Q&A: Sen. Lucas' project relies on tax-exempt bonds

Posted to: News Portsmouth
Login or register to post comments

By Jen McCaffery
The Virginian-Pilot
© January 27, 2009

PORTSMOUTH

George Scruggs, bond attorney for Victory Conference Center Hotel LLC and Victory Conference Center LLC, and Michael Glenn, the project's developer, answered questions about the bonds investors are seeking for the project.

How do the bonds work?

They are a special category of tax-exempt bonds called enterprise bonds. A private business owner can take advantage of this bond financing for qualified projects.

Why does Portsmouth have access to these bonds?

In 1999, Norfolk and Portsmouth were designated $130 million in enterprise bonds to stimulate economic development and create jobs in distressed areas. Victory Conference Center LLC and Victory Conference Center Hotel LLC are seeking Portsmouth's final portion of the bonds: $32 million.

What's the deadline for issuing the bonds?

The bonds would have to be issued before the end of the year, when the designation of certain neighborhoods in Norfolk and Portsmouth as an empowerment zone runs out.

Who would issue the bonds?

Portsmouth's Economic Development Authority. Before the bonds can be issued, however, federal and state law requires a public hearing and the consent of local governing bodies. In this case, that would be Portsmouth and Norfolk's city councils.

Who would underwrite the bonds?

Once the deal is put together, the developer would find a firm to underwrite and market the bonds. That firm would then determine whether the bonds could be sold to the public and try to sell them. They would likely be marketed to sophisticated investors such as commercial banks or bond funds. The incentive for bond purchasers is that they would receive tax exemption on the bonds' interest.

How would the bonds be backed?

Security for the bonds would be the revenue generated by the project and the mortgage on the property. Personal guarantees from the developer may also be required. If the companies defaulted on the bonds, the bond buyers could foreclose on the land and any improvements, such as new construction, and seek any guarantees provided by the developer. State law also says that the bonds are not the obligation of Portsmouth or the city's Economic Development Authority.

Can the bonds sell in this market?

That's the $64,000 question. Market conditions affect us all.

- Jen McCaffery, The Pilot

COMMENTS ADVISORY: Users are solely responsible for opinions they post here; comments do not reflect the views of The Virginian-Pilot or its websites. Users must follow agreed-upon rules: Be civil, be clean, be on topic; don't attack private individuals, other users or classes of people. Read the full rules here.
- Comments are automatically checked for inappropriate language, but readers might find some comments offensive or inaccurate. If you believe a comment violates our rules, click the report violation link below it.

NO the $64,000 question isn't whether the bonds will sell...

Submitted by henry on Tue, 01/27/2009 at 1:59 pm.

The real question is whether less than 100 low paying jobs is worth $32,000,000 in government liability?

If Louise Lucas and her lawyer think this is such a profitable and worthwhile project and truly believe that it will work in the current economic climate,

Then Let Louise Lucas put all that she owns as collateral. If she is willing to put every interest in every business she has and her houses and other assets then I'm willing to say yes to a smaller amount say 10 million. There has to be a commitment from Louise Lucas to risk all that she has for such a large government commitment to be risked for so little gain.

Greed and avarice

Submitted by 2cents on Tue, 01/27/2009 at 10:10 am.

When is this nightmare going to end???

BTW

Submitted by stevenm on Tue, 01/27/2009 at 9:14 am.

There are other alternatives to using Lucas Transportation as medical transportation. Most of the local cab companies off the same service with specialized vehicles.

Siphoning

Submitted by stevenm on Tue, 01/27/2009 at 9:12 am.

She is attempting to siphon off the remaining funds in a program designed to stimulate growth. A hotel and conference center at this time does not represent growth. What it does represent is the greed that Lucas has and the opportunities that she chooses to enrich herself and her family. When done, she will be the sole owner of the hotel, not the investors. She will also have controlling interest in the convention center. If this is not personal enrichment through the use of public funds by a public representative nothing is. What a conflict of interest. I wonder how many people would have invested in this project if it had not been marketed as a black project. Can we trust her to look out for our best interest? Absolutely not! She must be removed from her office and held accountable for her actions. Suing ones constituency, just how foolish is that? It only shows the level of contempt she feels for the citizens of Portsmouth and her level of personal greed. Send her packing and vote NO on her proposition.

Public Money being used without security?

Submitted by peterk41262 on Tue, 01/27/2009 at 8:52 am.

The only way the bonds are protected is from "the revenue generated by the project and the mortgage on the property. " So that means if this thing fails and doesn't make any money or Lucas' construction company goes bankrupt, the tax payers loose.
The only thing to back the bonds is future taxes and the mortgage on the property! It will take 100 years for the taxes on that hotel to add up to anything. The Mortgage is useless. There is a growing number of abandoned property in Portsmouth. House usold for years. a Mortgage in Portsmouth has as much value as ski boots in Iraq.

This is wrong on so many levels
VOTE NO CITY COUNCIL !!! Our we will vote no on you during relelection time! Lucas needs to be investigated. It seems she is abusing her power of office.
VOTE NO!!!