VIRGINIA BEACH – Deficiency. That’s the key word when considering the state’s gap financing program for tourism projects, a state official told city representatives this week.
The presentation from Wirt Confroy, director of business development for the Virginia Tourism Corporation, came as local officials continue to research how the incentive works after a request this winter to use it for the 27th Street Hyatt Hotel project triggered a larger discussion of the program.
The state established the program in 2011 to provide funds through tax rebates for projects that have a financing gap of no more than 30 percent. For a city to use the program, it must have a tourism development plan, and it must define a deficiency that it wants to fill, Confroy told the Virginia Beach Development Authority on Tuesday. That deficiency could be anything from wineries to five-star hotels, he said.
Virginia Beach’s Cavalier Hotel received gap funding because it provided something other Virginia Beach hotels didn’t, he said.
“Cavalier received gap financing several years ago not because it’s historic,” Confroy said. “It was its five-star status that really aren’t seen other places in Virginia Beach.”
Confroy said the General Assembly was clear that “there must be a deficiency designated, really by the locality, in what you want to build.”
A member of the Development Authority asked Confroy how many applications the state has received from developers who have already begun construction, as was done with the 27th Street development. Confroy said that usually does not happen, but starting construction before applying does not make a project ineligible.
Here are the steps that must happen before the state comptroller reviews a developer’s application, according to the Virginia Tourism Corporation:
- The city must identify a tourism deficiency in its business community.
- The developer must secure lenders and financing, including gap financing (with city and private lenders).
- The city and developer create a tourism development plan that proves the project fills a void.
- The applicant pays a $500 application fee.
- The Virginia Resource Authority verifies financing and debt structure.
- A local ordinance is passed to create a tourism zone that encompasses the project.
- A local ordinance is passed adopting the project.
One commissioner asked why the state changed its position on the 27th Street developer’s application — saying it was ineligible for the program, then saying it was being considered after all. Confroy said the state initially did not have all the information it needed from the developer and the city, including a clear marketing plan and reasons why the hotel was unique.
Authority commissioner Steve McNulty said Confroy’s overview helped him understand how the program works, but he remained fuzzy on exactly what factors determine if a project is unique and fills a void. He said he didn’t see anything particularly original about the Hyatt Hotel on 27th Street.
“It’s still not clear. At least to me it’s not clear,” McNulty said. “I just think there are already a good number of hotels at the Oceanfront. This particular Hyatt, it’s not a Grand Hyatt.”
It’s not comparable to The Ritz-Carlton, McNulty said.
“I don’t really understand that matrix yet,” he said. “But it’s a question we have to ask.”
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