VCU Health OK’d to demolish city-owned Public Safety Building

PublicSafetyBldgWork1

A welding crew was active Tuesday on the site of the old Public Safety Building. City Hall is visible in the distance. (Jonathan Spiers photos)

As it continues to pay for its costly exit from an ill-fated downtown development project, VCU Health has been given a go-ahead by the city to begin demolishing and clearing the project site, at an estimated cost of $5 million.

City Council on Monday authorized the health system to access the city-owned property at 500 N. 10th St. to begin demolition of the old Public Safety Building, which had been planned to be razed as part of the VCU Health-anchored development.

The $325 million project was aborted in February after VCU Health decided to back out of its lease and the city took back ownership of the 3-acre property.

PublicSafetyBldg1

The 3-acre Public Safety Building property at 500 N. 10th St. (BizSense file photo)

The decision cost the health system a onetime exit payment of $73 million. As part of its exit agreement the health system also committed to go through with the demolition, which it has said is estimated to cost $5 million.

The agreement also put VCU Health on the hook to continue paying the unbuilt project’s annual guaranteed obligation payments, or payments in lieu of taxes, which were worked into the deal to cover the minimum real estate tax revenue that the project was anticipated to generate for the city over 25 years.

Those payments – one of which was due this month – have so far totaled nearly $2 million. Those, along with the demolition cost and the project-exit payment, bring the total known cost for VCU Health to back out of the project to $80 million.

The health system has said it decided to exit the project in light of challenges arising over the course of the pandemic and the financial obligations that came with the project, which put VCU Health on the hook to pay more than a half billion dollars in rent over its 25-year lease.

Public Safety old rendering

A rendering of the project that was planned to replace the Public Safety Building. (BizSense file)

In bowing out as the master tenant, VCU Health agreed to continue making the annual tax payments until the property is sold by the city for future development.

Virginia Commonwealth University – a separate entity from the health system but with some shared leadership – is now pursuing a new and more expensive project for the site, including a $415 million facility for its School of Dentistry.

The ordinance that City Council approved Monday authorizes execution of a license agreement between the city and VCU Health that was included in the project’s wind-down in February. The scope of work in the agreement includes remediation of contaminated and hazardous materials such as asbestos abatement, demolition and removal of the 69-year-old building.

The work would complete prior asbestos abatement and other site preparations that had gotten underway before the project’s demise. DPR Construction is VCU Health’s contractor for the work.

The license agreement requires that all of the site work be completed nine months from the council’s approval, putting the completion timeframe in March 2024. A separate construction schedule that was circulated during the wind-down process indicated the actual demolition would last 75 days.

Initial work appeared to be underway Tuesday, as a welding crew and City of Richmond dump truck were visible and active on the site.

PublicSafetyBldgWork2

The site is across Leigh Street from VCU’s College of Health Professions building.

Meanwhile, the tax payment to the city that was due this month totaled $1.3 million. The city billed VCU Health on June 8 for $1.16 million – the remainder due after an initial payment of $135,000 that was made by the health system in January.

The health system had made the first two obligation payments – $77,000 for tax year 2021, and $546,700 for 2022 – by the time the wind-down process was completed in February.

The payments as laid out in the development agreement jump significantly the first three years, reflecting the expected four-year construction timeline. The payments then level off at about $2 million for the fourth and fifth tax years, and increase more gradually thereafter, reaching just under $3 million for the final tax year, 2045.

If paid out completely through 2045, the 25 payments would total nearly $56 million to the city. The tax payments were among several financial obligations that VCU Health assumed when it signed on as the master tenant – and that it has said factored into its decision to exit the project.

PublicSafetyBldgWork1

A welding crew was active Tuesday on the site of the old Public Safety Building. City Hall is visible in the distance. (Jonathan Spiers photos)

As it continues to pay for its costly exit from an ill-fated downtown development project, VCU Health has been given a go-ahead by the city to begin demolishing and clearing the project site, at an estimated cost of $5 million.

City Council on Monday authorized the health system to access the city-owned property at 500 N. 10th St. to begin demolition of the old Public Safety Building, which had been planned to be razed as part of the VCU Health-anchored development.

The $325 million project was aborted in February after VCU Health decided to back out of its lease and the city took back ownership of the 3-acre property.

PublicSafetyBldg1

The 3-acre Public Safety Building property at 500 N. 10th St. (BizSense file photo)

The decision cost the health system a onetime exit payment of $73 million. As part of its exit agreement the health system also committed to go through with the demolition, which it has said is estimated to cost $5 million.

The agreement also put VCU Health on the hook to continue paying the unbuilt project’s annual guaranteed obligation payments, or payments in lieu of taxes, which were worked into the deal to cover the minimum real estate tax revenue that the project was anticipated to generate for the city over 25 years.

Those payments – one of which was due this month – have so far totaled nearly $2 million. Those, along with the demolition cost and the project-exit payment, bring the total known cost for VCU Health to back out of the project to $80 million.

The health system has said it decided to exit the project in light of challenges arising over the course of the pandemic and the financial obligations that came with the project, which put VCU Health on the hook to pay more than a half billion dollars in rent over its 25-year lease.

Public Safety old rendering

A rendering of the project that was planned to replace the Public Safety Building. (BizSense file)

In bowing out as the master tenant, VCU Health agreed to continue making the annual tax payments until the property is sold by the city for future development.

Virginia Commonwealth University – a separate entity from the health system but with some shared leadership – is now pursuing a new and more expensive project for the site, including a $415 million facility for its School of Dentistry.

The ordinance that City Council approved Monday authorizes execution of a license agreement between the city and VCU Health that was included in the project’s wind-down in February. The scope of work in the agreement includes remediation of contaminated and hazardous materials such as asbestos abatement, demolition and removal of the 69-year-old building.

The work would complete prior asbestos abatement and other site preparations that had gotten underway before the project’s demise. DPR Construction is VCU Health’s contractor for the work.

The license agreement requires that all of the site work be completed nine months from the council’s approval, putting the completion timeframe in March 2024. A separate construction schedule that was circulated during the wind-down process indicated the actual demolition would last 75 days.

Initial work appeared to be underway Tuesday, as a welding crew and City of Richmond dump truck were visible and active on the site.

PublicSafetyBldgWork2

The site is across Leigh Street from VCU’s College of Health Professions building.

Meanwhile, the tax payment to the city that was due this month totaled $1.3 million. The city billed VCU Health on June 8 for $1.16 million – the remainder due after an initial payment of $135,000 that was made by the health system in January.

The health system had made the first two obligation payments – $77,000 for tax year 2021, and $546,700 for 2022 – by the time the wind-down process was completed in February.

The payments as laid out in the development agreement jump significantly the first three years, reflecting the expected four-year construction timeline. The payments then level off at about $2 million for the fourth and fifth tax years, and increase more gradually thereafter, reaching just under $3 million for the final tax year, 2045.

If paid out completely through 2045, the 25 payments would total nearly $56 million to the city. The tax payments were among several financial obligations that VCU Health assumed when it signed on as the master tenant – and that it has said factored into its decision to exit the project.

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Jake Crocker
Jake Crocker
10 months ago

Good riddance public safety building. More like the public eye sore building

steve cook
steve cook
10 months ago

I have very little biz sense but this whole deal seems like something Mr.Haney would have pulled out of the back of his pick up. I don’t think even Eb would have fallen for it.

Shawn Harper
Shawn Harper
10 months ago

I don’t have much biz sense but I think instead of building a valuable life saving Health care facility, this site should be made into parking.

Lucas de Block
Lucas de Block
8 months ago

If they don’t put residential on this site then I don’t want it.