JLARC poised to examine VCU Health in light of failed development

A rendering of the office tower and complex that was planned to replace the Public Safety Building at Ninth and Leigh streets. (BizSense file)

Scrutiny over the failed downtown development that cost VCU Health $73 million to back out of is prompting a closer look by the Virginia General Assembly’s investigative arm.

A subcommittee of the Joint Legislative Audit & Review Commission included the health system among topics it is likely to study in the coming year, according to recommendations submitted Monday to JLARC staff. The staff will next draw up resolutions for consideration by the full commission at its meeting on Nov. 13.

VCU Health was one of several suggested topics that staff proposed to the subcommittee at Monday’s meeting, specifically the aborted redevelopment of Richmond’s old Public Safety Building and the health system’s governance structure, which has drawn scrutiny from Gov. Glenn Youngkin.

Sen. Janet Howell

Sen. Janet Howell (D-Fairfax), who chairs the full commission and serves on the study topic selection subcommittee, spoke in favor of studying the health system during Monday’s meeting.

“I think it is important that we do it. It’s highly followed by the press, and I think we need to get really accurate information about what’s going on there,” Howell said. “In my mind, there is some problem with the governance structure of the health system.”

In presenting the topic, JLARC Senior Associate Director Justin Brown referred to scrutiny of the health system’s operations in light of the failed development, which VCU Health had agreed to anchor as a master tenant. The $73 million payment was needed to break its lease, and the health system remains on the hook for additional costs that Youngkin said could end up totaling $100 million.

Noting that staff had heard interest in the topic from some JLARC members, Brown told the subcommittee, “There’s also been some anecdotal concerns generally about how well that health system is being operated and how that may be affecting health services in the Richmond area.”

“It’s not typical for us to look at a single relatively small entity that’s local or regional in nature,” Brown said, “but from time to time the commission has over our history asked us to do these narrowly focused things.”

Other topics advanced for study include regulation of the data center industry, transportation issues such as tolling strategies and congestion reduction, and topics relating to broadband, higher education and the state health department. Selected studies would be completed in 2024 and published on JLARC’s website.

Outside Monday’s meeting, Howell said it is likely that VCU Health would be selected by the full commission in November. JLARC Director Hal Greer agreed, stating that study selections are not official until then but that the VCU Health topic “has momentum.”

The Public Safety Building as viewed along Ninth Street in 2020, with the under-construction VCU Health Adult Outpatient Building rising behind it.

In the days after Richmond BizSense in May broke the news about the $73 million exit payment, which VCU Health revealed in response to Freedom of Information Act requests, former Virginia governor and Richmond mayor Doug Wilder called on JLARC to investigate the matter, describing the payment as “financial misbehavior” and a “misappropriation of VCU spending.”

No action was taken at JLARC’s meeting that month, and at its next meeting in July, Howell said there had been no interest from JLARC members when asked if an investigation was possible.

While study topics can be proposed during General Assembly sessions, typically through joint resolutions of the House and Senate, selections usually stem from the topic selection subcommittee, which meets in October and is made up of House and Senate members.

Doug Wilder

Wilder, a professor at Virginia Commonwealth University and namesake of its L. Douglas Wilder School of Government and Public Affairs, said in a phone call Monday he was pleased that JLARC is taking up the issue.

“I’m glad that JLARC has agreed to look into this to the extent that it not be delayed further,” Wilder said. “I would likewise suggest to the governor that he support what the legislature has done through JLARC. I am reasonably certain that he would be supportive of that as well.”

Wilder has also called for the university’s Board of Visitors to fire VCU President Michael Rao, who also is president of the health system and chairs its Board of Directors.

Rao’s role as board chairman also was noted by Youngkin in his letter last month to General Assembly leadership urging changes to VCU Health’s governance structure. Youngkin said those changes should include replacing Rao as chairman and having him remain on the board as an ex officio member.

Rao has said he supports Youngkin’s thinking on the matter. He also has noted in recent Board of Visitors meetings that VCU Health’s bylaws require that the university’s president dually serve as president of the health system. Rao has said the role is not involved in health system operations and described it as facilitating communication and coordinating operational strategy between VCU Health and the university.

Wilder has since called for the involvement of Virginia’s congressional delegation, earlier this month sending a request to U.S. Sens. Mark Warner and Tim Kaine and Reps. Bobby Scott and Jennifer McClellan asking that they weigh in on the issue.

Wilder said Monday he had heard back from Kaine, who he said told him he was having his staff look into it and would get back to him. Wilder said he had not heard back from Warner, Scott or McClellan.

Emails sent to their respective press contacts Monday were replied to by Valeria Rivadeneira, Warner’s press secretary.

“The lawmakers have received Gov. Wilder’s letter and hear his concerns,” she said.