A $25 million chunk of funding for the nascent Diamond District baseball stadium is being held up by the debate surrounding Gov. Glenn Youngkin’s now defunct plan to build an arena in Alexandria.
The city of Richmond hopes to use state sales tax revenue to help pay off the minor league ballpark, but the law giving the city that authority expires in July.
Now the Richmond ballpark needs help from Youngkin and state lawmakers. The tax problem is not dire enough to kill the Richmond project, but it could increase the difficulty of paying for it.
“The rug was pulled out from under us,” one person familiar with the development said.
State law allows certain localities to collect sales tax from arenas, amphitheaters, convention centers and other publicly owned buildings and use the money to pay off the building’s debt.
For example, a spectator who buys a T-shirt at the new ballpark would pay a 6% sales tax, and that money would go toward the stadium, instead of the state’s general fund.
But the law allowing localities to collect that money expires July 1. Earlier this year, Del. Bonita Anthony, D-Norfolk, sponsored a bill to extend the provision until 2027.
“We know that collecting sales tax revenue is vital to bringing large public projects, such as an arena, to life, since a locality can leverage the revenue generated by the sales tax through bond issuance,” Anthony told legislators last month.
But there was one problem with the bill – it contained the word “arena.”
Youngkin proposed building an arena in Alexandria for the Washington Wizards and Capitals, and Sen. Louise Lucas, D-Portsmouth, chair of the Senate Finance and Appropriations Committee, vowed to oppose it. On Wednesday, Ted Leonsis, owner of the two teams, said he reached a deal with D.C. Mayor Muriel Bowser to keep the teams in Washington.
“We know that around here in the General Assembly, when you say the word ‘arena,’ it creates a negative buzz,” Anthony said. “But I just want to note that this bill does not provide a vehicle for the proposed situation in Northern Virginia.”
The bill is rejected
The House of Delegates approved the measure 66-33, with most Democrats showing support and most Republicans opposing it. But the bill lost traction when it reached the Senate Finance panel. The committee, led by Lucas, never held a vote – the same tactic she used to derail the legislation for the $2 billion Alexandria arena project.
Essentially, funding for Richmond’s baseball stadium got caught up in the Alexandria arena debate, several people familiar with the issue said. Lucas and Anthony did not respond to requests for comment. There’s a bit of irony that the bill died in Lucas’ committee. She is the same legislator who sponsored a nearly identical piece of legislation last year, which Youngkin signed.
Until the law is changed, Richmond cannot collect the stadium’s sales tax, denying the city of at least $25 million, said Lincoln Saunders, the city’s chief administrative officer. The lack of funding is not a death blow to the stadium, but it would make it harder for the city to pay its bills.
“We’re still committed to the project,” Saunders said. “We’re still pushing forward.”
The stadium is expected to cost north of $110 million, and the city plans to spend roughly $600 million to pay off the stadium’s bonds. The city will depend more heavily on real estate taxes generated from residences and commercial space developers plan to build around the stadium.
“It doesn’t kill the ballpark,” another person familiar with the matter said. “But it makes it harder and more expensive to afford what we want.”
How the city plans to pay
To pay for the new stadium, the city’s community development authority will issue bonds. Then the new tax dollars generated from the project will pay off those bonds. New taxes are the difference between the higher tax revenues generated after construction and the lower revenues from before construction.
The city is creating a Tax Increment Financing, or TIF, district, and all the new taxes generated inside the district will go toward the stadium.
There are several kinds of taxes the city will use to pay off the bond debt:
Real estate tax from the properties surrounding the baseball stadium. A development group called RVA Diamond Partners will buy the parcels and build residences, a hotel and commercial space. The property owners will pay a real estate tax of $1.20 for every $100 of assessed value.
Meals tax from the stadium and nearby restaurants at a rate of 6%.
License taxes for businesses that open in or near the Diamond District. The tax rate varies based on the type of business.
Admission taxes, which the city claims when a business charges admission to an event.
The city also expects to collect hotel taxes from a hotel planned in the district and lease agreements with the Flying Squirrels and Virginia Commonwealth University.
Youngkin could address the problem by writing budget language or a new bill that allows localities to use state tax revenue.
“We do want to capture these revenues for the benefit of the project,” Saunders said. “So we’re going to continue to advocate for the state to extend the language, so Richmond and localities like ours can benefit the way other communities have.”
Virginia lawmakers will return to Richmond April 17 to take up the governor’s vetoes and his proposed amendments to the budget and other legislation.
It’s unclear if Youngkin will help. Asked for comment, a spokesperson for the governor did not address Richmond specifically.
Even if Youngkin writes budget language to assist Richmond, he would still need the votes from legislators.
From the Archives: Professional baseball in Richmond, 1953-1990
The city plans to build a ballpark on Arthur Ashe Boulevard, with residences, commercial space, a hotel and a park nearby. On the right side of the image is VCU's planned athletics village.
The city created a tax incremental financing district. New tax revenue generated within the district will pay for the financing of a minor-league baseball stadium. New taxes are the difference between the higher tax revenues generated after construction and lower numbers before construction.
Sen. Louise Lucas, D-Portsmouth, chair of the Senate Finance and Appropriations Committee, did not take up legislation to extend localities' ability to use sales taxes from a publicly owned building to pay off the building's debt.