Briefing: North of Broad/Downtown Neighborhood Redevelopment Project

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1 Member NYSE FINRA SIPC Briefing: North of Broad/Downtown Neighborhood Redevelopment Project City of Richmond, Virginia

2 Due Diligence Independent 3 rd Party Economic Analysis Goals and Objectives of the Analysis Global Observations and Findings Financial Results 1

3 City Due Diligence The Mayor commissioned an independent 3 rd party economic analysis (the Analysis ) that outlined the direct, indirect and induced (i.e. outside the proposed TIF District) impacts to be undertaken in conjunction with negotiations. The purpose of the Analysis was to independently examine the financial impact of the Project. Hunden Strategic Partners, a Chicago based Destination Real Estate Development Consulting Firm, was engaged to provide the Analysis for the North of Broad/Downtown Neighborhood Redevelopment Project. Hunden has worked on more than 500 projects/studies in the past 20 years. Hunden has no affiliation with the Developer, its proposal or any of the affiliated parties in connection to the proposed Project. 2

4 Due Diligence Goals & Objectives of the Analysis To independently analyze the economic benefits/costs to the City of the proposed Project to include: Direct Impact of the proposed Project development. Direct, Indirect and Induced impacts on the area surrounding the Project development and the City as a whole. Impact on Arena, event and entertainment. Impact on Greater Richmond Convention Center and hotel/meeting activity. Impact on existing and potential for new retail and restaurant activity. Impact on existing and potential for new office space. Potential for cannibalization of existing businesses in surrounding areas. Additional 1.5% Meals Tax for Schools. 3

5 Due Diligence Global Observations and Initial Findings Global Observations The unique nature and scope of the Project would benefit not only the immediate Project area, but also the surrounding existing businesses. No cannibalization expected. The critical mass of the Project would actually be beneficial to current businesses. Initial Findings: The Hunden report estimates an even more favorable economic benefit to the City than the Developer and provide over $1 Billion of net new tax revenue over 30 years (1). A New arena would attract many national entertainment tours and provide a strong opportunity for a sports franchise, likely the American Hockey League. The proposed Convention Center Hotel (Hyatt Regency) is what the market needs to better leverage the Convention Center and optimize the performance of existing and new hotels. (1) Excludes estimated $278 Million of increment from two new Dominion Towers. 4

6 Due Diligence Global Observations and Initial Findings (cont.) Initial Findings (cont.): The influx of thousands of new residents and day-time workers from the proposed residential and office developments will demand and support more, better and diverse shopping and dining options. Residential properties in downtown Richmond have experienced improved performance in recent years with high average occupancy rates, steady rental rate growth and low concession rates. New office buildings would be welcomed by the downtown Richmond Market due to the aging inventory and lack of suitable, large contiguous space. Richmond Public Schools will benefit from additional (1.5%) meals taxes for schools due to the Project, which will be applied to the designated funds for school investment. This amount is in addition to potential allocation of new City revenues that can be available. 5

7 Billions Financial Results City Revenues (Total over 30 Years) Do Nothing estimated incremental real estate tax revenues of the proposed TIF District received by the City assuming no Project. $2.0 $1.5 $1.0 $0.5 Do Nothing Do the Project $1.7 B Do the Project estimated incremental real estate tax revenues, other local tax revenue and arena/ parking revenue received by the City as a result of the Project (1). $480 M $0.0 (1) Real Estate and Other Local Tax revenue estimates are from the Hunden Analysis. Parking /Arena revenue estimates from the Respondent. 6

8 How will the Project be Funded?/ Financial Benefits to the City 7

9 How Will the Project be Funded? The Project will be funded from three sources: Source One: Private investment: Approx. $1.1 Billion Source Two: New Revenues generated by the Project: Approx. $600 Million Source Three: Incremental Real Estate Revenues of the TIF District: Approx. $1.1 Billion 8

10 How Will the Public Portion of the Project ( Arena/Blues Armory/Leigh Street ) be Funded? The Public Portion of the Project will be funded from Non-recourse Revenue Bonds repaid from Sources Two and Three: New Revenues generated by the Project (Source Two); and Incremental Real Estate Revenues of the TIF District (Source Three). 9

11 New Revenues Generated by the Project (Source Two) New Revenues generated by the Project as follows: 1. Incremental Sales Tax Revenues from the Project Blocks City s local and the Commonwealth s share, which is subject to General Assembly approval. Existing Sales tax revenues will remain in the City s General Fund. 2. Incremental Other Local Tax (Meals, Admissions, BPOL) Revenues from the Project Blocks. Existing Sales tax revenues will remain in the City s General Fund. NOTE: the recently adopted additional 1.5% Meals Tax dedicated to schools will not be included. 3. Incremental Parking Revenues. Existing Parking revenues will remain in the City s Parking Enterprise Fund. 4. New Arena Revenues. Do not currently exist; Current Coliseum is subsidized. 5. Rebate of Incremental Lodging Taxes in excess of the City s obligation to the Greater Richmond Convention Center Authority ( GRCCA ). To the extent available in an amount not to exceed the Lodging Taxes generated by the new Convention Center Hotel. 10

12 Incremental Real Estate Revenues (Source Three) from the Proposed TIF District Incremental Real Estate Tax Revenues generated by the TIF District (highlighted in orange): Bounded on the east and west by 1 st and 10 th Streets, respectively. Bounded on the north and south by I-64/I-95 and I-195 (Downtown Expressway), respectively. Existing Real Estate Tax revenues in the district will remain in the City s General Fund. 11

13 Tax-Exempt Real Estate Approximately One Billion Dollars of Tax-Exempt Real Estate in the Proposed TIF District. Approximately One Billion Dollars of additional Tax-Exempt Real Estate in the area immediately to the East of the Proposed TIF District. 12

14 $ millions New Revenues Generated by the Project (Source Two) Total over 30 Years New Revenues Generated by the Project (Total over 30 Years) $200 $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 Sales Tax Meals Tax (6.0%)(1) Admissions Tax Lodging Tax Total over 30 Years Total over 30 Years New Revenues Generated by the Project $604.4 million BPOL Tax Project/ Other(2) Note: Other Local Tax Revenue estimates from the Hunden Analysis. Project/Other revenue estimates from Respondent. (1) Excludes 1.5% Meals Tax dedicated to Schools. (2) Includes Parking and Arena revenues. 13

15 $ millions Incremental Real Estate Tax Revenues (Source Three) Total over 30 Years $1,200 Incremental Real Estate Tax Revenues (Total over 30 Years) $1,000 $800 $600 $400 $200 $0 Real Estate Tax Total over 30 Years Total over 30 Years Incremental Real Estate Tax Revenues $1.1 billion Note: Real Estate Tax revenue estimates from the Hunden Analysis. 14

16 New Revenues/Incremental Real Estate Tax Revenues (Sources Two and Three) Total over 30 Years Total over 30 Years New Revenues Incremental Generated by Real Estate Tax the Project Revenues Total $ $1.1 = $1.7 million billion billion 15

17 The Revenue Bonds Issued in an approximate size of $350 Million. Fixed rate debt. Repayable over 30 years with the potential to be repaid in as few as 18 to 20 years. Total debt service over 30 years approximates $620 Million, however, debt service could be as little as $495 Million. 16

18 Financial Benefits to the City Total Surplus over 30 Years All Surplus revenues benefit the City as follows: Required by the Underwriter 50% of the Surplus Revenues will be directed to the early payment of the Revenue Bonds. Based on the Hunden Projections, the Revenue Bonds are projected to be paid off in 18 years (by FY 2036). Projected interest savings to the City approximates $125 Million. 50% of the Surplus will go to the City for General Purposes. This amount translates into $1.2 Billion. See next page for approximate annual benefit. 17

19 $ millions Financial Benefits to the City Average Annual Surplus Average Annual Surplus Revenues to the City after paying annual debt service payments and accelerating the repayment of the Revenue Bonds. $100.0 $90.0 $80.0 $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 Average Annual Surplus Revenues to the City $91.4 $60.8 $13.3 First 10 years Second 10 Years Last 5 Years ( ) ( ) ( ) Excludes Surplus over first five years ( ) to fund stabilization fund and to be applied to payment of revenue bonds in final year. 18

20 What if the City Does Nothing? The Coliseum will continue to be a drain on the General Fund with annual operating subsidies and debt service approximating $1.5 Million. Capital investment related to several projects (i.e. GRTC Transfer Station, Social Services Facility, Coliseum, amongst others) will require tens of millions of dollars that will hurt the City s future debt capacity and cash flows. There will be fewer dollars for school construction (i.e. no additional 1.5% Meals Tax as a result of the Project). A core portion of the City s downtown will remain undeveloped and not generate tax revenues. The Greater Richmond Convention Center will remain underutilized due to the lack of sufficient hotel capacity. There will continue to be a lack of affordable housing in the City s downtown area. 19

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