EDITORIAL: Va. Beach economy too weak for Town Center risk

Nov 22, 2008 (The Virginian-Pilot - McClatchy-Tribune Information Services via COMTEX) -- TWBC | Quote | Chart | News | PowerRating -- Virginia Beach is poised in the next few weeks to make significant additional investments in Town Center and around Pembroke Mall.

This page has been an enthusiastic booster of Town Center since the beginning, but times have changed.

Before the City Council commits more money to develop the office, shopping and entertainment district, members must look much harder at what those investments do to and for taxpayers in this depressed economy -- and for the next 20 years.

In both plans on the table -- a fourth phase of Town Center and a remake of the Pembroke Mall area -- the financial burden on the public increases.

Eight months ago, Virginia Beach planned to pay $1 for every $4.50 spent by developer Armada Hoffler for Town Center's Phase IV.

This week, officials said they have added to those plans. Phase IV now includes a third hotel, 20-story office tower, 195 apartments, retail space and a parking garage. If the City Council approves the plan Dec. 9, taxpayers would be responsible for $1 for every $2.80 in private investment -- $56.4 million.

In previous phases, the public's share was $1 for every $5 the developers paid.

In the plan for Pembroke Mall, on the council agenda Tuesday, the city would create another tax increment financing district, commonly called TIF, from Virginia Beach Boulevard north to Jeanne Street.

The money raised by capturing the increases in property tax revenue for the next 20 years would finance a $3.1 million pedestrian bridge across the boulevard to Town Center. The mall's owners would pay an unspecified amount to improve the mall and adjacent shopping center.

In both cases, the developers would get a sweet deal. Armada Hoffler gets the city to help with financing it can't get from any bank. And it gets the city as a guaranteed tenant. Pembroke's owners get better pedestrian access as well as a bridge to bring customers from Town Center. Both projects would use money that would otherwise go toward schools, city services and capital projects -- including, in Town Center's case, $500,000 a year in hotel taxes -- to pay the city's share of the developments.

The investments in Town Center would build more office and living space at a time there's a glut of both. Already, leasing agents at Two Columbus Center, where there's 100,000 square feet of office space, say only 18 percent has been leased.

Once the tower is built, adding another 332,000 square feet of office space, the city plans to lease two floors. Phase IV also would double the amount of conference space at Town Center, despite plenty of available space at the huge, new, state-of-the-art convention center a few miles away.

These proposals come while the city is facing its worst-ever financial crisis.

This week, three hours before praising the Town Center plan, Virginia Beach leaders learned the city is $81 million short for next year's budget.

Nearly 1,000 Virginia Beach homes are in some level of foreclosure. Property values have dropped -- for homes and cars. Business and sales tax revenues have declined. Fewer tourists are visiting, and when they come, they're spending less.

So as residents grapple with dwindling retirement funds, the inability to get credit and the loss of jobs, Virginia Beach leaders want to invest taxpayer money -- not in much-needed road improvements or schools, but in their popular entertainment, shopping and commerce district.

There's no question Town Center has been good for Virginia Beach. It has become a bustling center of activity, contributes to the city's economy and offers high quality food and lodging to business travelers, residents and tourists.

Council members point out that Virginia Beach's proposed investments are part of the city's effort to do what residents said they wanted: bring in more jobs and businesses so homeowners aren't responsible for so much of the tax burden.

So far, though, nobody has provided a convincing argument for why, when the city's budget is in shambles, the city should spend money it doesn't have for projects it doesn't need.

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