THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, October 27, 1995 TAG: 9510270506
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY ALEX MARSHALL, STAFF WRITER
DATELINE: NORFOLK LENGTH: Medium: 93 lines
The cost of redeveloping the upper Bay streets of East Ocean View has doubled from previous estimates, reaching $70 million to $80 million, redevelopment officials said this week.
These figures mean that if the city continues to pursue the project, it will have to go more deeply into debt to pay for tearing down the existing neighborhood and redeveloping the land.
Already the city will spend $1.5 million this year for clearance efforts.
``The city is committed to the project; it's just a question of how we are going to handle it financially,'' Mayor Paul D. Fraim said. ``We are coming to terms with it.''
Officials from the Norfolk Redevelopment and Housing Authority told the City Council this week that they expect to release a financing plan in the next 45 to 60 days. The plan would explain who would loan the authority money and how it would be paid back.
R. Patrick Gomez, the project director, said he expects some combination of public and private financing to back the project. Tax revenue and money from the future sale of building lots would pay off bank loans and city bonds, officials said.
Financing the project entirely through loans from private banks - the agency's original plan - is difficult because the authority is actually reducing the value of the land it buys by tearing down the homes on it, said an NRHA official.
Unlike past redevelopment efforts, the project will not use federal money, so it will face a steeper road paying for itself.
To redevelop the section of East Ocean View from 23rd to 30th Bay streets, the city will have to clear 90 acres and roughly 1,500 homes. Supporters argue that replacing a blighted, high-crime area with a new, more middle-class neighborhood would improve the tax base and bring up surrounding areas.
To date, the NRHA has bought the homes of 80 families, who have moved to other parts of Norfolk and Hampton Roads.
The price tag for the project comes from totaling the costs of its various phases, which include:
Buying the existing homes and streets and tearing them down.
Putting in streets, utilities and amenities like a neighborhood pool.
Marketing the land, paying legal fees and subsidizing neighborhood maintenance, interest costs and other expenses.
The cost of site improvement has risen to $21 million from $8 million, Gomez said. Land acquisition and clearance costs have risen to about $35 million from an original estimate of $27 million. The estimate for marketing is $4 million. The authority was still calculating the other expenses, Gomez said.
On Tuesday, Steven W. Cooper, a redevelopment official, said the project would cost about $80 million. But in a follow-up interview, he put the total ``in the 70s'' if the estimate doesn't include some costs that also could be classified as income.
Cooper, assistant executive director for development, said the authority expected to earn $30 million to $32 million from the sale of about 600 lots. This is less than half the expected total cost of the project.
Gomez said the redevelopment authority was working to reduce the overall costs.
If the project is successful - if developers buy lots, build homes and sell them - the city would make money from the increase in real estate taxes, Cooper said.
In the first phases of the project, however, the redevelopment authority would actually be shrinking the city's tax base by buying property and buildings from owners who are paying taxes. The redevelopment authority does not pay real estate taxes.
So far, the NRHA has spent or committed $6.7 million, which comes from private bank loans. The city is paying the debt on this loan - this year an estimated $1.5 million - using funds designated for neighborhood capital improvement.
The city announced the redevelopment of this section of East Ocean View in the summer of 1993. In December 1994, internationally known architect Andres Duany led a design ``charrette'' in Norfolk to create a plan for the replacement neighborhood. The housing would range from apartments and condominiums to luxury homes. When finished, the neighborhood should be worth more than $100 million, Gomez said.
The decision to raze this section of East Ocean View aroused protest from current residents, some of whom have vowed not to move.
Barbara Caffee, a longtime resident, said this week that she has begun putting linoleum on her kitchen floor and making other improvements, rather than holding off in fear of losing the house.
``I'm not leaving,'' Caffee said. ILLUSTRATION: Map
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