In 2003, Hampton Roads Ventures administered $15 million in federal tax credits designed to attract investors to distressed areas, including $3.5 million for then Harrison Dry Storage Boatel (now Morningstar Marina) on Shore Drive near East Beach, NRHA’s upscale waterfront development. Since then, the subsidiary has invested little in Norfolk. (Jim Morrison)
In a report required by Norfolk City Council, Hampton Roads Ventures, the for-profit development subsidiary of the city’s housing authority, says that it has met with representatives of several Norfolk projects including a shared kitchen, a grocery store, and a health and wellness center, but has not completed deals to invest in them.
HRV also transferred $1.5 million to its parent, the Norfolk Redevelopment and Housing Authority, in August, by far the largest contribution since it was formed in 2003.
But the company has yet to assemble a marketing plan targeting Norfolk projects, nor has it changed the “About Us” page on its website that calls it a rural development entity.
After a Virginia Mercury series detailing how Hampton Roads Ventures had invested only a fraction of the $360 million in tax credit allocations it has won in Norfolk, the City Council moved to create oversight of a firm some members said they didn’t know existed. A July resolution required the firm to make its “best efforts” to include Norfolk projects in future applications for new markets tax credits, a U.S. Treasury Department program to encourage development in distressed, low-income areas by offering investors a 39% tax break over seven years.
Andria McClellan, a council member who in May questioned why HRV had not sent more of its cash reserve to the city housing authority, said she was “cautiously optimistic” that the most recent transfer signaled a change.
But she also called for a focus on finding Norfolk projects.
“More work clearly needs to be done by HRV to actively market this funding opportunity within Norfolk and the region, specifically in the much-needed affordable housing industry,” she said. “I understand these deals take months to complete, so there may be a lag in their efforts. However, a marketing plan should not take that much time to construct. I would expect to see a detailed marketing plan by year’s end at the latest.”
A spokesman for the housing authority said Ronald Jackson, the authority’s executive director, was close to announcing an HRV deal with a local nonprofit, but he would not disclose the details until the agreement was signed. Jackson did not respond to a list of questions emailed to him, nor did Delphine Carnes, the lawyer for HRV who is also the authority’s counsel.
Representatives of HRV have repeatedly declined interviews and refused records requests under the Virginia Freedom of Information Act, saying the subsidiary receives no government funding. Norfolk Mayor Kenneth Alexander has said he thinks HRV should subject itself to the public records law.
A $1.5 million transfer
Companies like Hampton Roads Ventures are called community development entities. Such groups, which may be offshoots of banks, nonprofits, public agencies or other financial institutions, are eligible to apply for new markets tax credits from the Treasury Department. If they prevail in the highly competitive process, they can then use the credits to match projects and investors, who earn a 39% tax break over seven years.
In the last two awards cycles, HRV won a total of $100 million in new markets tax credits designed to spur investment in distressed or severely distressed areas that otherwise would not attract capital. The report reveals those allocations went to projects in Oklahoma, Louisiana, Texas, Missouri, Nebraska, Oklahoma, New York and Virginia.
While Hampton Roads Ventures was originally conceived as a way to drive investment in Norfolk, it has not backed a project there since 2008.
Nevertheless, the Norfolk housing authority and HRV officials told the city council at a meeting in May that funding from HRV was critical as federal and city monies declined.
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. They also open their meetings and finances to public scrutiny. Hampton Roads Ventures does not.
In August, Donald Musacchio, chair of the housing authority’s Board of Commissioners and vice chair of HRV’s board, requested $1.5 million from HRV to fund $400,000 in community safety improvements, $950,000 in other community improvements and renovations, and $150,000 in youth programming. The following day, Alphonso Albert, chair of HRV’s board and vice chair of the housing authority’s board, replied that the distribution had been approved.
“As you know,” he wrote in a letter obtained through a public records request, “the HRV Board of Managers has approved a methodology for calculating the amount of earnings that could be made available to NRHA.”
He did not specify that formula. HRV, according to the balance sheet provided to the city as part of the report, had $11.6 million in retained earnings after the payment to the Norfolk housing authority. During a May meeting, some city council members asked why HRV was sitting on millions while coming to the city for additional funding.
In the nine months since The Mercury series was published, Hampton Roads Ventures has transferred nearly $2.5 million to NRHA. In the 18 preceding years, it had transferred $1.3 million.
The additional security funding arrives at a time of rising concerns about crime in Norfolk and housing authority properties in particular. Most shooting hot spots identified in maps provided by the city to the Newark Community Street Team, consultants hired to train community members to resolve disputes before they escalate, are located in public housing communities operated by the authority.
On the map showing people shot between July 8, 2021, and July 7, 2022, Young Terrace, Calvert Square, Grandy Village and Diggs Town, all run by the housing authority, were identified as hotspots, with Young Terrace/Calvert Square labeled as the “most significant” hotspot. It was also the most significant hotspot on a map identifying people shot in the last five years. The maps were obtained through a public records request.
Promises of a marketing plan
Norfolk City Council’s July resolution required HRV to market itself to Norfolk applicants.
In a memo accompanying the report, Jackson said HRV is working on a marketing plan that will include new market tax credit training for developers, Hampton Roads Chamber members and financial institutions. He also said HRV had been in touch with nonprofits, but some of the local projects would not qualify because they were not in distressed areas, a federal designation based on factors including low median incomes or high poverty rates.
Norfolk has 16 severely distressed census tracts, which are given the highest priority for allocations, plus more labeled distressed. The poverty rate in those tracts ranges as high as 80%, and the unemployment rate tops out at 40%.
Jackson added that Jennifer Donohue, Hampton Roads Venture’s CEO, had met with representatives of several projects under review, but they were not ready to proceed. He did not answer a request for the number of meetings and declined to name the representatives of the organizations through a spokesman.
HRV has not altered the “About Us” section of its website to target Norfolk projects. The site describes HRV as a “Rural Community Development Entity committed to attracting private investment capital into innovative economic community development projects primarily in severely distressed rural areas.” Despite what housing authority officials have said in the past, HRV is only required to invest 50% of its allocations in nonmetropolitan areas.
According to a profit and loss sheet for the first nine months of 2022, HRV spent more than $324,000 on payroll expenses and $200,000 on consultants. Its website shows three employees, a chief executive officer, a portfolio manager and an executive assistant.
In addition to passing the resolution requiring annual reporting, City Council expanded the Norfolk housing authority’s board to nine members from seven. Two of those four will also join the board of managers of Hampton Roads Ventures.
In emails obtained through a records request, council member Tommy Smigiel suggested adding “someone that won’t play around in this position – maybe a lawyer.” Among those appointed was Amy Chudzinski, a lawyer and member of former councilman Andy Protogyrou’s firm. Another appointee, Fred McRae, a former public housing resident and frequent critic of the authority, resigned on Sept. 13 before participating in his first commissioners’ meeting. In a brief phone interview, he said he’d become too busy to properly serve.
The latest projects backed by HRV
- $6 million for a sawmill and millwork expansion in Marion and Independence, Virginia with Woodgrain, a corporation with about 20 locations across the United States. A Woodgrain executive said the sawmill now employs 73 people, which he described as “significantly more” than previously, though he couldn’t provide a number. That deal closed in August.
- $9 million for Danimer Scientific in Bainbridge, Georgia, to build a production plant to create what it calls more sustainable, natural ways to make biodegradable plastic. That deal closed in August.
- $9 million for Jefferson Health Care in Fairbury, Nebraska, a 17-bed acute care facility, to build a clinic addition, replace the boiler and repair the roof, according to an executive there. The deal closed in August.
- $8 million in Alstom Railcar in Howell, New York, part of a global conglomerate headquartered in France that supplies rail transportation solutions. A spokesman for the company did not return an email request for details. That deal closed in December.
- $5 million in the Community Food Bank of Eastern Oklahoma. A food bank spokesman was unable to detail how the money was used. The deal closed in February.
A solution to Norfolk’s affordable housing crisis?
McClellan expressed interest in whether Hampton Roads Ventures will invest in affordable housing in Norfolk. New markets tax credits can be used to invest in for-sale affordable housing as well as rental housing in a mixed-use development if retail provides 20% of the project’s income. Nonprofit community development entities nationwide have invested nearly $500 million in such credits to build more than 4,200 for-sale affordable homes in about 30 other cities, including Atlanta, Charlotte, Newark, Baltimore, Santa Fe, Pittsburgh and Memphis.
In Pittsburgh, the mayor in 2020 hailed the tax credit approach as a model after the city’s Urban Redevelopment Authority used them to build 26 homes, 18 of which were sold to families with incomes below 80% of the area’s median income.
HRV has funded mixed-use development including housing in other cities, including a $16.5 million mixed-use senior apartment complex in Illinois and a $6.5 million luxury condominium project in Culpeper. But it has not invested in housing of any kind in Norfolk.
Jackson did not answer emailed questions about whether the Norfolk housing authority has asked HRV to make investments addressing the housing crisis in Norfolk. During the authority board’s May retreat, he said Norfolk is about 12,000 units short of the needed affordable housing.
Increasingly, the authority is using housing choice vouchers, which assist low-income residents with renting privately owned housing. When the authority opened applications for vouchers in April, it received more than 4,000 applications. But according to a May report, the Norfolk rental market has the ability to absorb about 100 vouchers per year. The housing authority only uses 3,942 of its 5,233 authorized vouchers because of funding or housing supply constraints.
Old Dominion University’s State of the Region report, issued earlier this month, described an affordable housing crisis in the area as well as in Norfolk. Norfolk has the highest percentage of cost-burdened households, defined as spending more than 30% of income on housing, in the region. More than 42% of Norfolk households are cost-burdened, broken down as 29% of homeowners and 52% of renters.
Regionally, the report found that of the 229,000 households considered cost-burdened, about 97,000 spent more than 50% of their income on housing. Affordable housing, the report noted, is also a competitiveness issue, key to attracting new companies.
“To ensure more affordable units enter the pipeline, it will be important to find creative ways to bridge the financing gap,” the authors wrote.
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