For two years, the city of Richmond pitched a new minor-league baseball stadium as a project that would have no impact on the city’s taxpayers.
This month, however, city leaders made a significant pivot. Deciding the old plan had become too expensive, they announced a new financing structure. The city will issue general obligation bonds and, if the worst-case scenario unfolds, the city would have to delay programs or raise taxes to pay off the debt.
“I know we said a hundred times we would never do this,” Sharon Ebert, deputy chief administrative officer for Richmond, told the City Council last week.
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There’s minimal risk in the new plan, city leaders say. It saves $215 million, it brings funding three months faster, and it ultimately helps ensure a new ballpark opens on Arthur Ashe Boulevard in 2026. Mayor Levar Stoney says it’s necessary to keeping the Flying Squirrels in Richmond.
But opponents counter that the burden should not fall on taxpayers, that the city needs more time to consider the plan and that schools should be the top priority. Paul Goldman, a Richmond lawyer who last year led a successful campaign against a South Richmond casino, called it a bait-and-switch.
The City Council will vote on the new financing structure on May 8. With seven of nine members on board, the council is expected to approve the new bonds.
Old vs. new
When the old plan was hatched in 2022, the city announced plans to create a community development authority that would issue bonds. If the revenue to cover the bonds never materialized, the city would not be responsible for paying the debt.
But as the Federal Reserve raised interest rates, the cost of financing the project ballooned. The community development authority would have to pay an 8% interest rate, and the cost to build the stadium, install the necessary infrastructure and pay off the bond debt would have reached about $495 million.
This approach would have been slower, too. The authority would not have been able to issue the bonds until the stadium was fully designed and the final cost was determined — two steps that have not yet occurred.
Earlier this month, the city announced its intention to ditch that plan. It needed something cheaper and faster.
Instead, Richmond intends to issue $170 million worth of general obligation bonds, which will cost the city about 4% to pay back, because the bonds are seen as a stable investment.
The total cost of the stadium, infrastructure and debt repayment will total $280 million. The city can float the bonds in June without having a final stadium design or total cost.
Because the new approach needs less revenue, the city will draw tax dollars from a smaller footprint, and developments west of Arthur Ashe Boulevard will pay their taxes straight to the city’s general fund. Because the bonds can be sold faster, the city expects to capture $25 million in state sales tax revenue that is due to disappear July 1 under a new law. If the city can issue the bonds before July 1, it can claim all the sales tax revenue generated by the stadium project.
The bonds would be paid off by real estate taxes generated from the new homes to be built around the stadium and lease payments from the Flying Squirrels.
But the new deal comes with a catch: If the Squirrels fail to pay their lease payment, or if the new homes do not generate enough tax revenue, the city will have to cut services elsewhere or raise taxes to pay off the bond debt.
The case against
Those against the project generally say the chance the project falls on the shoulders of taxpayers is too great. Goldman called the stadium a risk the city cannot afford.
In an effort to let residents decide, Goldman has called for the city to hold a referendum in November. In Virginia, counties must hold referenda to approve most bond sales, but cities are not required to do so.
Goldman does not buy the argument that building the stadium will not affect school funding. The city will generate tax revenue from the nearby residences even if it does not build a stadium. That money could go toward renovating five elementary schools instead of the ballpark, Goldman said.
“What is the cost of denying them all they can be?” he said of students. “This is the most expensive way to do it for the taxpayer, because the taxpayer is on the hook for $170 million.”
Goldman also worries about the project’s transparency. Because the Economic Development Authority will own the stadium, and not the city itself, the EDA can hire whoever it wants to build the structure without going through a public bidding process.
If taxpayers might end up paying for it, they should have a say in how it is built, he said. “It should be city property, which is different than EDA property.”
The city has let the Flying Squirrels take the lead designing a stadium within the city’s budget. The city has also identified some of the companies that will work on the stadium, including KEi Architects.
Other opponents say the city has rushed the process. City leaders announced the plan for the new bonds in early April, and the council will be voting about a month later.
Those in support
City leaders are convinced the level of risk is low.
“Is there risk? Yeah,” Ebert said to the council. “I don’t think it’s a great risk. I think it’s a minimal risk.”
The city’s plan hinges on money coming from two places: Squirrels fans and new residents. The Squirrels need fans to attend games so the team can pay its $3 million annual lease payment. The developers — Diamond District Partners LLC — need people to move into the new homes once they are built so they can pay about $7 million annually in taxes.
These are conservative financial estimates, Ebert said, and the revenue should easily cover the bond debt. Since the city is saving $215 million, that money will be added to the city’s general fund. And because the project will bring new revenue, it will not impact Richmond’s ability to build schools, roads and fire stations.
Since the Squirrels arrived in 2010, Richmond has promised them a new stadium. For 20 years, city leaders have tried to replace The Diamond. The Richmond Braves ultimately left for Gwinnett County, Georgia, due to the city’s reluctance to build. These are factors Stoney considers.
“This really comes down to — do we let the Squirrels go or not?” Stoney said. “I’m unwilling — and I think a lot of Richmonders would stand with me and say the same thing — we are unwilling to let another franchise leave the city of Richmond.”
Other supporters of the project consider the investment and its potential return. The way Andreas Addison, who represents the council’s 1st District, sees it, Richmond will issue bonds for $170 million and get a $2.4 billion mixed-use neighborhood in return. He calls that a good deal.
Addison addressed the claim that the city could reap those benefits by building homes but not a ballpark. He said the Diamond District needs an economic engine to bring residents there.
Scott’s Addition has breweries, and Manchester has access to the James River and the best view of the city. The stadium will springboard the Diamond District neighborhood, growing it faster than it otherwise would, he said.
“Look how long Scott’s Addition has taken,” he added.
Addison recognizes that an economic downturn could occur — something like the pandemic or the recession of 2008. But he believes such an event would challenge the entire city, not just this project, and such fears are not a reason to hold back development.
He knows residents always call for prioritizing building schools. But development also helps schools, he said. Since he joined the council in 2017, Richmond’s budget has grown by more than $250 million, and some of that money has gone to help schools. The more people who move to and visit Richmond, the more tax revenue the city can spend on schools.
The city needs a two-pronged attack, he said, encouraging economic development and funding schools at the same time. Henrico County did it, he said, by modernizing J.R. Tucker High and Highland Springs High while building the Henrico Sports & Events Center.
“That’s the challenge. We have to do both,” Addison said. “We’ve got to put some economic activity to work to make the city attractive for investment.”
Other members of the council have gotten on board. Katherine Jordan, who represents the 2nd District, said hearing the financial structure had changed was “not a call I wanted to take.” But the financial figures make the project “100% compelling.”
Jordan echoed the sentiment that residents will keep moving to the area, and fans will continue attending games.
“Things are being built right and left,” she said. “This is going to be successful. The Squirrels are wildly successful.”
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