Virginia Beach council narrowly rejects arena finance plan, mayor prepares to buy them off

The Virginia Beach city council cast its vote yesterday on the revised financing plan proposed by its would-be arena developer, and the result was a resounding “most of us want it, but not enough to make for a supermajority, so it’s dead“:

The project needed the approval of at least nine of the 11 council members because it involves leasing 5.8 acres of city-owned land near the convention center to the developer for 60 years.

Eight members voted for the deal. Louis Jones, John Moss and Barbara Henley opposed it.

Henley said her no vote came down to losing control of the land for 60 years. Moss and Jones declined to comment.

While the council approved the original plan 10-1 last December, the developer’s decision to switch up its financing — putting in less cash, and relying more heavily on unrated bonds — apparently was enough to give two more councilmembers pause. We might be able to tell why from looking at what they said during the council debate, but much of that took place in secret, so everyone feel free to speculate wildly.

What we do know is that it would only take one councilmember switching sides to get this deal approved, so expect lots of horse-trading to be conducted in coming weeks to see what people’s price is. Mayor Will Sessoms has already declared that he plans to talk to Jones, Moss, and Henley to “see what it will take to get them on board”; maybe something shiny for their districts? You like shiny, don’t you?

Virginia Beach arena builder wants to use $240m in unrated bonds, council replies “mmmph”

So after the Virginia Beach city council held its closed session about the city’s $200 million arena subsidy plans yesterday, the members of the council emerged into the light to hold an “informal” session that the public could attend. (Virginia Beach has some deeply, deeply weird ideas about democracy.) And it turns out that some news was revealed, namely that the developer hoping to build the project now wants to cut its cash investment and take on more debt via unrated bonds:

United States Management is interested in taking on as much as $240 million in debt to make sure the company can cover its construction loans, City Manager Dave Hansen said. The developer also reduced its equity contribution from $40 million to $20 million…

In July, the council set a number of requirements, and one of them included obtaining an investment grade bond from a rating agency. That rating hasn’t arrived yet, and United States Management President Andrea Kilmer said she can’t wait any longer if they want to break ground by the end of the year. The new proposal would require the arena to open by the end of 2019, but United States Management has a goal of 2018.

Hansen has said a positive bond rating is essential because it will determine the interest rates on the debt that the city will be reimbursing. The council had a difficult discussion during Tuesday’s closed session about proceeding with unrated bonds, he said.

So do the members of the council intend to still vote for the deal, regardless of its dependence on unrated bonds? No clue: Barbara Henley, who voted against the original deal last year, says she plans to vote against this one, too, but other councilmembers declined to comment publicly, and we can’t even glean anything from what they said in their official meeting, because that’s secret. Hopefully they’ll at least reveal the results of the vote, but at this point I wouldn’t rule anything out.

Virginia Beach arena report redacts actual numbers, council to vote in secret, democracy cries

Something appears to be wrong with Virginia Beach’s arena financing plans — I mean, something aside from all the hidden public costs it will come with. The Virginian-Pilot has a very odd report out today that — you know, let’s just dig in and try to figure it out as we go along:

A new report says the city should move full steam ahead with building a sports and entertainment arena near the Oceanfront.

But the public won’t get a detailed explanation for how Johnson Consulting arrived at that conclusion because many of the financial predictions upon which it’s based have been redacted from the report.

Wait, redacted? Redacting financial predictions from a financial prediction report would seem to be very odd behavior, even in the rarefied world of economic impact consulting, where facts that don’t conform to the desired result must be disposed of. Tell us more, Virginian-Pilot!

“The Hampton Roads region has been starved for a venue of this size and quality for quite some time,” the report said.

“Virginia Beach does extremely well as a tourism destination, but adding an arena to the existing tourism infrastructure could allow for even greater economic benefits for the City.”

Okay, right, report is happy about the prospects of a new arena! But just reprinting its conclusions without noting its methodology — which you already said is murky — isn’t getting us anywhere. What else you got?

United States Management has outlined its finances and projected sales numbers to the city, but has said that an exemption in the Virginia Freedom of Information Act allows it to keep proprietary information confidential.

“Proprietary information”? What would that be? Also, since when do economic impact statements need to be acquired by filing a Freedom of Information Act request — if the city council is discussing it, isn’t it public record by definition?

The City Council will meet in closed session tonight to discuss the project’s finances.

Oh. Well, then.

After meeting in secret, the council is expected to vote on October 4 on whether to throw about $200 million in subsidies — $76.5 million in land and infrastructure spending, plus another $8.5 million a year in tax kickbacks — at an arena that will only cost $200 million to build. The council approved this once last year already, but since then the financing details changed slightly (who’s lending the money, not who’s paying it off), so they have to vote again. Not where anyone can see them, though. That would be gauche.

Virginia Beach approves new financing deal for arena, local media still don’t understand it

The Virginia Beach city council has okayed the new bank that will provide the loan for the city’s $200 million arena, and that’s not really very interesting to anyone except maybe financial industry geeks. What I’m more curious about is: This time, did the Virginia Beach media manage to correctly describe the financial setup, where the developers will borrow the money and then the city will repay it with tax revenue? Virginian-Pilot, whatcha got?

Under the framework of the new preliminary deal, B.C. Ziegler would finance $200 million, or the guaranteed maximum cost to design and build the arena – whichever is less.

The complex would be privately financed, with the city covering the cost of the land and $76.5 million in infrastructure upgrades through a tax on arena event tickets and hotel stays.

Close! The $76.5 million in infrastructure and land spending is correct, but the city will also kick back $8.5 million a year in property taxes, business license taxes, admissions taxes, arena meals taxes, construction sales taxes, arena sales taxes, and hotel taxes, which will pay off most of that $200 million in bonds.

How about WAVY-TV?

When the project was first approved, it looked as if a bank in China would help finance it. Now, a Chicago financial institution, B.C. Ziegler and Company, will be financing the $200 million in bonds to build the arena.
U.S. Management will put up another $10 million for the project.

Complete fail! Though at least WAVY says “finance” the arena instead of “fund” it, if any readers/viewers are savvy enough to catch that distinction.

One day, a Virginia Beach news outlet will actually explain who’s paying for the city’s new arena — here’s a link to the city council’s own summary of the funding plan, so any future journalists can have an easy citation. (Hint: It’s under “Consideration.”) Let’s hope someone manages it before it’s time to tear down this arena because it’s obsolete.

VA Beach arena gets new bank, news outlets forget to note public still paying off the loans

I wasn’t going to post anything about the latest Virginia Beach arena news, which involves the developers taking out their construction loan from a U.S. bank instead of a Chinese bank, but then I saw this headline:

VA Beach Arena to be funded by U.S. bank

Yeah, just no. The arena isn’t going to be funded by the bank; it’s going to be financed by the bank. The actual funds going to pay off the arena loans will come from a mega-TIF tax kickback of all property taxes, business license taxes, admissions taxes, arena meals taxes, construction sales taxes, the city’s share of arena sales taxes, and the top 1% off of the city’s 8% hotel tax, which will leave city taxpayers providing about $206 million toward an arena that will only cost $200 million to build. Sorry to be pedantic about the word choice, but it’s kind of a big omission when your headline gets entirely wrong who’s paying for your city’s new arena, you know?

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.

Sigh.

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.