Capitalist benefactors: Richmond Mayor Dwight Jones (left) and Governor Terry McAuliffe.
Richmond is home to numerous craft brewers: Legend Brewing, Triple Crossing, Richbrau, Strangeways and Hardywood Park, just to name five that show up on the first page of a Google search. But when it comes to rolling out the red carpet, state and local government is lavishing its favors upon Stone Brewing, of Escondido, Calif. — $23 million in City of Richmond bonds to build the brewery, $8 million to build a restaurant, $5 million from the Governor’s Opportunity Fund and potentially $250,000 from the Governor’s Agriculture and Forestry Industries Development Fund.
Admittedly, none of the local brewers have achieved the scale of Stone Brewing, which announced last week that it would invest $74 million in Richmond, creating 300 jobs. In a state economy struggling for traction, Stone’s announcement is the fifth largest economic development deal (ranked by investment) so far this year.
But the massive loans and subsidies raise a number of issues of equity and fairness, as Bart Hinkle noted one such issue in his Times-Dispatch op-ed this morning:
Stone executive Steve Wagner says other factors determined its final decision: water supply, wastewater capacity and proximity to suppliers. If that’s true, then Richmond should have been able to land the brewery without the handouts. It’s bad enough to think officials felt they had no choice but to offer Stone public inducements. It’s even worse to think the inducements were necessary.
Hinkle also wonders, as I do, how the home-grown brewers feel about the special treatment accorded their potential competitor. While the Stone Brewing brewery will serve a wider East Coast market, its restaurant will compete more directly with local brew-pubs. And, really, how many brew pubs can a city Richmond’s size support? Will Stone Brewing’s presence crowd out local players? Nobody knows but it’s a risk worth pondering.
There’s one other issue: Richmond apparently will be issuing $31 million in municipal bonds to help finance construction of the brewery and the restaurant. The city has finite borrowing capacity. If it borrows $31 million to back the Stone project, that’s $31 million it cannot spend elsewhere without endangering its AA+ (Standard & Poors) bond rating. This is a city, mind you, that wants to issue bonds for an $80 million baseball stadium and redevelopment project in Shockoe Bottom, $8 million to create a Bus Rapid Transit system along Broad Street, spend millions more to the city bicycle-ready for an international bike race in 2015, push ambitious housing-redevelopment and neighborhood-revitalization goals the city’s East End, support a new children’s hospital, and presumably pursue other capital improvement projects and economic development opportunities as opportunities arise.
Its good that Mayor Dwight Jones has a can-do attitude. But the city needs to pick its projects wisely. It needs to leverage its public investment to the max. And it needs to keep some powder dry for other opportunities that may appear. The best criteria to adopt when investment public dollars is this: Would I invest this money if it belonged to me? Am I maximizing risk-adjusted Return on Investment? I have seen no evidence that the Stone Brewing deal would pass that test.
— JAB
