virginia,” the release said.
In fact, Hampton Roads Ventures hasn’t invested in Virginia communities in a decade.
HRV is wholly-owned by the NRHA. The Community Development Financial Institutions Fund, the federal agency that oversees the tax credits program, wanted public officials to have oversight of the for-profit Hampton Roads Ventures. The NRHA resolution creating HRV as a private corporation required the authority’s commissioners to be “the governing body.”
The Norfolk City Council’s resolution authorizing HRV, a requirement of state law, noted it would be “managed by the commissioners of the Authority.”
The board of commissioners for the NRHA has been the board of managers of Hampton Roads Ventures from the beginning. In years past, the minutes of some NRHA board meetings noted that five minutes after adjournment, the HRV board meeting would begin.
Why hasn’t NRHA prodded its subsidiary to fund projects in Norfolk? The housing authority’s lawyer says that the authority does not control its subsidiary, despite those resolutions making NRHA’s board of commissioners the “governing body” of HRV.
In response to a records request, Carnes, the attorney for both the housing authority and HRV, was dismissive. “HRV’s policy and investment decisions are handled by an Advisory Board comprised of seven individuals who represent low-income communities from around the country,” she wrote. “All of these individuals are nationally recognized professionals involved in community development and none of them serve, or have ever served, on NRHA’s Board of Commissioners.”
Advisory board members would not comment. Donald Phoenix, chair of HRV’s advisory board, and the Southeast regional vice president of NeighborWorks, did not return messages left for him. Edward Jones, the mayor of Grambling, where HRV funded a retail center, replied to an email interview request by referring questions to Jennifer Donohue, HRV’s chief executive officer. Mike Hawkins, the director of community housing with the Virginia Housing Development Authority, the state’s mortgage finance agency, and a longtime HRV advisory board member, did the same in a phone call. A few weeks after that interview request, Hawkins no longer appeared on HRV’s list of advisers.
Hampton Roads Ventures, through Carnes, refused to voluntarily release its financial records. “Our firm has consulted with Jennifer Donohue, chief executive officer of HRV, who confirmed that HRV is neither obligated nor willing to turn over its records,” Carnes wrote.
Donohue, who started as HRV’s compliance director in 2010 and became CEO in 2019, did not return calls seeking comment. Before joining HRV, she was a real estate agent and contractor. She has a master’s degree in public administration from Old Dominion University, according to her LinkedIn profile. Carnes said in an email that Donohue declined to be interviewed.
An outlier among similar organizations
Under state law governing housing authorities, NRHA has an “area of operation” bounded by the city in which it operates. It may do projects in other municipalities only if it receives permission from them. But that law does not apply to HRV.
Hampton Roads Ventures appears to be an outlier in how public agencies like NRHA have used community development entities. A sampling of others shows they created nonprofits that have invested only in their community with tax returns that are public. Their activities, by and large, are transparent. HRV’s are not.
They often plow their profits from fees back into funds to support small businesses or other mission-driven projects, according to a 2013 study by the Urban Institute. One example the study cited was a CDE that funded an initiative that purchased foreclosed homes, rehabilitated them, and then sold them to low-income families.
The District of Columbia Housing Authority, for instance, has won $128 million in new markets tax credits through its nonprofit subsidiary, DC Housing Enterprises. All its investments were in the District of Columbia until last year when delays in a project meant $6 million in allocations were set to expire. When DCHE sent that money to a project in Los Angeles, there was an outcry.
John Falcicchio, Washington’s deputy mayor for planning and economic development, said DCHE needed to be held accountable for its failure to keep the credits in the local economy. “They’re asking the board to do something extraordinary, which places our tax credits into a deal in Los Angeles,” he said during a housing authority meeting authorizing the transfer. “It’s really hard for me to stomach that knowing there’s a need in the District of Columbia.”
The Portsmouth Redevelopment and Housing Authority, like NRHA, created a for-profit subsidiary, Southside Development Enterprises, that won new markets tax credits in 2003 and 2008 totaling $31 million. They were used for three projects in Portsmouth — an office park, the Old Dominion University’s Tri Cities Center and a Kroger grocery store. Philip Page, PRHA’s director of development and capital funds, said housing authority employees administered the deals. They were not paid additionally for that work.
The Virginia Community Development Corporation, a nonprofit dedicated to building affordable housing and revitalizing historic properties, created a community development entity, the Virginia Community Development Fund, that has won $70 million in allocations. Among the projects it funded were a library, a Boys and Girls Club in Richmond and museums in Roanoke and Bristol.
Laura DuPuy, the development director for VCDC and the manager for VCDF, said new markets tax credits were another tool to advance the VCDC’s mission. “We knew there were projects out there that would support our communities, to build up our mission and have more tools to offer in those communities,” she said.
The Virginia Community Development Corporation board appoints the Virginia Community Development Fund board, she said, and the VCDF board decides what projects to back. The development fund invests only in Virginia and West Virginia, where its parent company has done housing projects. Both are nonprofits with tax returns that are public information.
In Chicago, the city founded the nonprofit Chicago Development Fund (CDF), which has won $411 million in new markets tax credits since 2006, all used for projects in the city. The CDF’s finances are public as are its quarterly governing board of directors and advisory board meetings.
That geographic focus mirrors what the Pennsylvania Housing Finance Authority does. The authority created the nonprofit Cornerstone Commonwealth Group, which has won $406 million in new markets tax credits used for 45 projects that created more than 9,300 permanent jobs, all in Pennsylvania.
Cornerstone has been successful not only at placing investment within its area, but at generating fees and profits to use for other projects. Its 2020 tax return shows it earned $2.3 million in fees and had $10.6 million in cash at the end of 2019. The 2019 and 2018 returns showed $2.1 million and $3.7 million in administrative fee revenue.
Brian Hudson, the recently-retired executive director of the Pennsylvania Housing Finance Authority and formerly the head of Cornerstone, said fees from the subsidiary were stockpiled and then used as gap funding or equity investments when the company found worthy projects in distressed areas of Pennsylvania. The goal, he added, was to act as a catalyst for further development.
“CCG (Commonwealth Cornerstone Group) systematically plowed money back into deals,” Hudson said. “I have nothing but good to say about how we structured that (CCG) because it was driven by mission, not profit.”
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