Virginia Beach City Council nixes Oceanfront arena deal

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USM presented a rendering of the proposed Oceanfront arena to Virginia Beach City Council on Tuesday, Oct. 4. (Kate Mishkin/Southside Daily)

USM presented a rendering of the proposed Oceanfront arena to Virginia Beach City Council on Tuesday, Oct. 4. (Kate Mishkin/Southside Daily)

After more than 30 people stood in front of Virginia Beach City Council Tuesday evening to express their opinions, mostly in favor, about the proposed Oceanfront arena, council failed to pass a proposed financing deal that would have allowed it to go forward.

Council members Louis Jones, John Moss and Barbara Henley voted against the proposal, which needed nine votes in favor to pass because it involved the transfer of 5.8 acres of city-owned land to the Virginia Beach Development Authority. Eight of the 11 members of council voted to support the financing proposal.

The vote came one week after council members were presented with a new financing proposal that indicated bonds would be sold as unrated instruments; in addition, the developer, United States Management LLC, would have increased its equity contribution by $7.5 million, to offset the risk of unrated bonds. 

The total projected cost of the arena is roughly $200 million.

City Council had approved a revised arena-financing plan in July, after USM scrapped an earlier approach of securing a $170 million loan from a Chinese lender. Under the plan approved in July, USM proposed to borrow $200 million from B.C. Ziegler and Co., a Chicago investment bank, that would serve as underwriter. The plan also required the Virginia Beach Development Authority to serve as a conduit issuer of bonds USM would use to finance construction.

Council imposed seven conditions on its approval in July, though, including an economic feasibility study. That report, paid for by USM, was prepared by Chicago-based C.H. Johnson Consulting and released last week.

Portions of the feasibility analysis were redacted, however, citing a provision under the Virginia Freedom of Information Act that grants an exemption from disclosing “proprietary information, voluntarily provided by a private business pursuant to a promise of confidentiality from a public body, used by the public body for business, trade and tourism development or retention.”

Council members had access to an unredacted copy of the study, but Kilmer wasn’t sure how many had seen it.

Some speakers on Tuesday criticized the lack of transparency.

Mayoral candidate Don Weeks called the arena a project “cloaked in secrecy.”

He was one of several dozen residents who packed into the council chamber Tuesday night, so many that several speakers stood outside to wait their turns. A group of Girl Scouts had to be called in from outside to be recognized by the city earlier in the meeting.

Several speakers praised the deal and noted support for Kilmer, but others expressed dissatisfaction.

“Take your time and get us a better deal,” said Reid Greenman, a Virginia Beach resident.

Some had concerns specifically about the project’s location.

“Why are we sticking an arena down by the oceanfront if the sea level’s rising?” said Dianna Howard, chair of the Virginia Beach Tea Party. 

Before the vote, council members Amelia Ross-Hammond, Bob Dyer, John Uhrin, Rosemary Wilson, Ben Davenport and Mayor Will Sessoms voiced support for the deal.

Ross-Hammond called the proposal a “leap of faith,” and Wilson said it would help retain millennials in Virginia Beach.

“Ladies and gentlemen, this is what will give us the opportunity to make sure that all of a sudden Virginia Beach can fill hotel rooms up in the winter and become a year-round destination,” Sessoms said, after his council colleagues and members of the public had spoken. 

During her presentation to council, Andrea Kilmer, president and CEO of USM, played a video. It showed Virginia Beach from above, taken from a drone.

“It will create memories of a lifetime. It’ll create jobs,” she told council. “It’ll be a catalyst to revive the Oceanfront and make Virginia Beach a year-round playground.”

Council’s vote also came on the heels of news that USM, an ESG company, would partner with Los Angeles-based AEG Facilities to manage and operate the Oceanfront arena. 

“This is very disappointing,” Kilmer said in an interview after the vote.

Kilmer said she had spoken with Jones and Moss but didn’t know ahead of time how they would vote.

“We need to regroup and get with all our team members,” she said. “We have a lot of players at hand.”

This is a developing story and it has been updated since it was first published. Check Southside Daily for updates.

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