A for-profit subsidiary of the Norfolk Redevelopment and Housing Authority that hasn’t invested in Norfolk for 15 years pledged last month to back a shopping center with a grocery store, potentially eliminating a food desert adjacent to two public housing communities.
The $3.5 million investment by Hampton Roads Ventures would help finance the $10 million project’s first phase at the corner of Brambleton Avenue and Church Street, a partnership between the city and Urban League of Hampton Roads, which has a contract to purchase the 5.1-acre site for $3.2 million.
Called The Village, plans include the rebuilding of a Family Dollar store damaged by a fire, as well as the construction of a job training facility and a grocery store to replace a Save A Lot that closed in 2020. The proposed redevelopment is contingent on Norfolk receiving a $5 million state grant.
The promise comes more than a year after a City Council resolution required HRV to make its “best efforts” to include Norfolk projects in future applications for new markets tax credits. The U.S. Treasury Department program encourages development in distressed, low-income areas by offering investors a 39% tax break over seven years.
HRV’s last investment in Norfolk came in 2008, when it backed the Fort Norfolk Plaza, a health center just off Brambleton Avenue.
The 2022 resolution pushing for the subsidiary to invest in Norfolk projects and seeking more oversight passed after a Virginia Mercury series detailed how HRV had invested only a fraction of the $360 million in tax credit allocations it had won in Norfolk. Some city council members said they didn’t know the NRHA subsidiary existed and raised questions about why it was not focused on Norfolk. The city has 16 severely distressed census tracts, which are given the highest priority for new markets tax allocations. The poverty rate in those tracts ranges from 31% to as high as 80%, and the unemployment rate tops out at 40%.
Why is a Norfolk community development entity investing everywhere but Norfolk?
Plans for The Village became public on Oct. 24, when Norfolk City Council approved an application for the $5 million state grant to revitalize the shopping center. The grant, which uses American Rescue Plan Act dollars, requires matching local funds. HRV’s contribution would be added to $250,000 from the city and $1.25 million from the private owner for the reconstruction of the Family Dollar.
“We want to bring an underutilized asset for the neighborhood back to active use,” Sean Washington, the city’s economic development department head, told City Council. “And as we all know, there’s an urgent need for a grocery store there.”
Officials from NRHA, Hampton Roads Ventures and the Urban League did not respond to repeated requests for comment. Representatives of HRV have repeatedly declined interviews and refused records requests under the Virginia Freedom of Information Act, saying the subsidiary receives no government funding. Norfolk Mayor Kenneth Alexander has said he thinks HRV should subject itself to the public records law.
In response to a public records request for email communications between NRHA’s executive director and Hampton Roads Ventures in the six months before the announcement of The Village, NRHA said there had been none.
‘Better health, opportunity, and quality of life’
Other Virginia housing authorities have created entities like Hampton Roads Ventures that match projects with investors attracted by the favorable tax breaks associated with federal new markets tax credits. But they focus on funding projects in their cities or regions, often plowing the millions of dollars in administrative fees they earn back into local projects. They also open their meetings to public scrutiny. Hampton Roads Ventures does not.
That has made it difficult to determine what the subsidiary is doing at any given time and why.
Over the past 15 years, Hampton Roads Ventures has spurred investments in numerous other states, including a mixed-use senior apartment complex in Illinois, a peanut shelling plant in Georgia, grocery stores in Louisiana, Illinois and Ohio, a grain terminal business in Mississippi, an aluminum company in Alabama, a hair gel company in Tennessee and a cotton mill in Louisiana.
Previously, NRHA officials said they were unable to attract a qualified Norfolk project and that Hampton Roads Ventures needed to focus on rural transactions to continue to win tax credit allocations in the highly competitive process.
Whether the promise to invest in The Village signals a changing focus remains to be seen.
Although we have a national footprint, our home and headquarters is in Norfolk and that makes The Village even more exciting. We are pleased to be a resource.
– Alphonso Albert, chair of Hampton Roads Ventures
In a letter to Urban League of Hampton Roads President and CEO Gilbert Bland sent two days after Norfolk City Council approved the state grant application, Alphonso Albert, the vice chair of NRHA’s board and chair of Hampton Roads Venture’s board of managers, wrote that The Village “will help bring better health, opportunity, and quality of life for the residents of this area of Norfolk.”
In the letter, Albert committed Hampton Roads Ventures to assist in the redevelopment by providing access to its tax credits or working with other community development entities and investors to produce $3.5 million. He noted that any HRV participation in the project would still “require approval by the various entities’ boards.”
“Although we have a national footprint, our home and headquarters is in Norfolk and that makes The Village even more exciting,” he concluded. “We are pleased to be a resource.”
What Hampton Roads Ventures has been doing
Norfolk City Council’s July 2022 resolution required Hampton Roads Ventures to make an annual Sept. 30 report to the city about its projects and efforts to fund Norfolk projects.
That report shows the subsidiary allocated tax credits to two projects during 2023: $8 million for a grocery store in Picayune, Mississippi, and $7 million for a cancer health care center in Lillington, North Carolina.
Norfolk leaders push community development group to invest locally
According to a November report from the Treasury Department, HRV has $60 million in unallocated tax credits, some of that dating to 2020. Some of those credits may have been committed to deals that have yet to close. Treasury Department rules require HRV to spend about half the allocations in rural areas.
A cover letter for this year’s report from Delphine Carnes, the lawyer for NRHA and Hampton Roads Ventures, details local marketing efforts that include four events about new markets tax credits at the Slover Library and meetings with several people and organizations, including the Urban League, Norfolk Innovative Corridor head Linda Peck and council members Andria McClellan and J.P. Paige.
“We had a very productive meeting,” McClellan said. “We brainstormed on ways to reinvest these dollars into communities in the area and talked about possible stakeholders and other organizations that would be good partners.”
With the area’s affordable housing crisis, she suggested HRV contact SmithNMTC Associates, a St. Louis consultancy that has shepherded $560 million of new markets tax credits into for-sale affordable housing throughout the country. McClellan said the response was that HRV knew how to manage allocations and that SmithNMTC would be expensive.
Hampton Roads Ventures did not contact SmithNMTC, according to Howard Smith, a co-founder. The firm provides its model for using tax credits for free but also offers consulting. In addition to dealing with the extensive compliance paperwork, the firm takes the risk of paying back the credits if the project does not follow investment rules.
“Our company has currently closed over $560 million in total [new markets tax credits] for homeownership; and, we have $54 million in closings going on right now,” he added in an email. “Clearly we are not too expensive for those who understand the program and want to use it for its intended purpose.”
NRHA, meanwhile, announced in July that it received a $6.4 million grant to assist first-time minority homebuyers with down payment and closing costs as well as offering a 1% interest rate discount.
Additionally, HRV transferred $500,000 of its cash reserves to NRHA for use in several programs, including workforce development, renovations, youth services, crime prevention and staff training initiatives. In the two years since the Mercury series was published, HRV has transferred nearly $3 million to NRHA. In the 18 preceding years, it had transferred $1.3 million.
Contributions from HRV and the cutting of 240 staff positions — a move that followed a consultant’s report concluding the housing authority had become bloated after failing to adjust to a reduced role in redevelopment — mean NRHA did not dip into reserve funds this year to balance its budget, for the first time in a decade.
Hampton Roads Ventures also forgave a $440,000 loan to the city’s historic Hunton YMCA for what is now the redeveloping Tidewater Gardens project. The organization lost United Way funding in 2018 because it owed the Internal Revenue Service unpaid payroll taxes. Hampton Roads Ventures stepped in with the loan in 2018 to keep the organization afloat. In July, Norfolk City Council authorized spending $6.6 million to acquire the building, operate the Y at a temporary facility and construct a new building at a different location.
Overall, the September report shows HRV had retained earnings of $11.3 million and a net income for the first nine months of $1 million. The development entity made $128,000 in “contributions,” which were not itemized.
Some of the people who met with HRV representatives said they received a donation. Ann Peoples of Peoples Pharmacy on Church Street, who discussed a mixed-use health and wellness project in the planning stages with the group, said she received a donation to help her business recover from a fire in the building. She declined to name the amount.
The annual audit for 2022 shows HRV with $2.8 million in revenue and nearly $1.5 million in expenses.
The biggest expense was more than $463,000 for salaries and benefits. HRV’s site lists three team members — the chief executive officer, a portfolio manager and an executive assistant.
GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
