Last week we dipped into recently released financial projections detailing how Richmond Mayor Levar Stoney proposes funding construction of what would be the state’s largest coliseum.
It’s a complicated plan that includes more than a billion dollars in spending, and, not surprisingly, generated a few questions. Here’s what one reader asked (bolded text) along with the answers I sent back.
If revenues on the project fall to less than half of projections, you say that “funds would start to flow out of the city.” What exactly are you saying? How does that square with the Mayor’s “no risk to taxpayers” pledge?
Going back through the mayor’s statements, it looks like he’s been pretty careful about how he’s worded this to focus on how the bonds are issued, but the city’s financial estimates acknowledge the proposed tax increment finance district would generate an estimated $308 million with or without the project. The city says that if the project performs half as well as they estimate, it would still break even, meaning that $308 million wouldn’t go to pay back debt on the arena. But if it performs worse than break even, bond holders would be entitled to the incremental revenues from the TIF, meaning money that otherwise would have gone to the general fund in a no-development scenario is instead going to pay down the debt on an arena. Getting back to the mayor’s no-risk language, what he’s saying is, “If this thing really bombs and incremental revenues from the TIF aren’t able to make up the difference, the bonds are non-recourse and the city wouldn’t have to cough up any additional cash.”
Can you suggest how citizens should judge whether or not $308 million is a reasonable base estimate of revenue for the designated properties over 30 years? Many people are worried about losing any desperately needed general fund revenue.
That’s something that’s going to require further analysis. The $308 million estimate is based on real estate tax revenues in the district continuing to grow at their current rate. It could be higher — several people have noted a recent rezoning makes significant redevelopment in Monroe Ward likely. It also could potentially be lower if there were, say, an economic downturn.
Our new coliseum will mean continuing costs exceeding the bond payments. And the city will be giving certain incentives to the developers. Is someone checking the details so that Richmonders know the total cost to taxpayers?
That’s another thing that I think will require further independent analysis, but the city does account for estimated incremental costs — the biggest is building and staffing a new fire station — in its revenue estimates. See page 24 of this analysis prepared by the city’s financial adviser.
Mayor Stoney, who I tend to trust, has put a strong public purpose overlay on this project — beyond the free market benefits which should be derived. Have you uncovered details on how Richmond citizens will gain these new jobs, both temporary and permanent? What specific structures/resources will be put into workforce development over what time period? This is an opportunity to put some beef into our community wealth-building efforts. We need much more than some job fairs. And about aid to the schools: Do we just wait to see what this lottery is able to bestow on us in the future? Are there stipulations about prioritizing schools in any future revenue developments? In 20 years, if revenues are high, will we be free to spend the “bonus” money on schools and other needs, or will it be committed to paying down our debt early?
This isn’t an area I’ve delved into, but it deserves a deeper look. One area of concern I’ve heard from people in the affordable housing arena is that the commitments included in this plan are not particularly impressive considering the value of the real estate and development involved. To your last questions, the mayor has proposed setting aside 50 percent of surplus revenue to schools, etc., but bond holders get the first crack at the money. My impression is that the goal is to pay off the bonds as quickly as revenues reasonably allow to lessen the cost of debt service.
Finally, as a practical matter, how much city hall talent/energy/focus will be spent on this project? We will have a difficult time funding the RPS Strategic Plan next year and afterward. Major new monies must be found. Should our elected leaders husband their political capital for this — or be bold? Can City Council really be bold? “Bold” is what the mayor wants, and I want to support him.
The city includes cost of city staff time in their projections, estimating the work of finance, economic development and planning and development departments will total to $7 million. I can’t speak to how much time and energy the mayor’s office has spent on it, but I think it’s safe to assume it will take up a lot of the City Council’s time going forward.
I have no dog in this. I want to support the proposal. … I’m just a citizen trying to figure out what’s best for all of us.
Here’s my takeaway: If you’re inclined to think the city should have a role in building, operating and maintaining a large arena, this is potentially a way to make this happen while generating new revenue for the city, but I’d want to see a credible, third-party analysis of the economic assumptions underlying the city’s performance estimates. Is it reasonable to assume a coliseum without a tenant will be booked as many nights as the city and developers say it will? Is it reasonable to assume 25 new restaurants will sell an average of $62 million worth of food every year? No idea. Presumably these are questions the review commission established by City Council will seek to answer.
If you’re not inclined to think the city should be involved in funding an arena, I’d want to know more about what kind of development potential and revenue potential the city-owned land in play holds in a scenario that isn’t built around funding a coliseum. Could we assume similar revenue? Would that mean the $350 million in bonds currently going toward an arena could instead pay for things like new schools and a redevelopment of public housing? This is not an area that has been explored by city leaders.