Hen­rico close to pick­ing a part­ner for new arena, but cost re­mains a se­cret

Richmond Times-Dispatch Weekend - - FRONT PAGE - BY C. SUAREZ RO­JAS

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.”

DANIEL SANGJIB MIN/TIMES-DIS­PATCH

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.

Vithoulkas

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