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Building a Village

What's the real cost? The questions surrounding the financing options for a new ballpark development.

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Yet, there is a hefty price tag. Questions of financing abound. And the linchpin that makes the deal possible is anything but certain.

The Braves propose the creation of a Community Development Authority similar to the one designed two years ago to pay for $66.7 million in improvements on Broad Street, including the demolition of 6th Street Marketplace. Likewise, the ballpark CDA would raise $80 million by selling bonds to institutional investors, raising the money with private rather than public dollars.

In the case of the Broad Street CDA, bonds are being paid off mostly with special tax assessments and parking revenues within a tax district that stretches about 10 blocks. In the ballpark plan, the bonds would be paid off with new taxes generated within an undetermined area of Shockoe Bottom.

There are key differences between the two arrangements, however, that are likely to make the ballpark bonds riskier and more difficult to pull off.

First, the Broad Street CDA had the luxury of tapping into revenue streams that already existed within the 10-block area downtown, making it more palatable for potential investors. With the ballpark CDA, there are no existing revenue streams.

There are several options, according to Kenneth Powell, vice president of public finance for Legg Mason Wood Walker Inc. — the firm working on the financing package for the ballpark CDA, as it did for the Broad Street CDA — and Edwin Gaskin, a former city economic development official now in private practice.

One option is a six-block tax district, wherein nearly all of the taxes generated by the ballpark development would go toward paying off the debt. The district, bounded generally by 18th, Broad and Franklin streets and Main Street Station, would become, in essence, a business commune that would exist largely outside of the city's tax rolls for the next 25 years. Other options include expanding the tax district outside of the six-block area to tap into taxes generated by other Shockoe Bottom property owners. And Powell says they could levy additional real estate fees on property owners who benefit from the ballpark.

The exact mix of real estate, sales, meals and hotel taxes needed to float the ballpark bonds isn't clear just yet, Powell says. "We are very flexible in how we get there." But that will ultimately be up to City Council. Only the city has the authority to create the CDA, so council must decide which taxes it will allow to be diverted to pay off the bonds. And that will make or break the deal, Powell says.

There is another difference between the Broad Street CDA and the ballpark CDA. The city agreed to morally guarantee the Broad Street bonds if the revenues ever fell short of the annual debt payments. That made the deal easier to sell to investors and drove down the interest rate. Because some say the city is already carrying too much debt, Powell says the Braves will not ask the city to back the bonds. Instead, he says, the development must fly on its own.

Still, Powell says a couple of key concessions should make investors more confident in the ballpark CDA. First, Richmond Braves General Manager Bruce Baldwin says the Braves are willing to sign a 25-year lease to guarantee the taxes generated by the ballpark. "That's my commitment to our community," Baldwin says. Second, a legal contract with the developer would ensure that the rest of the project, a $250 million investment, creates 1.2 million square feet of taxable real estate. There should be enough to cover the debt, Powell says.

Ultimately, because the Braves are asking for "no public money," investors will demand to see that the development generates enough revenue to cover 200 percent of the annual debt payments on the ballpark, adds Powell. Once the revenue generated by the project stabilizes, any tax revenue above and beyond the annual bond payments goes back to the city. "That's what it takes [for the city] to put no money in it," Powell says.

Most likely, the city will have to pay up front. It probably would have to upgrade the drainage system that got overloaded during the remnants of Tropical Storm Gaston last year, which would cost millions of dollars. It will be asked to donate the land it owns in the six-block area. And, of course, it would be giving up potential revenue for the next 25 years to build a ballpark for the Richmond Braves.

Is it worth it? A public policy debate is likely to ensue. Proponents say the city would benefit from the Shockoe Bottom jump-start — increasing property values surrounding the ballpark, along with other economic spinoffs.

The other side of the argument is that development could happen anyway — regardless of a ballpark. The developer agrees that the project probably would work without the Braves. "The real answer is, I don't need [the ballpark] — the Braves need it," says Timothy L. Kissler, a principal with Global Development Partners. "Our view is, the ballpark is an entertainment venue. You could also do a casino," he says, or a large multiscreen movie theater.

"The critical question is whether the infrastructure that's funded through the bonds is necessary to get the private investment done," says Karl Seidman, a senior lecturer of urban studies and planning at the Massachusetts Institute of Technology.

"Like a lot of economic development tools, they can be used wisely or they can be used to subsidize development that would happen anyway," says Seidman, who specializes in economic development finance. "It really comes down to the specifics."

In the case of the ballpark plans, those specifics are still being worked out. Powell and Baldwin say the plan is to get the city's blessing first — within the next 60 to 90 days — and then proceed with a more thorough analysis of how the financing will work.

As for the developer, Kissler says a lot more work must be done in the months ahead. His firm has yet to conduct a market feasibility study to determine exactly what the development will look like, he says.

Councilman William J. Pantele, chairman of City Council's finance committee, says the city will be asking some tough questions.

"We certainly understand their vision. Now we have to look beyond the vision to see if what being proposed is workable," Pantele says. "It is, rest assuredly, not free. The rhetoric of development sometimes overcomes the facts. What we're about now is finding out what the facts are." S

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