Correction: In the earlier print version of this story, Style miscalculated the overall sales needed to generate the projected tax revenue in the ballpark development proposal. Style regrets the error. The correction in its entirety is posted below this story.
Is Shockoe Bottom capable of generating $90 million in retail and restaurant sales?
In the debate over Highwoods Properties' proposed $363 million ballpark development, it's a nagging question that's received little attention from project backers and city leaders.
The plan's success, however, hinges on some ambitious numbers: The financial plan recently released by the project's developers specifies that $8.95 million in yearly tax revenues are needed to cover $70 million in ballpark bonds. Of that revenue, more than $6.59 million would come from retail and food sales.
A year after phase I is complete in 2012, the developers bet that the project, called Shockoe Center, will generate more food sales than Stony Point Fashion Park. In fiscal year 2006, the last year the numbers are available, Stony Point's eight restaurants generated $25.7 million of the mall's gross $134.27 million retail and food sales, according to the Richmond Times-Dispatch.
Taxed at 6 percent — the city's meals tax rate — Stony Point generated a little more than $1.5 million to the city's tax rolls. Including the ballpark, Shockoe Center's restaurant and food sales are projected to be more than $32.5 million, according to Style's caculations, generating $1.95 million in meals taxes.
“I can't imagine where they are getting that number,” says Mike Byrne, owner of Richbrau Brewing Company and Restaurant in Shockoe Slip. “Right now, restaurant sales across the board are going down. 2009 is the worst economic environment that I've seen in my lifetime.”
Byrne says $32 million in food sales is mind-boggling — and wholly unrealistic. “I know what it's like to try and do more than $2 million in sales,” he says. “To do it in this population base is very, very difficult.”
What's more, to date there's been no market analysis — a study of the area's demographics and median income — to support the developers' projected sales and meals revenue.
Pete Boisseau, a spokesman for Shockoe Center, says that study will come later, after the city passes the plan. The developers want the city to create a tax authority that will allow it to collect all the tax revenues within the development and use that money to pay off the bonds on the $70 million ballpark.
The entire $363 million development won't generate tax revenue for the state or the city — including meals, real estate and admission taxes — for 30 years.
“I think you are asking the wrong question when you ask about a ‘market analysis’ for the ballpark,” Boisseau writes in an e-mail. “This is an economic development project. The private dollars involved dwarf the cost of the ballpark. The ballpark makes the private investment possible from the standpoint of solving the flood plain issues with its design. The private investment, in turn, finances the ballpark and [in] return provides a return on its investment to the City and State starting immediately.”
There could indeed be a financial return. But the plan doesn't anticipate the city seeing its investment pay off, by way of boosting the tax base, until 2042, once the bonds are paid in full. Until then, the bigger question may be whether the ballpark development could wind up as an economic drain on the city.
Unless there's a massive increase in the city's residential base and overall spending habits by 2012, the project, if successful, would likely draw business away from tax-generating city restaurants and retailers.
And that would be, in practical terms, the opposite of economic development — not just for existing businesses in the city, but on city tax revenue. For example, the meals taxes generated at Shockoe Center would be diverted to pay off the ballpark bonds and wouldn't be available to pay for city services, such as schools and police. Last year, the city collected $24 million in meals taxes.
The ballpark developers say they must have an agreement with the city by March 1. Bill Pantele, former City Council president and mayoral candidate, says before that happens the city needs to carefully analyze the financial feasibility of the proposal.
“You're asking for the elected officials to make a public commitment with the statement that you are going to prove the figures later,” Pantele says. “I don't think it's a chicken and egg thing. In this case, the chicken comes first.”
Correction to print edition
In “Shockoe Ballpark, an Economic Retention Basin?” (Street Talk, Jan. 28), Style miscalculated the overall sales figure projections for Shockoe Center, the proposed ballpark-anchored development in Shockoe Bottom.
The Shockoe Center development must generate a little more than $90 million in retail and food sales, and not $137.4 million, according to Style's calculations, to achieve the projected tax revenue included in the development group's financial projections.
When including admissions taxes to events in and around the baseball stadium, the ballpark development would need to attract about $97 million in retail sales, food sales and events, including baseball games.
In addition, Highwoods' developers project the total retail and sales tax revenue, including retail and food sales at the ballpark, is $6.59 million, not $6.24 million, as reported in the print edition.
The tax revenue projections haven't been finalized, says Pete Boisseau, a spokesman for the group, and are subject to change as the project moves forward.
The overall figures included in the story were incorrectly calculated by Style, not the ballpark's development team. Style regrets the errors.