Virginia Beach approves new $200m arena, media fail to report city taxes will pay for most of it

Maybe because of the approaching holidays (not that all of them are still approaching), everyone everywhere voted on everything last night, so let’s get right to it:

The Virginia Beach city council voted 10-1 last night to approve the plan for developers United States Management to build a new $200 million arena, which would (at least at first) be just for concerts, not any sports teams. Here’s how WAVY-TV described the financing:

USM would pay for the $200 million facility and the city would take care of the infrastructure costs of about $76 million.

And here’s how the Virginian-Pilot described the financing, way back in May of 2014:

USM’s plan calls for it to spend more than $200 million of its own money to build the arena, then receive up to $7 million annually in tax revenue to pay down its debt.

That $7 million annually actually turns out to be more like $8.5 million, including kickbacks of all property taxes, business license taxes, admissions taxes, arena meals taxes, construction sales taxes, and the city’s share of arena sales taxes, plus the top 1% off of the city’s 8% hotel tax. (It’s all spelled out on the Virginia Beach Department of Economic Development’s website, albeit hidden in a subsidiary “Revenue Fund Agreement” document.) Add it all up, and the arena developers will actually be getting about $206 million in subsidies for their $200 million arena — with about $130 million of that going directly to pay off the money that the developers plan to borrow from a Chinese government-owned bank for arena construction.

Now, I know that finance is confusing, but you’d think the news reports would have found somewhere to mention the tax kickbacks, even if they buried it way down at the bottom. (The Virginian-Pilot’s article on last night’s vote was similarly silent.) Presumably it wasn’t mentioned in the media because it wasn’t mentioned by any of the elected officials at the hearing, but come on, journalist people, you are allowed to actually read and report things on your own — even Wikipedia is okay with that.

Virginia Beach gives preliminary approval to $200m arena, public could pay $175m of cost

Three years after Virginia Beach started looking into building a new arena to lure the Sacramento Kings to move to town (SPOILER: they didn’t), Mayor Will Sessoms and the city council met yesterday to reach agreement on the construction of a $200 million, 18,000-seat venue on city land. According to the latest renderings, the arena will include lots of spotlights and fireworks and lens flare (or maybe that’s the moon, who can tell, it’s all so blurry).

The project would receive $50 to $70 million in city infrastructure spending (which would include things like a plaza outside the arena, which isn’t really infrastructure, but anyway), and also … we don’t know what else also, because the meeting was behind closed doors, as will be today’s followup meeting. So no official word on whether the city is still planning on providing $8.5 million a year in tax kickbacks to the arena developers to help pay for stadium construction costs, as was reported last year (along with reporting that the arena would be “funded entirely by private investors,” because journalists don’t understand simple economics and anyway can’t be bothered to question press releases because someone important might get mad).

So we could still be looking at more than $175 million in public subsidies for a $200 million arena. There will at least be one public hearing on the project (on December 1) before a final city council vote on December 8, which presumably will be public, but you never want to assume in Virginia Beach.

“Private” Virginia Beach arena could cost public $185m

The Virginia Beach city council found out last night how much a new “privately funded” arena would cost the public, and the answer is: a lot.

On Tuesday, City Council learned that it could cost $52.6 million to $78.8 million to pay for the utilities, road improvements, and traffic patterns in the area.

Add in $7 million a year in tax kickbacks that the developer would be demanding, and that’s a total public cost (in present value) of between $160 million and $185 million. For an arena that will cost $200 million to build.

City councilmembers, naturally, were taken aback by the high price tag:

Council members seemed thrilled with the idea and thought it was time to move forward.


Virginia Beach to get more details on “private” arena plan that isn’t

The city of Virginia Beach could release information today on how much infrastructure costs would be for a proposed $200 million arena, according to an article in today’s Virginian-Pilot. More on that tomorrow, then; in the meantime, here’s how the Virginian-Pilot again completely screwed up its reporting on Virginia Beach’s two arena proposals:

The council voted in May to begin negotiating with USM instead of rival development group W.M. Jordan, which included politically influential developer Bruce Thompson. Those negotiations are continuing, and the city won’t release cost estimates.

The Virginian-Pilot obtained both proposals in February and reported that each arena would cost about $200 million. The key difference is that W.M. Jordan wanted taxpayers to pick up nearly all of the costs, while USM said it would obtain private financing.

Oy gevalt. No, no, that’s not the key difference at all. As was discussed back in May, the W.M. Jordan plan would have provided $10.5 million a year in public money to pay off arena bonds, whereas the USM plan is set to provide $7 million a year in tax kickbacks so that the developer can pay off arena bonds. Which is indeed better — 7 is less than 10.5, last I checked — but is not at all the difference between “taxpayers picking up nearly all of the costs” and “private financing.”

Anyway, the Virginia Beach city council is set to receive a consultant’s report today on infrastructure costs, so we should learn more about the city’s total outlay then. Though if USM is smart, it will offer to pay for the infrastructure costs now, and have the city repay them later, since apparently no one in the local media is clever enough to see through such advanced accounting tricks.

Virginia Beach approves “private” arena plan that would use $7m/year in public money

The Virginia Beach city council voted last night on which of two arena plans to pursue, and according to the Virginian-Pilot, it “chose United States Management’s privately financed proposal” over a competing bid that would have “relied almost exclusively on taxpayer money from the city and state and would have forced the city to pay $262.5 million in debt service over the next 25 years.”

Well, that’s a no-brainer, right? So how does USM intend to pay for the arena without public money? Let’s see:

USM’s plan calls for it to spend more than $200 million of its own money to build the arena, then receive up to $7 million annually in tax revenue to pay down its debt.

Um, excuse me, what?

People, people. I understand that this whole “money” thing is hard to wrap your brains around. There’s money now, and money next week, and my money, and your money, and it can all be so confusing sometimes. But even elected officials and journalists have to understand that $7 million a year in tax revenue isn’t private money, right?

Actually, it could be more or less than $7 million a year — USM is asking to get 1% of the city’s hotel tax, plus a full kickback of all “taxes generated by the operation of the arena,” which presumably means sales, income, and property taxes, though don’t go looking in the Virginian-Pilot archives for an explanation of any of this. If tax revenues go up, USM gets more money; if they go down, USM has to cover the shortfall.

This is still likely better for the city than the competing W.M. Jordan plan, which would have required the public to pay off $10.5 million in annual bond payments, plus other costs. (The city would own the arena under the Jordan plan, but as we’ve covered here before, the last thing a city wants is to own an arena; it’s owning the arena’s revenue streams that’s the important part.) Of course, the USM plan could still fall apart — which given that it relies on getting a $200 million loan from a bank in China, seems like a pretty likely scenario — in which case the Jordan plan would be back on the table.

The important thing is, though, that whether you have the city paying to build an arena and “repaying” itself through the taxes paid by arena patrons that would normally go to the general fund, or the team paying to build an arena and repaying itself with those exact same taxes, it’s pretty much the same kind of tax subsidy. The Virginian-Pilot could have run a headline like “Council chooses less risky arena proposal,” but instead it went with “Va. Beach council picks privately funded arena plan,” which has the advantage of being more grabby, if the disadvantage of not actually being true.

Virginia Beach now has two competing incredibly vague arena proposals

Monday was the deadline for proposals to build a sports arena in Virginia Beach — I know, I’m kicking myself for not finishing my application on time, too — and two different developers threw very different hats into the ring. In one corner, developer W.M. Jordan Co. sent in its arena plan that was first floated in November; what was then only vaguely described as a “public-private partnership” turns out to be a plan for the city to pay 75% of the construction cost and get “repaid” by increased taxes from additional visitors.

If that doesn’t float your boat, the competing plan is simultaneously more promising for the city and even more crazy:

“We agree that a major arena is the right decision for Virginia Beach and are exploring options that are best for our community, such as shifting the risk from the City and citizens to private investors,” [ESG Companies VP Andria] Kilmer told in November. “We are finalizing our analyses in anticipation of making a proposal that will be for a locally-owned, privately-financed arena which incorporates national and international players to provide Virginia Beach with an iconic world class venue.”…


The $200 million or so needed to build the project will come from a bank in China. ESG would pay the loan back over time.

This apparently would not be an EB-5 cash-for-green-cards plan (or if it is, ESG isn’t saying), but rather a direct loan from a Chinese bank. The hook for the bank is apparently that construction would be overseen by the Beijing-based China Machinery Engineering Corp., which appears to mostly build coal-burning plants.

Of course, the fact that a bank would be fronting the money doesn’t say much about how the loan would be paid off, and ESG hinted that the public could still be on the hook for some of that: It mentioned a possible contribution of city hotel tax revenue, plus there’s a complicated lease deal for the arena (ESG would own it, but lease city-owned land, but ownership would revert to the city after 40 years) that makes it unclear to me whether they’d be in line for property tax breaks.

You can see details of the two proposals here (ESG) and here (W.M. Jordan), though since the ESG proposal hasn’t been fully made public yet, in their case “details” just means “clip art of hockey player silhouettes.” (And W.M. Jordan offloaded all their financial details into a separate “volume two” document that doesn’t appear to be online.) The Virginia Beach city council was set to meet last night to hear presentations on the two plans (according to WAVY-TV, at least), but I can’t find any reports on what, if anything, was discussed there, either. Maybe they avoided holding a real meeting by having half their members stand in the hall. All the kids are doing it!

Virginia Beach revives arena plans, money to come from [SPOILERS OMITTED]

Sorry for two days of nothing but Atlanta Braves news, but it kind of took over my brain, along with that of the rest of the sports media. (Here’s my latest for Sports on Earth on the whole mess; more on that a bit later.) But surely something else less crazy must be going on in the sports stadium and arena world, right?

Richmond, Virginia mayor plans ballpark on site of slave cemetery

No, no, I said less crazy. Come on, anybody?

The concept of building an 18,000-seat arena at the Oceanfront [in Virginia Beach] that fell apart earlier this year is back with a new player.

Okay, that’ll have to do. Virginia Beach, you’ll recall, last year proposed building a $426 million arena with $391 million in public money, possibly to lure the Sacramento Kings, before the whole thing fell apart when it turned out the state of Virginia wasn’t eager to give them $150 million to help pay for the thing. Then last month there was talk of mysterious Chinese investors, and yesterday the Virginia Beach city council actually voted on, um, something?

W.M. Jordan Co., one of the region’s biggest construction firms, has submitted to the city a proposal with partners to build an arena next to the city’s convention center…

“In talking with various folks, we felt an arena would work without a franchise,” said John Lawson, president and CEO of W.M. Jordan.

He said an existing arena might help attract a team to Virginia Beach, and the building would be constructed so it could be modified to accommodate a team. He said it could open at the end of 2016.

Okay, that’s nice and all that a construction company wants to construct something, but who’s going to pay for this exactly?

Lawson declined to provide financing details about the proposed public-private partnership that would be used to build it. He said that information will come out later. He did say in an email it would be “substantially” cheaper.

“I’m very confident when the financial details are made public that the public will easily understand the financial arrangement and be supportive,” Lawson said.

Oh, one of those proposals. This really is the week for that sort of thing, isn’t it?

If there’s anything to the “substantially cheaper” thing, it sounds like W.M. Jordan may be looking at something along the lines of Oklahoma City’s arena, which was first built for a bargain-basement $89 million without luxury suites or other facilities for a big-league sports team, then later got a $112 million upgrade when the Thunder came to town. It’s not a terrible idea for a small market, though given the economics of concerts vs. sports, Virginia Beach might be better off just skipping the team and booking as much music as it can. Not that that’s still likely to pay off an arena’s construction costs, but at least Katy Perry pays rent.

Not to leave any stones unturned, the Virginia Beach council gave anyone else who feels like building an arena 60 days to submit their own proposals. Because you never know when some more mystery Chinese investors might be lurking out there, just waiting to build an arena for the nation’s 44th largest TV market.

Somebody mentioned “Virginia Beach” and “arena” in the same sentence again

Let’s see, what’s the last thing you would expect to see in the news this morning? Zombie invasion? Harry Reid and John Boehner starring in a new buddy-cop movie? Word that Virginia Beach is reviving its crazy arena plans that it declared dead almost a year ago? (Okay, that’s almost the same as “zombie invasion.”)

Yep, you guessed it: According to city councilmember Bill DeSteph, who is running for the state house of delegates, two groups are interested in maybe proposing building something! And one of them includes a Chinese investor! And it wouldn’t cost the city anything, except tax credits, which of course cost the city! And “just about everybody in this room would support it”!

Since that’s clear as mud, let’s check in on Mayor Will Sessoms, who was the force behind last fall’s attempt to lure the Sacramento Kings by building them a new arena that would be paid for by cough cough, sorry something must’ve gone down the wrong pipe, what were we talking about again? What say you, Mayor Sessoms?

Mayor Will Sessoms said a group of Chinese businessmen has expressed interest in investing in a Virginia Beach project but has not taken any formal action.

Sessoms said possible projects they might be interested in include an arena, an entertainment project at the old Dome site and light rail.

He said he met some of those potential investors briefly at a recent luncheon but could not recall their names or companies they represent.

Alrighty, then. Wake me when the zombies are here.

VA subcommittee: No state tax money for VA Beach arena, but here’s some state tax money

So those Virginia Beach arena plans aren’t quite as dead as we were led to believe. Apparently there’s still a bill kicking around in the state house, and it passed a subcommittee yesterday and moved on to committee, which is no assurance of anything but is still more progress than anyone expected a couple of weeks ago.

What the bill says, and what legislators say it says, is a hilarious lesson in the rhetoric of public subsidies. From the Virginian-Pilot’s report:

When talks with the [Sacramento] Kings were under way, the proposed deal included $150 million in state support. But Del. Bob Purkey, R-Virginia Beach, said today that local lawmakers made it clear to city officials “there was no chance in hell” of a direct state contribution.

Instead, [Del. Ron] Villanueva’s bill allocates state income and sales tax revenue generated by an arena to pay off the construction bonds.

So, instead of a “direct state contribution,” under Vilanueva’s bill the state would take state money collected at arena events and use it to pay off the cost of construction. (Yes, that’s a TIF.) And just to drive the point home, a legislative staff analysis says that the cost to the state treasury “would likely be significant.” But that’s not a state contribution, oh no. Heaven forfend!

None of the coverage of the new bill discusses how much money would be raised by this TIF, but keep in mind that Seattle’s arena sales tax kickback is only expected to be worth $5.8 million (that’s total, not per year), and income tax kickbacks usually don’t amount to that much either — even if you assume a $70 million NBA payroll, and that Virginia could collect its 5.75% income tax on the entire year’s earnings, not just the part of the year the NBA season was underway, that’s still only about $4 million a year. But, hey, you gotta start somewhere. And at least now the Virginia Beach arena advocates know that some legislators consider some tax dollars to be more public than others.

VA Beach, Comcast declare arena plans dead (for now)

And this just in from WAVY-TV in Virginia Beach:

Today, Virginia Beach Mayor Will Sessoms and Peter Lukko, the president of Comcast Spectacor, will release a joint statement regarding their ongoing negotiations to get the arena deal done.

Unfortunately, those negotiations are at a stand-still.

So, the Kings will not be signing an agreement to come to Virginia Beach if the arena is built.

At least not now.

And here’s the text of the Sessoms-Comcast statement, which says that while “we both firmly believe that Hampton Roads is ready for a large sports-and-entertainment venue,” “we have not reached a level of progress that will allow the city to go before the General Assembly to request the necessary funding.”

So on the spectrum of possibilities, this is pretty much “nothing has been accomplished but that everyone will reconvene at a later time to try again.” Sessoms will not ask the state legislature for $150 million toward the arena project this session, Comcast Spectacor will take their ball and go home for now, and everybody will forget this entire “NBA in Virginia Beach” thing ever happened. Until the next time there’s talk of a team moving somewhere, when suddenly people will be able to raise Virginia Beach as an option without people laughing (too loud, anyway). This is arguably moderately good for Virginia Beach’s profile, and outstanding for NBA teams seeking leverage with their current cities.

And speaking of NBA teams, this still leaves the Kings without a relocation target, less than two months before the March 1 deadline for the 2013-14 season. There’s always Seattle — KING-TV reporter Chris Daniels is already predicting the Seattle rumors will heat up imminently — but that would require selling the team to Chris Hansen, which the Maloof brothers still insist they don’t want to do. Unless Hansen is prepared to swoop in and overwhelm the Maloofs with an offer — which would be kind of dumb now, since he’d be bidding against himself — and the Maloofs are prepared to accept it — and the Maloofs have never been known for being ready to take action on anything more complicated than ordering appetizers — it’s probably a pretty safe bet that the Kings will be back in Sacramento, for next season at least.