A light rail line, the Tide, runs through downtown Norfolk. (Ned Oliver/Virginia Mercury)
After months of scrutiny of the out-of-state deals financed by Hampton Roads Ventures, Norfolk Mayor Kenneth Alexander said the city will draft a resolution requiring the housing authority’s subsidiary to focus on Norfolk.
The comments by Alexander came after a meeting with representatives of the Norfolk Redevelopment and Housing Authority and Hampton Roads Ventures during a City Council work session on Tuesday.
“The interest of this council is for NRHA and Hampton Roads Ventures to focus on the security and prosperity and success and growth of the City of Norfolk and its people,” he said. “The resolution that I’m having drafted will better define that.”
A series of stories by The Virginia Mercury detailed how Hampton Roads Ventures has won $360 million of New Markets Tax Credits, but invested only a fraction of that in Norfolk, none since 2008. Instead, HRV has funded projects worth hundreds of millions of dollars benefiting cities and rural areas in at least 15 states. The Treasury Department says that for every New Markets Tax Credits dollar invested in a neighborhood, it spurs eight dollars in private investment.
When City Council approved the creation of Hampton Roads Ventures, NRHA’s involvement was not defined in the ordinance, Alexander said. Since then, he noted, HRV’s strategy evolved to focus on investing in rural areas, but the city was not notified. “What you have through your work unpacked and uncovered was not the intent of council,” he said.
“The point is to spur economic development in areas that but for the new markets tax credits there would not be any investment. That’s the reason they exist,” he added. “I’m not suggesting that they shouldn’t do business in other markets, rural markets. But this is the city of Norfolk. We need to spur economic growth.”
Jared Chalk, the city’s director of economic development, said in an interview Wednesday that HRV needs to create a campaign to bring Norfolk projects into its pipeline.
“They’re sourcing deals all over the country,” he said. “They need to be sourcing deals here in the City of Norfolk and putting together a marketing plan and getting out in the community.”
He said HRV’s staff should attend local events, meet with companies and bankers and work with community leaders to identify opportunities. His interview came after Delphine Carnes, the lawyer for HRV and NRHA, answered emailed questions to her and Chalk about financing Norfolk projects. In her response, Carnes said businesses interested in the tax credits could complete an HRV form or meet with Chalk and his staff.
Chalk said HRV, not city staff, has to be the primary mover behind recruiting Norfolk projects. He said the economic development staff would meet with HRV and show them areas targeted for redevelopment and refer projects. “They’ve got the staff and the capacity to do this,” he added. “They need to be doing this primarily in the City of Norfolk.”
He agreed with Alexander that the key benefit of the New Markets Tax Credits program is to jumpstart investment in areas where it’s hard to attract private capital. The second part of the process, he added, is what to do with the profits from administering projects.
‘Everything should be FOIAable’
Hampton Roads Ventures has refused public records requests saying the Virginia Freedom of Information Act does not apply because it receives no public funding, although NRHA has released audits of the corporation.
Asked if HRV should be subject to public records requests, Alexander said, “No question. Everything should be FOIAable.” Other council members during the session also called for HRV to be more transparent.
In an email response to a question about whether HRV would voluntarily submit to the public records act, Carnes said HRV would continue to cooperate with the city by providing information, but was not subject to the act.
During the council session, Alphonso Albert, the chair of the board of managers of HRV and an NRHA commissioner, and Ronald Jackson, NRHA’s executive director, defended HRV, saying the funding it provides was critical to the housing authority as federal and city monies declined. According to NRHA documents, HRV has transferred $2.3 million to the housing authority, all since 2016. It’s not clear what funds, if any, were transferred between 2003, when HRV was created, and 2016.
“HRV has never refused to provide New Markets Tax Credit funding to a qualifying Norfolk business,” Jackson said. “In fact, the opposite. HRV has offered to provide New Markets Tax Credits financing to several local businesses and developers who ultimately declined to participate, citing the complexity of the program, the reporting requirements and the fact that there’s little demand for New Markets Tax Credits funding in Norfolk.”
In a May 1 letter to City Council obtained by The Mercury, Jackson cited one example, the Salvation Army’s Kroc Center, which opened in 2013 and was funded with donations. The sponsor, he said, “decided not to participate in the NMTC program due to its complexity, collateral requirements, and ongoing reporting obligations to the U.S. Treasury Department and to investors.”
Jackson did not specify other businesses that were offered the funding and when, nor did he specify whether HRV has marketed the program to local developers in recent years. The Mercury has public records requests with the Treasury Department pending since August for HRV’s applications for tax credits, which would reveal what projects they have pursued over the years.
Not ‘too complicated for Norfolk’
In the interview, Alexander didn’t buy the excuse the program was too complicated and had too many compliance requirements.
“You tell me the what and we’ll figure out the how,” he said. “Nothing should be too hard for government. Ever. “
Chalk agreed. “New Markets Tax Credits, yeah, they’re complicated,” he said. “So are historic tax credits or Opportunity Funds. So are Community Development Block Grants. Everything we do has a layer of complication to it. To say that it’s too complicated for Norfolk, that’s not right.
Jackson said funds transferred from HRV provide needed services such as workforce development and youth programming that the Department of Housing and Urban Development and the city are not funding. “There’s absolutely nothing nefarious there,” he said. “It seems we’re being punished for being successful.”
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 a Treasury Department database. Meanwhile, Hampton Roads Ventures has financed more than $100 million in projects outside the state.
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 a 39 percent tax break over seven years.
In his letter, Jackson said HRV’s business strategy had evolved so that for the past 10 years it has focused on rural transactions for manufacturing facilities, medical facilities and retail businesses that include a grocery store or fresh food component. To continue to win allocations in the highly competitive process, he said HRV needed to follow that strategy.
However, the CDFI Fund, which administers the New Markets Tax Credits Program, relaxed its compliance requirements in response to the pandemic. For allocations from 2017 through 2020, it created an exception that allows a CDE to apply to “finance one or more projects or businesses that are not generally consistent with the business strategy in the allocation application.” HRV won a total of $100 million in allocations in the last two years.
Carnes, the lawyer for HRV and NHRA, said she was aware of the pandemic exception, but did not answer a question about whether she had broached it with city officials.
‘Doing the people’s business’
Both Jackson and Albert, disparaged the Mercury’s reporting repeatedly in their remarks. “We’ve started to allow the reporter to set our agenda,” Albert said. “We’re doing the people’s business, but the reporter is telling us what to be outraged about.”
Council member Tommy Smigiel, the first to speak after the presentation, suggested that attacking the media was not a productive strategy. Until the stories appeared, Smigiel said, he and some other council members had no idea Hampton Roads Ventures existed. Council appoints NRHA’s commissioners, who also serve as the board of managers of HRV, and Smigiel said it was important to know their duties would include that responsibility. “What was the big secret about HRV? Why weren’t there discussions over the years when NRHA has presented to council or when council members have met with NRHA members?” he asked.
Council members Andria McClellan and Courtney Doyle each raised questions about how HRV was disbursing its funds, noting it had about $2 million on top of the reserves officials said it needed. “Y’all come to us all the time and say we need more money,” McClellan said, “And then we find out that y’all have a pot of gold and it’s not being used. That’s the problem.”
Doyle asked that HRV focus on Norfolk. “As difficult as the new market tax credits are, please invest in Norfolk,” she said. “It’s vital that we have that money coming back. We just need to make it work.”
She questioned a proposed process requiring vetting by the city’s Department of Economic Development of any projects before HRV considers including them in an application. “That basically imposes quite a bit of responsibility on our Norfolk economic development department. It needs to change,” she said. “That’s not where this responsibility rests.”
The Mercury series outlined roughly $250 million in investments spurred by HRV including a mixed-use senior apartment complex in Illinois. a peanut shelling plant in Georgia, grocery stores in Ohio, Louisiana, Illinois and Ohio, a grain terminal business in Mississippi, an aluminum company in Alabama, a hair gel company in Tennessee and a cotton mill in Louisiana.
Asked about his reaction after first reading that list of projects, Alexander said, “Where’s Norfolk. I’m the mayor of Norfolk. Where’s Norfolk?”
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