The $1.5 billion Navy Hill plan hinges on a special tax zone, the size of which has become a major sticking point for opponents of the downtown development proposal.
A bill introduced Wednesday at the Virginia General Assembly could allow the city to shrink the zone by giving it access to state sales taxes, the bill’s patron and the project’s backers say.
Del. Jeff Bourne, D-Richmond, introduced a measure to allow Richmond to keep a portion of the state sales tax collected in an area bounded by Leigh Street, Franklin Street, Third Street and 10th Street. The area is slightly larger than a 10-block area north of Broad Street, where the mixed-use project would rise if it wins approval from the Richmond City Council next month.
If state lawmakers sign off on Bourne’s bill, sales tax revenue tallying in the millions over 30 years would be diverted from the state to pay back bondholders for the project’s centerpiece: a publicly financed arena to replace the Richmond Coliseum.
“I put it in to give the city another tool in the toolbox should they decide to go forward with this project,” Bourne said, noting that the state approved a similar carve-out for Virginia Beach in 2018 as officials there pursued a major development project.
Bourne and the plan’s backers say the additional tax money — financial projections weren’t immediately available — could help the city reduce the size of the proposed tax increment financing zone, an integral part of the plan’s financing. As proposed, the district would encompass 80 downtown blocks, spanning from First Street to 10th Street, and Interstate 95/64 to Byrd Street.
All future real estate tax revenue within the district, either from new construction or natural assessment growth, would go to pay down the project’s bonds. A smaller zone would mean less city real estate tax revenue would be obligated to paying off debt for the project. Those dollars would otherwise flow to the city’s general fund, used to pay for basic services like schools and road maintenance.
Over the course of 30 years, the city would owe bondholders $600 million for the arena. NH District Corp. has said it would privately source $900 million for the first phase of construction.
The size of the tax increment financing district, or TIF, has become a major sticking point for some on the City Council. A council-appointed citizen commission that reviewed the plan suggested reducing the district’s size in a report issued last month.
Jeff Kelley, an NH District Corp. spokesman, said the development group viewed Bourne’s bill as a “viable” option for addressing concerns about the size of the TIF zone. New financial projections would be provided to the council that reflected how Bourne’s bill would affect the project’s financing, he added.
“We are interested in all options available to allow us to shrink the size of the [tax] increment financing area, which is the primary concern we have heard about the project from the community. We agree that Richmond should have the same options available for financing economic development projects that other localities do.”
Stoney’s administration spent 18 months negotiating the terms of the project with NH District Corp., the development group led by Dominion Energy CEO Thomas F. Farrell II.
“This legislation presents a significant opportunity to address concerns we’ve heard from the council and the community about the Navy Hill project,” said Jim Nolan, a spokesman for Stoney. “At a minimum, we believe that if this option was available to assist Virginia Beach, Richmond residents should have the same opportunity.”
The Navy Hill proposal calls for a 17,500-seat arena that would replace the Richmond Coliseum; more than 2,000 apartments and condominiums; a high-rise hotel; 1 million square feet of commercial and office space; 260,000 square feet of retail and restaurant space; renovation of the historic Blues Armory; a new transfer plaza for GRTC Transit System bus riders; and infrastructure improvements.
If approved, Bourne’s bill would take effect upon council approval of an agreement between the city and the developer and last for 35 years, or as long as it takes the city to pay off the bonds. The Stoney administration has said it aims to do so in as few as 21 years.