Henrico close to picking a partner for new arena, but cost remains a secret
Henrico County officials are open about the benefits they hope to reap from partnering with a private company to build an indoor sports center at the Richmond Raceway, but won’t say what competing proposals under review could cost taxpayers.
The administration of County Manager John Vithoulkas refused to answer questions about the financing of the two pitches and withheld cost estimates and other information from a report released to the Richmond Times-Dispatch under the Freedom of Information Act.
The document, a county staff memo provided to the county’s Board of Supervisors for its Dec. 11 meeting, listed total project costs that differed by about $10 million, board Chairman Tyrone Nelson said during the meeting.
He recently said the higher-priced arena would cost about $40 million.
It’s unclear what Henrico would owe. That information was not
provided to the board, Nelson said.
State law allows the county to shield financing information that could hurt ongoing negotiations, a move hailed as effective by some experts on public-private partnerships and questioned by open government advocates who say taxpayers should know what localities are doing on their behalf.
Nelson said the secrecy frustrates efforts for citizens to assess the plans, but he trusts county staff to strike a fair and balanced deal with either firm.
“It’s not usually like this. It’s not how we’ve operated in the past,” Nelson said after a meeting last month in which supervisors were expected to ask developers about their proposals without knowing the full details. “The point of those presentations was for us to ask direct questions, but much of [the information] wasn’t shared with the public.”
Henrico declined to release an evaluation it commissioned of the proposals, an effort the county attorney’s office said would cost $50,182.
In public statements and interviews, Vithoulkas and other county officials have said they will release more information about the financing of the project in February, when they are ready to recommend which proposal the supervisors should approve.
At the meeting last month, Vithoulkas said county staff will recommend “the most cost-effective proposal.”
What we know
The county picked MEB General Contractors and Eastern Sports Management from six proposals submitted last fall.
Both proposals eye undeveloped land at the Richmond Raceway, a site recommended by a working group that Vithoulkas appointed.
He said the idea for a center that could hold graduation ceremonies and other civic and cultural events has been bandied about for 20 years, but the idea was stowed away after officials pulled it from consideration in the $237 million bond referendum in 2000.
With a growing demand for recreational space, the supervisors at a retreat last year asked staff to prioritize the construction of an event center.
Both proposals in contention pitch buildings about the size of the Siegel Center in Richmond, but it’s unclear how many seats either would include.
MEB’s proposal is for a 210,000-square-foot rectangular-shaped building with 12 basketball courts. The plan includes an alternative design that is larger and would replace four courts with an indoor running track.
Eastern Sports Management proffered a 220,000-square-foot Lshaped building that also includes 12 basketball courts, as well as an “adventure play” area.
Eastern Sports Management, which is based in Fredericksburg and manages facilities there and in Virginia Beach, Stafford County and Downingtown, Pa., has proposed managing the operation of the facility.
MEB, which is based in Hampton Roads, said it intends to partner with American Sports Centers of Anaheim, Calif.
The potential economic benefits to the county, unlike the costs, remain in the public version of the staff report obtained through an open records request.
According to the report, tourism experts estimate the facility will generate $17 million in annual visitor spending over the next 10 years, largely at hotels and restaurants. The report also says the county would save $2.5 million in annual operating costs by having a private company manage the facility.
In response to a question from Supervisor Tommy Branin, Rick Hibbett, MEB’s project manager, said it will be designed with public use in mind because the project will “be paid for by the citizens of Henrico.”
In an email after the meeting, Hibbett said he misspoke and did not mean to insinuate that the project will be publicly financed.
“The financing arrangements for this project have not been finalized; however, our team has provided options for financing the project,” he said.
County officials and company representatives would not share financial details, but Vithoulkas did say Henrico will contribute.
“You’re going to have public money in this. The county would be a participant and ultimately have some use of the facility — that’s part of the negotiation,” he said in an interview last week.
What we don’t know
Andy Ballard, vice president of Eastern Sports Management, said Nelson’s description of the cost differences during the December meeting stopped short of revealing confidential price information.
“While one of the board members did say something about the two prices not matching up, we do not have any specific knowledge of what the other team proposed as a price,” he said.
While various financing options are under consideration, the county seems likely to have to buy the land for the facility at the Richmond Raceway.
“Our intent is to own the land. We have an opportunity with this location,” Vithoulkas said during the Dec. 11 meeting.
County officials would not say whether Henrico is currently negotiating with Richmond Raceway to acquire the land. The 313-acre raceway property is assessed at $34,409,300. The land alone is assessed at $6,322,400, or $20,200 per acre.
Brent Gambill, a spokesman for the raceway, would not say specifically whether the land is for sale. But he said officials at the raceway are eager to work with the county “on how to best advance the development” of the project.
The partially redacted county staff report says an independent firm, Downey and Scott LLC, on Dec. 3 submitted an assessment of the proposals, which officials said would cost Henrico about $50,000. A county working group has sent questions about the proposals to the two firms.
The county attorney’s office refused to release the assessment and the county’s questions to the two competing firms, citing state code that exempts the disclosure of certain information if it would make negotiating a deal more difficult.
Why they won’t say
Under the Public-Private Education Facilities and Infrastructure Act of 2002, localities and their potential private business partners have discretion to withhold the businesses’ proprietary information, such as trade secrets and financial records, from the public.
John Foote, a lawyer from Northern Virginia who has represented companies that have partnered with localities in PPEA deals, said the exemptions allow parties to maintain a competitive advantage in negotiations.
Typically, localities — and businesses, which are allowed to submit unsolicited development proposals with a public interest under the PPEA — seek public-private partnerships to move projects faster or when there isn’t enough public funding immediately available, Foote said.
He said it’s particularly convenient for Virginia counties because major capital projects that would incur long-term debt need to be approved in a bond referendum.
“In either a solicited or unsolicited project, it is often difficult to raise the public money necessary — especially if you have to go to the bond markets,” Foote said in an email. “When private money can be brought to bear on a public/private project it is much easier for the locality to finance its share, if it has one.”
Similar to public-private economic development projects, localities working with private entities under PPEA guidelines are granted wide discretion whether to disclose staff evaluations, memorandums and information before an interim or comprehensive agreement is signed.
Megan Rhyne, director of the Virginia Coalition for Open Government, said she understands why private companies want to keep certain information confidential, but thinks local governments should be more transparent when considering the expense of public funds in these kinds of projects.
“Whatever the county is offering to pay, the public needs to be aware of that. Will they use bonds? Reserve funds? That’s not the company’s proprietary information,” she said. “I’m sure there will be government attorneys who disagree with me, but that’s how I see it.”
Two companies are bidding to build an arena on property near the Richmond Raceway. A report estimates the project could generate $17 million in annual visitor spending.