BY BARBARA HENLEY
COURTHOUSE — On Dec. 9, 2014, City Council was asked to vote on a term sheet for the arena so that financing could be secured.
The presentations at that time to the council and public included that it would be a 40 year lease, the developer would pay all event day costs and, most importantly, that “prior to council approval of final documents, all key financing terms to be agreed on by developer and lender, and city to be provided with satisfactory evidence that such funds are committed subject only to final approval by lender.”
The projected timeline was that the financing would be secured, and city council would vote on the development agreements by the end of the first quarter of 2015. Groundbreaking would occur in the fall.
I supported that vote — a unanimous vote was encouraged to assist in getting the loan — but I expressed concerns about several of the issues: parking, compatibility with the convention center operations, and neighborhood protections. I was assured that all of that would be worked out before it came back to council for approval.
Here we are: Dec. 8, 2015, and we are being asked to give our final approval on all of these contract agreements. But I still have many salient concerns.
Some of those earlier deal points have been changed. It is now a 60 year lease. United States Management will only pay up to $200,000 of event day costs, but, most importantly, United States Management has not fulfilled its commitment that the financing would be firm before the city council is asked to approve the contracts. In fact, we would be allowing up to another 10 months for them to obtain a loan commitment and up to still another 10 months to close on the construction loan.
The loan cure rights agreement acknowledges: “Much of this document is incomplete as the city has not been engaged with the lender at this time. The document will be revised and executed without further council action if the terms requested by the lender do not represent a material impairment or change of the city’s rights or obligations.”
I worry about the clauses that the lender might require in their loan agreement or changes that they might request in these contracts. What will be considered material changes, and who makes that determination? If we have been willing to back down on our most critical requirement that the money be in hand before we act on the contracts, what else might we concede because we so badly want this deal?
I still have great concerns about parking. The city is responsible for parking. We guarantee 2,700 spaces within a specified area if an event is expected to have an attendance of over 6,500 people.
If some of those identified spaces are lost to some of the redevelopment we covet, we will be required to replace the spaces. How do we do that? At what point will we require the need to build structured parking? How will we pay for it? The tourism improvement program fund will be maxed out for several years. United States Management is entitled to charge for parking and retain that revenue during arena event periods; that city-owned parking lot money goes to the arena, not the city.
United States Management is permitted to sell sponsorships and naming rights to the city-owned plaza and parking areas and retain all revenues generated from the sale of such rights. How will all of that lost parking affect the patrons of the Virginia Beach Convention Center, especially locals attending events there?
I worry about the financing. For 30 years, every cent of all of the tax money directly generated by the arena is returned to United States Management for debt and interest payment. In addition, 1% of the 8% city-wide hotel tax which now goes to the tourism investment project fund will go to the arena. What happens if there is a real need or desire for something that we would normally look to the tourism improvement program fund to pay during these tight years? Are we prepared to do without it, or use money from the General Fund? We are also using an additional $500,000 annually from the tourism improvement program fund to pay additional city operational costs related to the arena. Will that be enough, or will there constantly be additional, unanticipated expenses?
We are leasing city-owned land for $1 a year for the 60 years, and subordinating our land to the arena debt. If the arena defaults, our options are to buy the arena, or lose our land to a new buyer. Who, then, will be in possession of this critical piece of land and part of our tourist industry?
My concerns go on and on. We have had one month, including Thanksgiving, to try to comfortably answer all of these questions. I have not gotten to that comfort point. We rushed last December because we thought we had to vote then in order for the loan to be quickly secured. Even the unanimous vote didn’t do it.
There are 10 months allowed for United States Management to get a loan commitment. Why can’t we have one of those months to allow more in depth discussion and understanding of these complicated documents?
I respect the sincerity of all of those who support this project. However, I cannot support this deal.