$70 million in bonds OK'd for Sen. Lucas' hotel project

PORTSMOUTH

State Sen. Louise Lucas moved one step closer Tuesday to securing millions of dollars to help finance a proposed hotel and conference center at Victory Village business p ark.

The city's economic development authority unanimously approved issuing up to $70 million in tax-free and taxable bonds, which would provide Lucas with low-cost financing.

Now, the Portsmouth and Norfolk city councils must vote. Portsmouth's City Council is expected to discuss the issue at its next meeting Tuesday.

Under the current proposal, Portsmouth and Norfolk would not take responsibly for the project's debt. BB&T Capital Markets is the proposed underwriter of the bonds, according to Lucas' application.

Lucas, a Portsmouth Democrat, wants to use up to $32 million of tax-exempt enterprise zone bonds and another $32 million in taxable bonds. She would also like to secure another $6 million in bonds for construction costs from the Virginia Department of Housing and Community Development.

The Victory Conference Center and Victory Conference Center Hotel would compete against other local hotel and conference centers - including the Renaissance Portsmouth Hotel and Waterfront Conference Center, Portsmouth's economic development director Steven Lynch said.

The city is paying $2.5 million per year in debt service on that hotel, which opened in 2001.

Lucas wants to begin construction in November and finish the development by April 30, 2010. The project would include a 200- to 250-room hotel and 50,000-square-foot conference center with a 16,000-square-foot ballroom.

It would be built on about seven acres adjacent to a new Tidewater Community College campus that is under construction. Portsmouth officials plan to develop Victory Village business park off Interstate 264 at Victory Boulevard as a city center.

As of December, Lucas had collected $1.8 million from about 600 investors, the majority of whom are black. Lucas has described the project as the city's first development led and financed by African Americans.

The allocation of the $32 million in tax-free bonds would exhaust the $130 million in enterprise zone bonds that the U.S. Department of Housing and Urban Development awarded to Norfolk and Portsmouth in 1999.

The bonds were to be used within ten years to stimulate economic growth and create jobs in both cities.

In 2001, Portsmouth awarded $8 million in enterprise zone bonds to the Ocean Marine Yacht Center. Last month, the council authorized the issuance of $12 million in the bonds to help finance the construction of a new Holiday Inn at the Crawford Connector.

As part of receiving the tax-free enterprise zone bonds, Lucas would be required to hire at least 35 percent of her employees from within Portsmouth and Norfolk's designated empowerment zone.

According to paperwork that Lucas submitted to the city, the hotel would employ an estimated 23 full-time employees at an average salary of $29,739. The conference center would employ 13 full-time employees, at an average salary of $45,235.

The hotel would generate $612,000 in real and personal property taxes per year, while the conference center would generate $300,000, according to the documents. The hotel and conference center have a combined estimated taxable value of $60.9 million, according to Lucas' documents.

During Tuesday's public hearing, commission chairwoman Ann Kirk-Mendes said the amount of bonds that Lucas has requested would finance the total cost of her project.

Lynch said the project has multiple potential funding sources, including the bonds, other tax credits, equity from investors, and, potentially, conventional debt.

"It's not 100 percent financing," Lynch said in a phone interview this week. "They will be bringing other financing to the table."

Howard Gordon, an attorney for Lucas, said the hotel would operate as a franchise of a well-known chain. A consultant has met with representatives of three hotel chains, he said. It would be premature to name them, Gordon told commissioners.

Lucas, who attended the meeting, said the Victory Village Hotel and Conference Center would host major events, such as graduation, for the new TCC campus.

TCC spokeswoman Laurie White said Tuesday that the college does not have an agreement with the proposed hotel and conference center.

Jen McCaffery, (757) 446-2627, jen.mccaffery@pilotonline.com