News Column

OPINION: Beach makes arena choice with an eye on the bottom line

May 14, 2014

By Roger Chesley, The Virginian-Pilot



May 15--In a decision that surprised no one, the Virginia Beach City Council gave the development group offering the cheaper option first dibs on building an arena. The 18,000-seat facility would rise near the Beach's Convention Center.

Council members gave United States Management the nod Tuesday evening. The group plans to spend more than $200 million of its own cash to build the arena. That was an obvious selling point.

This is a win for Beach taxpayers. The competing bid, from W.M. Jordan, relies heavily on public money from the city and state. (Expecting any subsidy from the commonwealth on this project was wishful thinking.)

Mayor Will Sessoms said the city has "suspended" the Jordan proposal. If USM can't deliver, however, it's difficult to envision a scenario in which the Jordan bid would be seriously considered.

China Machinery Engineering Corp. would finance a huge chunk of the private cost of the USM proposal. The Chinese firm's website touts it as the first large engineering and trade company in China. It's also one of the top international contractors. Joseph Gelardi, program director for USM, told me that officials learned of the firm through the outreach to Asia of Jim Cheng, then-Virginia secretary of commerce and trade in the administration of Gov. Bob McDonnell.

Construction won't begin post-haste under USM; it might not begin at all. Details still must be worked out. Private financing needs to be locked in.

Also, the cost of infrastructure improvements, borne by the public, has more than doubled from the original $50 million estimate. The Pilot's John Holland reported that two sources involved in the planning pegged the costs to be at least $120 million. The infrastructure includes a parking garage, ground parking and a reworked interchange at Birdneck Road.

"It's a nice project, but we have to see if it's the right fit," Councilwoman Barbara Henley told me Wednesday.

Added Sessoms: "If this infrastructure number gets so high, that could be a major obstacle." He said the council and city staff must complete their due diligence.

"It's anything but free," Councilman Jim Wood told me. "Will we have to build structured parking? Is it going to be a parking deck that could support private-sector retail?"

USM also wants $7 million annually in tax revenue to pay down its debt.

Those are legitimate concerns.

Now, let's talk about the potential benefits:

The city could host the largest arena between Washington and Raleigh.

The additional entertainment, convention and sporting events would lure more tourists and generate more traffic at Oceanfront hotels and restaurants, especially during the winter.

"There's no doubt in my mind that we would get some very, very big acts," Wood said. "We're the biggest city in Virginia, we have the military, and we have a huge base of customers."

The facility could compete for NCAA tournaments that now bypass Hampton Roads.

Given the capacity, the site also could be a bargaining chip to draw an NBA or NHL franchise.

"If ever there was an opportunity to bring an arena to Virginia Beach," Sessoms said, "this appears to be the best chance, in my opinion."

City officials have put the public's fiscal interests first -- but they're still dreaming big.

Roger Chesley, 757-446-2329, roger.chesley@pilotonline.com, pilotonline.com/chesley, www.facebook.com/RogerChesley

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Source: Virginian-Pilot (Norfolk, VA)