A majority of Richmond City Council members maintained their opposition to the proposed Navy Hill development this week, despite a largely supportive report from a third-party consultant that council had hired to assess the project.
After reviewing the report at a committee meeting Monday, members voted 5-4 to recommend striking the project’s proposed ordinances from council’s next agenda, and to go through with their request for Mayor Levar Stoney to withdraw the entire proposal in favor of a new RFP process.
The ordinances, deferred for months in light of the third-party review, were set to come back to council at its next meeting Feb. 10. The recommendations from council’s Organizational Development Standing Committee are to be formally voted on at that meeting, while a final vote to decide the $1.5 billion project remains scheduled for council’s Feb. 24 meeting.
Stoney has said he will not withdraw the proposal, calling the request “laughable” and “irresponsible” in light of council’s insistence on a third-party review that ended up costing the city $215,000. Council first voted on the withdrawal request at its regular meeting last week, prior to receiving the report it commissioned from Chicago-based firm C.H. Johnson Consulting.
Council had been similarly divided in approving the consulting firm’s contract, with four members contending the report could be slanted because C.H. Johnson had once employed the founder of Hunden Strategic Partners, the Chicago-based consultant that Stoney’s administration had previously hired to review the project. Hunden’s findings supported Stoney’s initial endorsement of the project in 2018.
Strengths and weaknesses
In its report, to be formally presented to council next week, C.H. Johnson listed perceived strengths and weaknesses, as well as opportunities and threats, of the project as proposed. It described the plan as written in the “city’s favor” in the event of a project default.
While the project calls for bonds to fund its centerpiece arena, which would replace the now-shuttered Richmond Coliseum, the report noted the proposed convention center hotel would be funded without a public subsidy, despite the center’s regional support structure. It also noted an opportunity for regional cooperation in the project, citing the convention center as a model.
On the strengths side, the report describes Navy Hill as a “thoroughly vetted development by various outside specialty consultants.” Weaknesses listed include a lack of a specific plan for the proposed GRTC transfer center or the city’s social services department, which eventually would be relocated to make way for new buildings.
Other weaknesses listed include a lack of an appraisal of city-owned land prior to the city’s request for proposals that produced the lone response from NH District Corp., the local group backing the project led by Dominion Energy CEO Tom Farrell.
Also listed among weaknesses are a lack of an organizational plan for NHDC’s nonprofit foundation, the percentage of income-based housing included in the proposal and the project’s proposed 80-block tax increment financing area. NHDC had said the TIF area could be reduced to 11 blocks with the passage of a state bill that would contribute a portion of state sales tax to the project. But that bill has since been tabled and effectively killed in the General Assembly.
Of the income-based housing, Stoney last month announced that enough units had been located within the project area to meet the city’s required percentage threshold for new multifamily residential development. He also has said that current funding levels for schools from the city’s tax base would be maintained throughout the project, including from properties in the TIF district.
VCU Health building detailed
As proposed, Navy Hill calls for the arena to be funded using $300 million in bonds that the city would pay over 30 years using real estate tax revenues from new development and increased assessments within the TIF district. The project would be kickstarted with $900 million in private investment that is projected to total $1.3 billion upon completion of the project.
The development agreement requires NHDC to show the $900 million has been secured before the city can pursue a bond sale to finance the arena, projected to cost $235 million and planned to be the largest in Virginia.
Spanning a 10-block area primarily north of Broad Street, Navy Hill would consist of a 17,500-seat arena, a 541-room Hyatt Regency hotel, 2,000 market-rate apartments, an initial 280 income-based housing units with potential for more, renovated Blues Armory building, GRTC transfer center, and additional retail, office and city-use buildings.
Last month, real estate data firm CoStar said it would fill one of the office buildings planned for Navy Hill, and Tuesday, VCU Health announced details for the block of buildings it has signed on to occupy along with nonprofits The Doorways, which would be relocated from beside the Blues Armory, and Ronald McDonald House Charities of Richmond.
The buildings that would rise in the block bordered by Ninth, Tenth, Leigh and Clay streets would be leased to VCU and the nonprofits, with NHDC retaining ownership to make the building taxable. The buildings would accommodate 250 offices to support the adjacent VCU Medical Center and outpatient pavilion, new facilities for the nonprofits, a retail pharmacy, retail and restaurant space, and more than 1,500 parking spaces, according to the announcement.
Deciding vote approaching
C.H. Johnson’s report warns that greater density would be needed with the loss of the TIF-reduction legislation, potentially lengthening the time frame for project absorption. It also notes other areas such as Hampton Roads and Norfolk are in early stages of planning redevelopment of their own aging venues.
If the arena was removed, which NHDC has said it would not do, the report projects that additional mixed-use development needed would slow the absorption rates for Navy Hill’s residential, office and retail components, resulting in a projected loss of $156 million in tax revenues.
The report goes on to question whether City Hall can handle a project the scope of Navy Hill, listing among weaknesses that the city “presently lacks capacity of appropriate oversight” of larger-scale projects. Navy Hill was cited among reasons for a new city policy rolled out in recent weeks allowing limited third-party permitting and inspections for larger projects.
In his State of the City address, Stoney said the project has and will continue to be tweaked to address such concerns, contending that community input has “made a good project even better for all of our residents.”
“Yet, after 26 months, some still doubt Richmond can do transformative things and fear Richmond will fail,” Stoney said, adding that he would not withdraw the proposal if requested.
Council members requesting the withdrawal include Kimberly Gray, Vice Chairman Chris Hilbert, Kristen Larson, Stephanie Lynch and Reva Trammel. President Cynthia Newbille, along with Andreas Addison, Michael Jones and Ellen Robertson, voted against the request.
At Monday’s committee meeting, Newbille defended the commission of a third-party consultant, indicating the results could spur further compromise.
Newbille said it was worthwhile “to have the opportunity to at least have a final report back from the independent consultant, to at least have an opportunity to look at the items that we submitted and could possibly consider negotiating to make this the kind of opportunity that we all say we want.”
“Short of there being a vote to bring it back at the council meeting on the 10th,” Newbille said, “that opportunity may be lost. Hopefully not.”