VIRGINIA BEACH — The city hopes to transform the 10.5 acre Dome Site into a mixed-use development consisting of office, retail, residential, entertainment, recreational and parking use, but it won’t come cheap.
Here’s a breakdown of the possible known costs to Virginia Beach taxpayers for development of the Dome Site, according to Deputy City Manager Ron Williams and a term sheet between the city and developer, Venture Realty Group, which was released Wednesday:
- Three parking facilities, to be paid for by the city. The garages will provide 1,934 parking spaces — approximately $30,000 per space — for a total cost of $58 million.
- The city will pay for the design, development, and construction of an “entertainment venue,” which is “not to exceed $30 million.”
- The city will pay Venture for the design and development of streetscapes, such as common spaces and walkways. The taxpayer cost is “not to exceed $7.5 million.” Maintenance of said spaces will be funded through special tax assessments under the Special Services District.
Total construction investment from the city: $95.5 million
The city will also pay certain incentives to Venture through participation in state tourism grants, as well as a performance incentive.
The city will participate in the state’s Tourism Development Financing Program. The developer will pay 80 percent of the total cost, but there is a 20 percent financing “gap.” Venture, the state, and the city will each pay one-third of the remaining gap financing.
- The annual incentive to Venture could be as much as $5 million, with nearly $2.9 million of that yearly incentive paid by the city. Over the 20 years noted in the term sheet, the city could pay more than $57 million to Venture through the TDFP.
- All of the performance grants would be paid solely out of tax revenues generated by the project — tax revenues that would otherwise enter the TIP fund.
Known totals of possible incentives paid by the city: $57 million over 20 years
- Venture may not generate enough net operating income early on — which, according to the term sheet, “enough” is equivalent to a 10 percent return on cost — and so the city will increase its contributions to the TDFP meant to ensure that Venture remains financially stable during the first three years after the Dome Site is developed, with a corresponding reduction in the final three years of Venture’s 20 year debt service. It is unclear how much the city will need to pay to reach that 10 percent return on cost for Venture, and Williams said it would depend on how well Venture and the development performed.
- Taxes generated on site that would otherwise be earmarked for the TIP fund will be returned, meaning Venture will receive credit for the meal and admissions taxes it generates after construction and once the development is producing enough tax revenue. Williams was not immediately available to clarify the total amount of incentives the city will need to pay.
Total known possible costs to the city, according to the term sheet, for Dome Site development: $152.5 million
Final costs will be determined during the pre-development phase of the development agreement, which Williams said is likely to be in 2019.