Chesapeake's risk rises at Belharbour

Less than a year ago, Chesapeake City Council took a big gamble on South Norfolk with public money.

It approved the building of $200 million worth of condos, shops, offices and a marina on a gritty industrial site along the Elizabeth River. The idea was to spark interest in South Norfolk, and for its part, Chesapeake pledged millions for the new streets and sidewalks to make Belharbour Station at SoNo livable.

The economic and environmental risks were well known. Could the ground be purged of industrial contaminants? And could it withstand competition across the river with downtown Norfolk?

Now, even before major construction has begun, a new risk threatens to undermine the project: the curdling of the real estate market.

So the council Tuesday night approved a new deal to take the pressure off the developer, Paylor Spruill. He can delay building the project’s first 120 condominiums by a year. He could build 240 apartments before finishing the condos.

Though the city has taken steps to protect its interests in the project, the latest hurdle renews questions about the wisdom of so much public investment in the venture and whether it will achieve its ambitious vision.

The project’s success could be an even longer shot during a housing glut. The market has more than four times the number of unsold homes it had at the end of 2004, an economist at Old Dominion University said this week.

Some safeguards have been put in place. At City Manager William Harrell’s urging, the council approved creation of a community development authority to handle $36 million in debt for public improvements at Belharbour. The authority can issue bonds, removing the debt from the city.

Harrell remains bullish on Belharbour’s possibilities, calling it a “unique development site.”

Spruill says workers have removed several thousand cubic yards of contaminated soil and replaced it with clean material, at a cost of about $1 million.

Everyone wants this project to work as part of the rebirth of South Norfolk, but hurdles — environmental, housing and others — make the odds of success much more difficult.