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A legal fight with the Richmond Marriott and the launch of the Miller & Rhoads project: how the city has lost its grip on East Broad Street.


When the developers behind the Miller & Rhoads hotel and condo project finally made their plans official that morning, many saw a watershed day for the city. The 250-room hotel and 150-unit condo project is a coup for East Broad, which has been suffering from an image problem lately. There's the giant hole that was Thalhimers next door, the barricaded Carpenter Center and the construction zone surrounding the new federal courthouse.

The developers promise to plop down $95 million to fix up the old Miller & Rhoads building, which should jump-start private investment in the area and help the convention center across the street by providing additional hotel rooms. After several fits and starts, the Miller & Rhoads project appears to be for real. Construction is set to begin this summer.

But across the street, another fight is just beginning. In an ironic twist, the only businessman who's invested any significant private capital on East Broad in the past five years — Richmond Marriott owner James A. Procaccianti — is in a legal tussle with the city over a special assessment tacked on to his real estate bill.

City Finance Director Harry Black says the city has stopped paying the Marriott hundreds of thousands of dollars in parking subsidies, part of a long-standing arrangement with the hotel. Black wants the city to conduct an independent audit of how the Marriott spends city money, which adds up to about $900,000 to $1 million a year.

"I have had some very significant questions about the invoices," Black says. "A lot of stuff is just not adding up, literally."

It may seem that two separate story lines are unfolding across the street from each other. But both are intricately intertwined, exposing the inherent disconnect between City Hall and the entity that made the project even possible — the Broad Street Community Development Authority.

Four years ago, City Council created the community development authority (CDA) to float $66.7 million in municipal bonds to pay for new streetscapes and utilities on East Broad Street. The bond issue was lauded as a creative new financing tool that shifted the burden of financing public capital improvements to the private sector. The city got its sidewalks and streetscapes (it also tore down 6th Street Marketplace), and investors were ensured a healthy return with very little risk.

The trade-off? Because the authority is beholden to institutional investors, the city has no direct control over the capital improvements or the revenue streams that ultimately pay off the bonds. But it is responsible for collecting the special tax assessments the property owners within the CDA agreed to pay. And Richmond coughs up considerable money to pay back the bonds — shifting $400,000 a year from the Richmond Coliseum's budget and agreeing to pay $250,000 year for special-event parking, for starters.

What's more, the city has a stake in seeing that the Marriott and the Miller & Rhoads project are successful. Combined, the hotels are responsible for paying $381,000 in special tax assessments, which go toward the annual bond payments. If for some reason the CDA comes up short, the city would likely be forced into covering the shortfall — up to $3 million a year — or run the risk of seeing its bond ratings on Wall Street downgraded.

In the case of the Marriott, the special tax assessment that Procaccianti agreed to pay — $256,778 — kicks in when the CDA completes its streetscape work. In the lawsuit, Procaccianti's lawyers argue that because the sidewalks around the Thalhimers site are unfinished, the work isn't completed; therefore the special assessments don't kick in. The CDA and City Hall disagree.

The work was substantially completed in May 2005, the city argues in an affidavit. Meanwhile, the city has placed a lien on the hotel property for the tax assessment plus interest. The city points out that the other property owners in the area are paying the assessment. Even the nonprofit Performing Arts Foundation, which has no income-generating venue, is forking over $200,000 this year to pay its part.

The city has also stopped paying the Marriott's parking subsidies. Through the city's housing authority, Richmond essentially pays for the Marriott's valet parking operation. Black is questioning the Marriott's billing practices. At the CDA's monthly meeting last week, he told the board that in one instance his office discovered questionable parking bills for guests who'd supposedly stayed at the hotel for more than 300 days. (He's also calling for an audit of one of the CDA's parking vendors, Standard Parking, which has submitted invoices raising similar questions.)

Black says the fate of Marriott's parking subsidies, set to be phased out once the streetscape work is completed, will be determined by the outcome of the Marriott's lawsuit. "Everything is going to be predicated on how the litigation plays out," he says.

It's likely a settlement will be reached, say those close to the case. The city can't afford to have a contentious relationship with such a key player as the Marriott, especially considering its role in paying back the bonds, not to mention the investment Procaccianti has put into the hotel. Since purchasing the hotel for $10.4 million in 2002, the Cranston, R.I., hotel operator has pumped $17 million into the property to renovate the lobby, meeting rooms, restaurants and hotel rooms. That fact isn't lost on Councilman Bill Pantele, who says he's still shocked that Procaccianti is suing the city.

"I don't have anything good to say," Pantele says. "As we try to bring downtown Richmond back, this isn't the kind of thing that is good for downtown, or good for them."

The city has plenty vested in the Miller & Rhoads hotel, as well. If that project doesn't get off the ground — and in real estate circles, many are concerned Richmond's condo bubble is about to burst — it will hurt the CDA as well as the convention center. At the press conference in late April, there was a sense of excitement, however apprehensive.

Pres Kabacoff, president and chief executive of HRI Properties of New Orleans, announced he was partnering with ECI Investment Advisors of Chicago and Prudential Securities to take on the project. The Miller & Rhoads hotel, he told the gathering April 26, is just his first project in Richmond, which he referred to as a "candy store of wonderful historic structures."

"We want to do more work here if we can," he said, looking back at Mayor Wilder. The mayor nodded approvingly. S

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