Parking Decks, Debt, & Trap Doors

by Jon Baliles

On Wednesday afternoon at 3:00pm in City Council chambers, City Council will vote and approve the plan presented by the Mayor and Chief Administrative Officer (CAO) to allow Richmond to issue $170 million in bonds to pay for the new baseball stadium on ten acres that will be surrounded by about 57 acres of new development built out over the next decade plus.

Two years after kicking off the Diamond District process, the new plan announced a month ago was suddenly hailed as the fastest way to build a new stadium so Major League Baseball (MLB) doesn’t move the franchise for failing to upgrade stadium facilities as promised since The Diamond is too archaic to be retrofitted or modernized.

Wednesday will be a rosy “kumbayah” meeting in which all the positives will be laid out in front of the Council and the public and none of the negatives or risks will be discussed. The public hearing will take place, but many people will be at work in the afternoon or picking kids up from school, and others might decide to stay home knowing this deal will be approved by Council on a 9-0 (or maybe an 8-1) vote.

The city’s “leaders” and financial experts promise this new plan will save millions over the next three decades because of lower interest rates and “almost no risk,” compared to the original plan they started out with two years ago. But the Mayor and CAO, in their desperation to get any deal done and not lose a second baseball franchise, forgot to put any protections in the deal for the city and managed to leave a trap door.

They swear up and down that the development that has been occurring organically in and around Ashe Boulevard and Scott’s Addition will continue (which is very probable), and that the new development in the Diamond District will produce enough new tax revenue to cover, or almost cover, the annual debt required to pay the bonds back (or so we are told).

But what no one will talk about on Wednesday is the trap door in the form of a blank check called the Community Development Authority (CDA) that will have a real impact on future city budgets and city services for decades to come. Two years ago when the Diamond District was announced, the plan was to create a CDA to issue bonds for the stadium that would be paid back by tax revenue from the development within the district’s boundaries.

Originally, the CDA plan hamstrung the developer because it required a higher interest rate and an enormous amount of collateral to sell the bonds to get the money to build both the stadium and the Phase I development. It would have taken an enormous sum of money or a lien on the value of the development (that has yet to be built and therefore still has no value). If the Phase I (non-stadium) development had already been built, say two or three years ago, and revenue was coming in, then the original CDA route may have been more feasible.

But as interest rates and inflation rose, the second iteration of the Diamond District deal, announced in April 2023, was to use the CDA to pay for the stadium debt and also expand the boundaries’ taxing authority outside the 67-acre parcel to capture other properties’ revenues to help pay for infrastructure.

When the third iteration of the stadium deal was announced last month, the Mayor and CAO announced the city would just issue $170 million in debt to pay for the whole thing. $130 million of general obligation (G.O. bonds) will pay for the stadium. That eliminated the need for a CDA to issue bonds because the G.O. bonds get a much lower interest rate; but if it falls short of revenue or fails, the city pays the debt off using the general fund (i.e., higher taxes or cutting services).

They also announced that the city would issue and be responsible for $40 million of G.O. bonds to pay for the infrastructure in the 67-acre development; so there was no need for the expanded CDA boundaries to pay for the stadium, water and streets, etc. The Mayor and CAO even celebrated that the CDA would be contained to the district boundaries and no longer extend to surrounding development, which means those tax revenues from outer properties will go to the general fund.

At this point, you might wonder, what do we need a CDA for anyway if the city is guaranteeing and picking up the whole tab for the stadium and infrastructure?

The answer leads to the deal’s trap door.

The CDA that will be created on Wednesday will have the legal power under state law to identify and pay for things in the Diamond District plan, including expensive things like a parking garage, to serve the stadium. No one wants to talk about who is responsible for costs like that now; they just want to get the stadium underway and then talk about parking later.

Structured parking generally costs about $22,000 per spot, which means a 1,000- car parking deck for the stadium would cost about $22 million. Which is why the CDA is still part of this plan — they will need to build a parking garage  in about two years when the current surface lot behind the Diamond begins to disappear and gets developed — and someone has to pay for it.

CDA’s are authorized by the state to issue their own bonds using tax revenues generated within its defined boundaries to pay for things authorized by state code. Those items include “roads, bridges, parking facilities, curbs, gutters, sidewalks, traffic signals, storm water management and retention systems, gas and electric lines and street lights within or serving the district.” They can also issue bonds to pay for parks, recreational, cultural, and educational uses, landscaping, etc. (see Exhibit C in the city’s enabling legislation as to what types of projects the CDA will fund):

In the list above, the CDA won’t need to issue bonds to pay for the baseball stadium; the city is already doing that; infrastructure too, we are told.

And that springs the trap door.

The CDA can issue its own bonds and siphon tax revenue from the new development inside the 67 acres to pay for things like parking (and more) without requiring the approval of the Mayor or City Council. They can use those tax dollars generated inside the district to pay for projects inside the district instead of City Council having to issue more general obligation bonds to pay for them. If the CDA revenues fall short of their debt service, they must levy a special assessment on the property owners to cover the shortfall. But the CDA could, theoretically, use all the tax revenues generated in the district boundaries to pay for projects within those boundaries.

State code concerning CDA’s reads:

The revenue bonds issued by a development authority shall not require the consent of the locality, except where consent is specifically required by the provisions of the resolution authorizing the collection of revenues and/or the trust agreement securing the same, and shall not be deemed to constitute a debt, liability, or obligation of any other political subdivision, and shall not impact upon the debt capacity of any other political subdivision.

Unsurprisingly, the Mayor and CAO didn’t bother to put such protections for the city or taxpayers in the legislation, like coming back to City Council if the CDA Board votes to use tax revenues to build a $22 million parking deck or anything else.

Once the CDA starts diverting new tax revenues from within the district’s boundaries to pay for things to help spur development, there will be less revenue from the Diamond District development to pay the $170 million debt for the stadium and infrastructure that will be approved on Wednesday. And since the city is issuing general obligation bonds, any shortfall in the stadium and infrastructure debt service will have to be made up with an annual allocation from the city’s general fund, which means less for schools, roads, libraries, etc.

The CDA paying for a parking deck is not at all a hypothetical scenario. CAO Saunders told Council a few weeks ago that a parking deck will be constructed in the northeast quadrant of the Diamond District in a few years’ time (timetable uncertain) at the corner of Robin Hood Rd. and Hermitage Rd. However, he did not say who would pay for the parking deck — no one has.

People often overlook the cost of parking, but it is a substantial expense and often a necessary amenity. That is why you haven’t heard Stoney or CAO Saunders or anyone talk about it. They don’t want to remind people that structured parking will be needed, it costs a lot of money, and someone has to pay for it.

It is known (for a fact) that neither the developers nor the Squirrels are being required to build a public parking facility in the Diamond District deal, nor are they eager to do so because of the cost. The developers will provide small parking decks to serve their residential and office development buildings, but nothing to handle the volume of stadium traffic.

In Mayor Jones’ Shockoe Stadium debacle of 2013/2014, there were countless reassurances of a 1,000-, 1,200-, and even a 1,500-space parking deck at Broad Street and 17th Street that would serve the proposed stadium. In the seven months that plan was debated and discussed, not one person EVER specified how big the deck would be, how much it would cost, or who would pay for it. Not once.

In 2024, the Mayor and CAO want to create the CDA as the mechanism as part of the deal to pay for a parking deck, but avoid the discussion about who will pay for it — until later. Once the stadium construction is underway, then the discussion can take place about building a parking deck, and the CDA will be able to pay for it with revenues from within the Diamond District without coming back to City Council for approval, discussion, or a public hearing.

But there is another trap door provided by the Mayor and CAO, which is the still- unknown roster of five members who will comprise the CDA Board that will make these kinds of decisions. State code allows members to be appointed by Mayor and City Council and to “consist of a majority of the petitioning landowners or their designees,” or in other words, people from the city, the Squirrels franchise, the developers, and members of the city’s Economic Development Authority.

State code also specifically says the board members “shall be selected in the manner and for the terms provided by the agreement or ordinance or resolution or concurrent ordinances or resolutions creating the authority.” The city ordinance 2024-112 to be voted on Wednesday is written in accordance with the state law — with one blank space left until the last minute: the “Exhibit A” page where the board member names are required to be listed is blank. That page (see below) says that the member list is “to be completed prior to Council’s adoption of ordinance.”

RVA 5×5 contacted the Clerk’s Office on Friday for those names that should, but do not, appear in the ordinance, and received this reply: “…the CDA board appointments will be made by resolution if Council approves a motion to expedite the resolution. I am not yet in possession of the legislation.”

So, the Council will hold a mid-day vote and approve issuing $170 million of debt and create a CDA Board that will issue even more debt in the coming years, and no one will know who will serve as board members until the last minute. It’s a somewhat appropriate “player-to-be-named later” scenario. Waiting until Wednesday is still technically within the boundaries of state code, and only a skeptic would see it as something nefarious; but it certainly is not transparent or trustworthy, is it? We would except nothing less from this Mayor and his administration.

Speaking of trust, when the city pivoted to the third iteration of the stadium last month, the CDA was no longer needed to issue the bonds for the stadium and infrastructure since the city agreed to pick up the entire tab. If you recall, the city is providing $40 million for infrastructure costs and $130 million for the stadium through the bond issuance. However, all indications, rumors, and realities are pointing to the likelihood that the final stadium cost will tally closer to $140 million (and maybe even higher).

Which means the third iteration still includes the CDA as part of the plan for two main reasons: to pay for the parking deck (that no one is talking about); and it is also likely an insurance plan for the developer of Phase I and the infrastructure so the city won’t stick them with the bill in the (likely) event a large amount of the infrastructure bond money ends up paying for the stadium overrun. If the stadium money eats into the infrastructure money, then the CDA can use tax revenue from inside the Diamond District to help pay for the needed infrastructure.

In other words (the words others won’t say publicly), the Mayor and CAO are willing to do and offer anything to get this deal done. They offer no protection for the city, a ginormous blank check to get it across the finish line, and they know they will be long gone by the time the trap door is sprung and the real bill becomes apparent and due that the rest of us will have to pay.

Everyone in this deal wins — except the resident and taxpayer who drives on our roads, sends their kids to schools, pays meals and car taxes, and waits forever to get a permit. But the real hot seat will be the one waiting for the next Mayor and City Council, who will have to explain in a year or two why Stoney ran up such an enormous tab on the city’s credit and then walked out on the bill.

That is important to keep in mind as we focus on who is going to be in charge of the city for the next four years. Let’s make sure the next iteration of our city leaders are more worried about trust and transparency and true public service instead of leaving a legacy of costly and desperate deals with lots of trap doors.

Jon Baliles is a former Richmond city councilman. Republished with permission from RVA 5×5.

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3 responses to “Parking Decks, Debt, & Trap Doors”

  1. LarrytheG Avatar

    Virginia is toothless with respect to citizens being able to truly hold their elected governance accountable. No real “recall” ability and no citizen-initiated referenda. We make fun of California but they have both and it does work.

  2. LesGabriel Avatar

    Does the $22,000 per parking space include the increased costs projected for the time frame when the parking deck will be built. Assuming that it will be on more than one level, new standards to accommodate the heavier weight of EV’s will presumably drive costs significantly upward. Multi-deck parking garages have a projected lifespan of 30-50 years, so they must be engineered to support the projected load. Although it is doubtful that EV’s will ever replace all internal combustion engine cars in the next 30 years, that is the goal of our current governments, so it must be planned for.

  3. Something I don’t understand. The Development Authority will pay for this by issuing bonds. What happens if no one buys the bonds, or, if enough do not sell?

    I assume the bonds will be placed with a big bank or a group of investors who do deals like this. Understanding of how this stuff works is way beyond my financial knowledge.

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