The biggest wave generated by the city’s Atlantic Park project is debt. The promised tax revenues aren’t sufficient yet to support it.

by James C. Sherlock

From an article by Stacy Parker in The Virginian-Pilot this morning:

To build two parking garages and improve streets in Atlantic Park, a public entity borrowed $53 million and agreed to pay off the loan with tax revenue generated from the project.

The bill has come due, but the taxes aren’t adding up yet.

Who knew?

About that $53 million debt thing. The Official Statement prepared by the City of Virginia Beach, Virginia, on behalf of the City of Virginia Beach Development Authority (the “public entity” referenced by Ms. Parker) listed the debt:

City Of Virginia Beach Development Authority

• $33,435,000 Public Facility Revenue Bonds, Series 2024A
• $27,225,000 Public Facility Refunding Revenue Bonds, Series 2024B
• $128,070,000 Public Facility Revenue Bonds, Series 2024C (Federally Taxable)

In 2024, this author wrote an 11-part series on the multiple scandals surrounding the Virginia Beach City Council’s actions to fund Atlantic Park.  Atlantic Park is comprised of:

• the Dome entertainment venue and the parking garages owned by the city, from which it hopes to generate revenue,
• all the steady revenue-generating assets like restaurants, shops, and apartments owned by a private development company,
• a maybe-not-revenue-generating wave pool owned by a North Carolina nonprofit funded with state revenue bonds because neither the city nor the developers wanted any part of it.  

In this case, as a Virginia Beach taxpayer, he did not wish to be right in his published prediction that the Development Authority would be unable to service the debt with project revenues.  

It turns out he was prescient.

Back in the day, the City Council appointed itself as the Atlantic Park Community Development Authority, which manages the project’s finances. Cute, huh? So it could be written in the prospectus that the bond debt was not the city’s debt.  

That was nonsense, and everyone involved, including the bond investors, knew it. The city’s bond rating would plummet if investors were not paid.

Fast forward. The Atlantic Park Community Development Authority has somehow convinced itself to reconvene as the Virginia Beach City Council to cover this year’s debt service shortfall. From an account called the “city tourism tax fund,” as if only tourists contributed to that fund.  

No waiter has ever asked your correspondent whether he was a tourist before collecting Virginia Beach’s highest-in-the-nation 6% restaurant taxes that are over and above the 6% sales tax on the same bill.

From the Virginian-Pilot article:

City Manager Patrick Duhaney said the deficit is not surprising given that the mixed-use development is still ramping up.

“It’s predicted that something like this would be needed to stabilize the project,” he said at the authority’s meeting on Tuesday.

Notice, not “the City Manager predicted”, but “it’s predicted.” 

Whoever “it’s” was.

Everyone in Virginia Beach who thinks that this is the last time that taxpayer money unconnected with Atlantic Park will be used to cover the Development Authority’s existing debt, raise your right hand. Thought so.

Finally, nobody asked, but P3 Foundation, Inc., is the North Carolina nonprofit that owns the wave pool for which the Virginia Small Business Financing Authority (VSBFA) issued tax-exempt, unrated sports-and-entertainment facilities revenue bonds with a total face value of $63.575 million.

Charity Navigator awards P3 Foundation its lowest possible ratings for accountability and financial health.

Probably nothing will go wrong.

• P3 Foundation will probably pay its debts.  
• The IRS will probably not shut P3 Foundation down.  
• The Development Authority will probably not have to buy the wave pool out of bankruptcy.  
• Any such purchase will probably not be backed with tax money from the City Council.

It’s predicted.  

Probably.