THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Wednesday, January 3, 1996 TAG: 9601030407
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY ALEX MARSHALL, STAFF WRITER
DATELINE: NORFOLK LENGTH: Long : 121 lines
The public will have to shoulder the initial costs of redeveloping the upper bay streets of East Ocean View, city officials told the City Council Tuesday, an estimated $35 million over the next six years.
City-backed bonds will have to finance the project because private banks, originally sought as a funding source, balked at lending the money without the city guaranteeing the loans.
Under the new financing plan, the city would dedicate $5.75 million of its capital budget for each of the next six years - a total of $34.5 million - to buying land and tearing down homes in East Ocean View.
The capital budget is used to finance new schools, roads, recreation centers and other long-term expenditures. This fiscal year, the city has authorized more than $99 million in capital expenditures. The $5.75 million annual cost of the Ocean View project is more than double what Norfolk has budgeted for 1995-96 on all of its street resurfacing and repair work.
Under the city bond proposal, Norfolk taxpayers, not private banks, are assuming the risk that the new neighborhood will flourish and repay its development costs through higher tax revenues.
The city has estimated the project will pay for itself by the year 2023.
The council, already facing heat for spending public funds on a downtown mall and subsidizing the Nauticus museum, took no action on the proposal Tuesday. The council will vote on the expenditure as part of the capital improvement budget, which is reviewed this spring and takes effect July 1.
The total cost of the Ocean View project is now estimated at $59.5 million. Under the new plan, the city would sell bonds for the initial phases of land clearance in the hope that private banks would lend money for the latter stages of street development and home construction.
The city, through the Norfolk Redevelopment and Housing Authority, has already spent $9.5 million on the project. Both apartments and single-family homes have been cleared, and roughly 100 families have been relocated.
The new plan significantly increases both the cost and the timeline for the project.
In mid-1993, the project was expected to take as few as two years for land clearance and cost $27 million. Most of the money would have come from private banks.
Under the city-funding plan, all of the land would not be cleared until 2003, and the first new homes would be sold in fiscal year 2001.
The plan for private financing fell through because banks balked at lending money based solely on potential resale of the redeveloped land.
This section of East Ocean View, the area east of Shore Drive, is a troubled neighborhood with crime problems and low vacancy rates. When redevelopment was announced in 1993, the area contained some 1,500 homes on 90 acres.
Under a plan developed in 1994 by architect Andres Duany, a new neighborhood of some 600 homes, mostly middle- and upper-class, would replace the existing one.
The city is pursuing the project because it believes that clearing the land and building a new, more upscale neighborhood will rid the city of some crime and social problems, and bolster tax revenues.
``I see this as an economic development project,'' said assistant city manager Sterling B. Cheatham in an interview after his presentation to the council.
The new cost estimate for the project - $59.5 million - is roughly double the original projections but lower than the $70 million to $80 million predicted several months ago.
These lower figures are based on several assumptions that put the project under a tighter budget, said R. Patrick Gomez, project director with the Norfolk Redevelopment and Housing Authority. The new estimates assume no administrative costs, eliminate an $8 million contingency reserve and assume there will be no inflation in land costs.
Under the new financing plans, the city would spend $5.75 million from the Capital Improvement Budget in the next six years. The city spent $1.75 million last year to repay loans used for land acquisition and demolition. Under the new plan, this money would continue along with an additional $4 million annually.
The NRHA would buy land and tear down homes in six phases, beginning in fiscal year 1997 and ending in 2003. Once the land is cleared, NRHA officials said they hoped private banks would then lend the NRHA money to continue developing streets and homes, using the land itself as collateral.
Most residents rent in this section of East Ocean View. Councilman W. Randy Wright gained assurances from Gomez Tuesday that the handful of families who own homes would be given the opportunity to move to a new home in the area if they wished.
Gomez acknowledged Tuesday that there was a danger that East Ocean View could deteriorate even more quickly because the shadow of redevelopment hangs over it. Councilman G. Conoly Phillips said Tuesday that he has already received complaints from land owners about the difficulty in finding tenants.
Gomez said he hoped the new plan would provide landlords, tenants and land owners with some degree of security because they would know what year their property was scheduled for purchase and demolition.
City officials said the plan was presented Tuesday only for purposes of ``discussion and feedback.'' ILLUSTRATION: Map
VP
Graphic
NORFOLK'S SPENDING
Ocean View
The city would spend $5.75 million on the project for the next
six years, a total of $34.5 million. The project would not pay for
itself through new tax revenues until the year 2023. The council
has not approved this financing plan.
Nauticus
The city now spends roughly $1 million annually to help the
museum pay its bills. The city says the project ultimately pays its
own way through increased tourism and general downtown
revitalization.
MacArthur Center
The city is scheduled to spend more than $100 million in various
forms on the planned downtown mall. It will pay for itself in the
first year if business is as good as predicted, city officials say.
by CNB