Taxpayer's bill for arena-related projects in Va. Beach could total $100 million


by Nick Ochsner, 13News Now

Posted on June 9, 2014 at 5:12 PM

Updated Tuesday, Jun 10 at 6:12 AM

VIRGINIA BEACH -- The proposed new arena being pursued by the city of Virginia Beach will come with a hefty price tag for taxpayers, despite the fact that the arena itself will be built with private funds.

In May, council members decided to pursue a proposal from United States Management that would build an 18,000-seat arena adjacent to the city's convention center on 19th Street.

The USM proposal calls for private investors to foot the bill to build the arena, which is expected to cost roughly $200 million. In exchange, the proposal calls for the city to give USM one percent of its hotel tax and any taxes generated from the operation of the arena itself.

In addition, the proposal calls for the city to complete a list of projects to improve the infrastructure around the proposed arena site. Emails obtained through a Freedom of Information Act request show those improvements will cost tens-of-millions of dollars.

13News Now requested emails and documents from members of the city's Arena Task Force after the city refused to provide information about the task force's secret meetings.

The emails reveal that the city has already spent or set aside hundreds of thousands of dollars just to decide which proposal to pursue.

Up-front expenses include $35,000 set aside to pay CSL International to study the financial feasibility of the two arena proposals. The city has signed a contract with Kimley-Horn and Associates for $126,650 to study infrastructure-related issues, including traffic, parking and storm water. The law firm Willcox and Savage has been retained to work on legal issues related to the deal. Staff has estimated their hourly fees will total roughly $150,000.

The CSL International study was presented to council members in May. The Kimley-Horn study is scheduled to be presented in early July.

"Let's look at it this way, the arena is going to be one of the biggest investments the city is going to purchase," explained councilman Bob Deyer. "We have to do our due diligence to make sure, first of all, that the financing is in place and that the business plan is going to be able to work."

Deyer said the arena would be great for Virginia Beach, both as a way to stimulate the city's tourism business and also as a way to provide new entertainment for the city's residents.

"With the downsizing of the military, we have to make sure that we keep our tourist industry viable," Deyer said.

The $311,650 that has been spent or allocated on lawyers and consultants pales in comparison to the money the city will have to spend on infrastructure costs if the arena plan moves forward.

The USM proposal, which was selected by the council, calls for the city to complete a list of projects totaling roughly $50 million.

Deputy City Manager Dave Hansen, who oversees the arena project, declined a request to be interviewed for this story. In a statement, Hansen said the arena project could cost taxpayers $100 million.

"The city is contemplating one of its largest ever economic development projects," Hansen said in the statement. "The public infrastructure costs to support the entire arena cover more than the needs of the arena. They also include infrastructure needs for a future convention center expansion, a future headquarters hotel, the necessary parking, public gathering spaces and the alignment of a public transit system."

Councilmember Deyer said many of the projects included in the list of infrastructure projects are things that would need to be done by the city whether or not the arena was built.

"These are the types of things we should be doing anyways," Deyer said. "That's the city's responsibility."

In addition to the infrastructure projects, the USM proposal also calls for the city to spend $4 million to install an ice floor in the arena that could support an NHL team.

In his statement, Hansen said staff is working to compile a comprehensive cost analysis for council members.

"City leaders have much to determine and some very difficult decision to make," Hansen said in his prepared statement. "They need the best available information."