The McDonnell administration figures the state can’t lose with an $80 million loan to build roads for the Kincora development in Loudoun County. Not everyone agrees.
Even in Northern Virginia, the land of mega-development projects, Kincora in Loudoun County is a big deal. The massive, mixed-use development north of Washington Dulles International Airport calls for erecting 3.7 million square feet of office space, a half million square feet of retail, 1,400 apartment and condominium units, 570 hotel rooms, a cultural arts center and a baseball stadium, all of which will create an estimated $1.8 billion in taxable real property value.
The project stalled for several years because its location near the intersection of Rt. 7 and Rt. 28, two of the most heavily traveled roads in Northern Virginia, would aggravate the area’s hellish traffic conditions. County government approved the Kincora rezoning contingent upon the developer, NA Dulles Real Estate Investor LLC, spending $80 million up-front to make major improvements to Pacific Boulevard and the Gloucester Parkway. But that was a non-starter. NA Dulles could not find the financing.
In stepped the commonwealth of Virginia. In June, the Commonwealth Transportation Board (CTB) authorized an $80 million loan from the State Transportation Infrastructure Bank (STIB) funneled through Loudoun County’s industrial development authority. Not only did the developer get the financing, it enjoyed a below-market 2.83% interest rate on the debt. Suddenly, the project was a go. Work on the roads has begun.
Transportation Secretary Sean Connaughton says the deal does exactly what the infrastructure bank was designed to do: leverage local or private resources to get roads built — which in this case happen to be the top transportation priorities in Loudoun County, Virginia’s fastest growing locality. If the county had relied upon development proffers to be paid as the project was phased in over two decades, it would have been years before the road improvements were complete.
This way, says Connaughton, “We get the infrastructure beforehand. The day the roads open, we expect 25,000 vehicles per day” from commuters now using existing roads. “We get the improvements 10 to 15 years earlier than we would otherwise.”
While Virginia’s Smart Growth community has not made a major issue of the Kincora financing, some observers do express reservations about the deal. Conceding that NA Dulles’ mixed-use development is preferable to scattered, low-density “by-right” development, they warn that mixed-use projects work best when they can access mass transit — and this project doesn’t.
Moreover, Kincora will be competing in the commercial real estate marketplace with major projects planned in concert with the building of the METRO Silver Line through Tysons Corner, Reston, Dulles airport and points beyond. What happens if NA Dulles’ forecasts don’t pan out? What would be the state’s exposure?
“The question I keep asking, what if this project doesn’t make a go of it? The developer is supposed to pay back the bonds,” says Ed Gorski, Loudoun County land use field officer for the Piedmont Environmental Council. “The Virginia taxpayers would be left holding the bag.”
Driven by Commercial Real Estate
When NA Dulles purchased the Kincora property in 2005, the developers thought it a great location to build Class A commercial office space, says Mike Scott, a senior member of the Kincora development team. Loudoun’s population was growing by leaps and bounds but first-rate commercial development lagged. Much of the office space that existed, like the giant AOL facility, was clustered in insulated campus settings.
Self-sufficient corporate campuses provide their own food services and other amenities for employees on site. But few corporations are big enough to support such an infrastructure on their own. Scott envisioned a mixed-use environment where employers would function as part of an ecosystem of businesses and homeowners that could. “Amenities will not locate in a nine-to-five office park,” he says. “You need to create activities in the evening and on weekends. Our idea was to bring those things together with residents and some destination attractions like the cultural arts center and the baseball stadium.”
Loudoun County officials did not immediately embrace the proposal, despite the prospect of dramatically expanding the county tax base. There were numerous issues relating to the project, the most daunting of which was the horrendous traffic in the eastern half of the county. The two main traffic corridors there — the east-west Rt. 7 corridor and the north-south Rt. 28 corridor — were hideously congested, as was another east-west arterial, Waxpool Road, located south of the project.
Kincora sat athwart two smaller roads that the county wanted to upgrade, the Gloucester Parkway and Pacific Boulevard. The thinking was that Gloucester could serve as an east-west alternative to Rt. 7 and Waxpool Road while Pacific could function as an option for north-south traffic.
Although Kincora’s offices and housing would generate more traffic in an already congested area, completing planned improvements to the two roads would result in a net gain for the county. “Kincora traffic is projected to constitute 30% of the traffic on the extension of Gloucester Parkway. They [Kincora] will construct 100% of the cost of that critical transportation link,” wrote attorney John McGranahan in 2007 correspondence to Loudoun officials. Kincora also would spend roughly $12 million on its own internal roads and utilities. Read more.