Briefing: North of Broad/Downtown Neighborhood Redevelopment Project - - PowerPoint PPT Presentation

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Briefing: North of Broad/Downtown Neighborhood Redevelopment Project

City of Richmond, Virginia

November 2, 2018

Due Diligence – Independent 3rd Party Economic Analysis

• Goals and Objectives of the Analysis
• Global Observations and Findings
• Financial Results

November 2, 2018 1

November 2, 2018

 The Mayor

• r commi

mmissi ssione

• ned

d an indepen penden ent t 3rd

rd party economi

nomic c analysis sis (the “Analysis”) that

• utlin

ined ed the direct, ct, indirect ect and induced ced (i.e.

• e. outsi

side de the proposed sed TIF F District) trict) imp mpact acts s to be underta taken en in conju junct nction

• n with

h negoti

• tiati

tion

• ns.

s.  The purpose se of the Analysis sis was to indepen endent dently y exami mine e the finan anci cial al imp mpact act of the Project. ct.  Hunden n Strategic egic Pa Partner ers, s, a Chicago cago based sed Desti tina natio tion n Real Estat ate e Developmen

• pment

t Consult sulting ing Firm, was engaged ged to provide de the Analysis ysis for the North h of Broad/Do d/Downt wntown wn Neighb ghbor

• rho

hood

• d Redevel

elop

• pmen

ment t Project. ct. – Hunden n has worked d on more than n 500 projects/ cts/studi studies es in the past t 20 years. s. – Hunden n has no affil iliat ation ion with h the Developer

• per, its proposa
• sal or any of the affilia

iated ed partie ies s in conne necti ction

• n to the proposed

sed Project. ct.

City Due Diligence

2

November 2, 2018

 To independ penden entl tly analyze yze the economi nomic c bene nefit its/costs s/costs to the City ty of the proposed sed Project ct to include: ude: – Dire rect ct Imp mpact ct of the proposed sed Project ct developme elopment nt. – Direct, ct, Indirect irect and Induced uced imp mpact acts on the area surround ndin ing g the Project ct development elopment and the City y as a whole. e. – Impa mpact ct on Arena, event nt and enterta tain inmen ment. t. – Impa mpact ct on Greater er Richmo hmond nd Conven enti tion

• n Center

er and hot

• tel/m

el/meeti ting ng activity ivity. – Impa mpact ct on existi sting ng and pot

• ten

ential tial for new ret etail and restau auran ant t activity ivity. – Imp mpact ct on existi sting ng and pot

• ten

ential tial for r new office ice space. ce. – Pot

• tent

ntia ial for cannib ibalizati alization

• n of existi

sting ng busin iness esses es in surroun undin ing g areas. s. – Ad Addit itiona

• nal 1.

1.5% Meals s Tax for School

• ols.

s.

Due Diligence – Goals & Objectives of the Analysis

3

November 2, 2018

Due Diligence – Global Observations and Initial Findings

4

 Global al Obse servat ation ions – The unique e nature e and scop

• pe

e of the Project ct would d benef efit it not

• t only the immedia

diate e Project ct area, but also the surroundi nding ng existi sting ng busin iness esses.

• es. No
• canni

nibaliz alizat ation

• n expect

ected. ed. – The critica ical mass s of the Project ct would d actuall ually be benef efici icial al to current t busi sine ness sses. es.

(1) Excludes estimated $278 Million of increment from two new Dominion Towers.

 Initi tial al Findings ngs: – The Hu Hunden n re report estim imates es an even n more re fa favorab

• rable

e economi

• mic

c benef efit it to the City than n the Developer

• per and provide

de over $1 Billio ion n of net et new tax revenue nue over 30 years(1

(1).

– A New arena a would d attract tract many nationa

• nal enterta

tain inment ment tours s and provide e a strong ng oppor

• rtu

tunit ity y for a sports ts franchise, chise, likely the American ican Hockey y League ue. – The proposed sed Convent ntion ion Center er Hot

• tel (Hyatt

yatt Regen ency cy) ) is what t the market et needs s to bet etter er leverage age the Conven enti tion

• n Center

er and optim imize ize the perfor

• rma

mance nce of existi sting ng and new hot

• tels.

November 2, 2018

Due Diligence – Global Observations and Initial Findings (cont.)

5

 Initi tial al Findings ngs (cont nt.): ): – The influx ux of thousands sands of new residen ents ts and day-ti time me worker ers s from the proposed

• sed

residen enti tial al and office ice devel elopme

• pment

nts will deman and d and suppor

• rt

t more, bet etter er and diver erse se shoppi ping g and dining g options

• ns.

– Resid iden enti tial al properti ties es in downt ntown wn Richmond hmond have e experie ienced nced imp mproved ed performa mance nce in recent t years s with h high average age occupancy upancy rates, s, stead ady y rental al rate growth th and low concession cession ra rates. – New office ce buildin ings gs would d be welcome comed d by the downt ntown wn Richmond hmond Market t due to the aging g inven entor

• ry and lack

k of suita table, e, large conti tigu guous

• us space

ce. – Richmo hmond nd Public ic School

• ls

s will benefit efit from additi tion

• nal (1.

1.5%) %) meals s taxes es for r school

• ols

s due to the Project, ct, which ch will be applied ed to the designat gnated ed funds ds for school

• ol invest

estment.

• ment. This

his amoun unt t is in additi tion

• n to pot
• tent

ntia ial allocat cation ion of new City y revenu nues es that t can be availa ailable. e.

November 2, 2018

Financial Results

6

$0.0 $0.5 $1.0 $1.5 $2.0

Billions

City Revenues (Total over 30 Years)

$1. 1.7 B Do Not Nothi hing $480 0 M Do t the Project ct

“Do Nothing” – estima imated ed increme emental tal real eal estat ate e tax reven enues es of the propos

• posed

ed TIF District ict rec eceiv eived d by the City assumin ming no Proje ject. . “Do the Project” estima imated ed increm emen ental tal real eal estat tate e tax reven enues es, ,

• t
• ther

er loc

• cal

al tax reven enue e and d aren ena/ a/ parking ing reven enue e rec eceiv eived ed by the City as a result t of the Proj

• jec

ect(1

(1).

(1) Real Estate and Other Local Tax revenue estimates are from the Hunden Analysis. Parking /Arena revenue estimates from the Respondent.

How will the Project be Funded?/ Financial Benefits to the City

November 2, 2018 7

November 2, 2018

 The Project ct will be funded ded from three e sources: ces: Source ce One: Privat ate investm estment nt: Source ce Two: New Reven enues es genera erated ed by the Project: ct: Source ce Three: e: Incremen ementa tal Real Estat ate Reven enues es of the TIF F District: trict:

How Will the Project be Funded?

8

Approx.

• x. $1.

1.1 1 Billion

• n

Approx. . $600 0 Mill llion

• n

Approx.

• x. $1.

1.1 1 Billion

• n

November 2, 2018

 The Public ic Portion ion of the Project ct will be funded ed from Non-recour ecourse se Reven enue ue Bonds ds repaid d from Sources es Two and Three: – New Reven enues es genera erated ed by the Project ct (Sour urce ce Two); ); and – Incremen ementa tal Real Estat ate Reven enues es of the TIF District trict (Source ce Three). ).

How Will the Public Portion of the Project (“Arena/Blues Armory/Leigh Street”) be Funded?

9

November 2, 2018

 New Revenue nues s generat ated ed by the Project ct as follows: ws: 1. 1. Increm emental ental Sales Tax Revenues s fro rom the Pro roject ct Blocks cks – City’s local and the Commonwealth’s share, which ch is subject ct to General ral Assembly appro rova val.

– Existing Sales tax revenues will remain in the City’s General Fund.

2. 2. Increm emental ental Other Local Tax (Meals, s, Ad Admi missi sions, ns, BPOL) L) Revenues s fro rom the Pro roject ct Blocks cks.

– Existing Sales tax revenues will remain in the City’s General Fund. NOTE TE: the rec ecen ently ly adop dopted ed additio ditional al 1.5% % Meals als Tax dedicat edicated ed to schoo hools ls will ll not

• t be includ

luded. d.

3. 3. Increm emental ental Park rking ng Revenue ues.

– Existin ting g Parkin ing g revenu nues es will remain in the City’s Parking king Enter erpri rise se Fund.

4. 4. New Arena Revenues es.

– Do not t curre rently tly exist; t; Curre rent nt Colise iseum is subsidi sidize zed. d.

5. 5. Rebate of Increme ment ntal al Lodgi ging ng Taxes in excess of the City’s obligation to the Greater Richmond Convention Center Authority (“GRCCA”).

– To the e exten ent t ava vail ilable ble in an amou

• unt

nt not t to exceed eed the e Lodgi

• dging

g Taxes es gene nerat rated d by the e new Conven entio tion n Cent nter er Hot

• tel.

New Revenues Generated by the Project (Source Two)

10

November 2, 2018

 Incremen ementa tal Real Estat ate Tax Reven enue ues generat ated ed by the TIF F District trict (high ghligh ighted ed in orange): ge): – Bounde nded d on the east t and west st by 1st

st and 10th th Streets,

ets, respecti ectively. – Bounde nded d on the north h and south th by I-64/I 4/I-95 and I-195 95 (Downt wntown wn Express essway), y), respecti ectivel ely.

Incremental Real Estate Revenues (Source Three) from the Proposed TIF District

11

– Existin ting g Real l Estate Tax reven enues es in the e distr trict ict will remain in in the e City’s General Fund. d.

November 2, 2018

 Approximately One Billion Dollars of Tax-Exempt Real Estate in the Proposed TIF District.  Approximately One Billion Dollars of additional Tax-Exempt Real Estate in the area immediately to the East of the Proposed TIF District.

Tax-Exempt Real Estate

12

November 2, 2018

New Revenues Generated by the Project (Source Two) – Total over 30 Years

13

Tot

• tal

al ove ver r 30 Years

Note: Other Local Tax Revenue estimates from the Hunden Analysis. Project/Other revenue estimates from Respondent. (1) Excludes 1.5% Meals Tax dedicated to Schools. (2) Includes Parking and Arena revenues.

$0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 Sales Tax Meals Tax (6.0%)(1) Admissions Tax Lodging Tax BPOL Tax Project/ Other(2)

New Revenues Generated by the Project (Total over 30 Years)

$ millions

New Revenues Generated by the Project

$604.4

million

Tot

• tal over 30 Years

November 2, 2018

Incremental Real Estate Tax Revenues (Source Three) – Total over 30 Years

14

Tot

• tal

al ove ver r 30 Years

$0 $200 $400 $600 $800 $1,000 $1,200 Real Estate Tax

Incremental Real Estate Tax Revenues (Total over 30 Years)

$ millions

Incremental Real Estate Tax Revenues

$1.1

billion

Tot

• tal over 30 Years

Note: Real Estate Tax revenue estimates from the Hunden Analysis.

November 2, 2018

New Revenues/Incremental Real Estate Tax Revenues (Sources Two and Three) – Total over 30 Years

15

Tot

• tal

l over 30 Years

New Revenues Incremental Generated by Real Estate Tax the Project Revenues Total

$604.4

+

$1.1

=

$1.7

million billion billion

November 2, 2018

 Issued sued in an approximat ximate e size e of $350 Million.

• n.

 Fixed ed rate debt. t.  Repaya yable over 30 years with the pot

• ten

ential tial to be repaid d in as few as 18 18 to 20 years. s.  Tot

• tal

al debt t service ice over 30 years s approximat ximates es $620 Million ion, however er, debt t service ice could d be as littl tle as $495 Million.

• n.

The Revenue Bonds

16

November 2, 2018

 All Surplus s revenue ues s benef efit it the City y as follows: s:  Requ quired ed by the Un Underwr writ iter er – 50 50% of the Surplus s Revenu nues es will be direct cted ed to the early paymen ment t of the Reven enue e Bonds ds. – Based ed on the Hunden n Project ctions,

• ns, the Reven

enue ue Bonds ds are project cted d to be paid off f in 18 18 years s (by FY 2036). ). – Project cted ed interest est savin ings gs to the City approximat ximates es $125 Million.

• n.

 50 50% of the Surplus s will go to the City y for General eral Purposes ses.

– This is amoun unt t transl slat ates es int nto

• $1.2

.2 Billion

• n.

Financial Benefits to the City – Total Surplus over 30 Years

17

See next page f for appro roximat mate annual benef efit.

November 2, 2018

 Average rage Annual Surplus us Reven enue ues s to the City ty after r paying ng annual debt bt servi vice ce paymen ents ts and accel elerati erating ng the repaymen ment t of the Reven enue ue Bonds ds.

Financial Benefits to the City – Average Annual Surplus

18

Excludes Surplus over first five years (2019-2023) to fund stabilization fund and to be applied to payment of revenue bonds in final year.

$13.3 $60.8 $91.4 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0 $90.0 $100.0 First 10 years Second 10 Years Last 5 Years

$ millions

Average Annual Surplus Revenues to the City

(2024-33) (2034-43) (2044-48)

November 2, 2018

What if the City Does Nothing?

19

 The Coliseum um will l conti tinue nue to be a d a drain n on the Genera ral l Fund nd with th annual l operati ting ng subsidi sidies es and debt servi vice approxi ximati ating ng $1. 1.5 Million.

• n.

 Capital tal invest estment ent related d to severa ral projects ects (i.e. . GRTC C Trans nsfer er Stati tion, n, Social Service ces s Facility ty, , Coliseum, amongst others) will require tens of millions of dollars that will hurt the City’s future debt capacity ty and cash flows. s.  There re will be f fewer r dollars for school

• l constr

structi uction n (i.e. . no addi diti tiona nal 1. 1.5% Meals Tax as a r result ult of the Project). ct).  A core portion of the City’s downtown will remain undeveloped and not generate tax revenues.  The Greater er Richm chmond nd Convent ntion n Center er will remain n underuti erutilized ed due to the lack of suffici cient nt hot

• tel capacity

ty.  There will continue to be a lack of affordable housing in the City’s downtown area.

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November 2, 2018 20