Wells Fargo Center seeks money transfusion from Norfolk

NORFOLK

City leaders probably will vote today to give a $2.85 million subsidy to the developer of the Wells Fargo Center, who says without the help he will not be able to build the second phase of the project.

If the City Council approves the subsidy, it won't be the project's first.

The 23-story office tower, on Monticello Avenue between Scope and MacArthur Center, is the centerpiece of the $171 million development. Already, the 250,000 square feet of office space is more than 70 percent leased and will probably open next year, officials have said.

However, the second phase - 50,000 square feet of retail space and 160 luxury apartments - has been delayed because of the economic downturn.

Alan Nusbaum, who heads S.L. Nusbaum Realty, which is developing the project, said that even with the subsidy, the project could lose money in its opening stages.

"It's highly unusual for us to go out on a limb like this, but the city wants to see the project completed, and so do we," he said.

"We've never seen an economy like this."

He said his company was close to signing deals with Starbucks, Panera Bread and others that recently decided not to expand because of continuing deterioration in the economy. So far, he said, he has no leases for any of the retail space.

After hearing from Nusbaum officials that the second phase was no longer feasible, the council discussed the project behind closed doors last week for nearly an hour.

The subsidy is not a direct payment. Instead, Nusbaum would receive a tax break for each of the first 10 years after the project is complete. It would be a rebate on a portion of the real estate, business and personal property taxes that the company pays on the project at the end of each year.

The payments could not exceed $2.85 million.

Rod Woolard, the city's director of economic developer, said the apartments and retail space, when completed, will generate about $1.1 million yearly in taxes.

The same incentive program was used for the Dominion Enterprises building in 2004, the expansion of the Ford plant in 2001, and the NorVa music venue in 2000.

Councilman Paul R. Riddick, who has been critical of subsidies to downtown developers, said he will support this one. The city can't afford to have a half-finished project downtown, he said.

"While you hate to see a project in that type of situation, it's something you have to take a deep breath and swallow," he said. "We're going to have to take a chance on it.

"It's like having a baby halfway out of the womb. You can't push it back in there. You have to take it out, clean it off, and take care of it."

Councilman Barclay C. Winn said the fact that Nusbaum wants to go forward with the project in this economy is admirable.

The project has received other city subsidies, including the land, valued at $3.6 million, that the city donated. The city also paid $5.4 million for public utilities and right-of-way improvements.

Norfolk also spent $53.4 million on parking garages for the project, but the garages will be paid for with parking fees and owned by the city.

The vote, to come at the council's 2:30 formal session, will take place on the same day that city leaders deal with more details about Norfolk's finances.

During its noon work session, there will be a presentation on $40 million in cost overruns on light rail.

Last week, it was learned that City Manager Regina V.K. Williams sent an e-mail to department heads ordering large cuts in next year's budget proposals because of a projected $39 million shortfall.

Larry Gregory, head of the Norfolk Tea Party II, said he understands why the city is anxious to complete the Wells Fargo project. But given the hard economic times, the council should not provide incentives to any new businesses.

"If they can't make it on their own, then they don't make it," he said.

Harry Minium, (757) 446-2371, harry.minium@pilotonline.com