Richmond changes direction on stadium issuance

The city of Richmond, Virginia, is changing course on a nearly $280 million bond issuance that will build a new minor league baseball stadium anchoring a $2.4 billion mixed-use project on 67 acres just northwest of downtown Richmond. 

Last week the Diamond District project, which includes retail, housing, and office space, took a public financing turn when the city announced plans to issue its own revenue bonds backed by a general obligation pledge to build the stadium as opposed to having debt issued through a community development authority. 

“A CDA is a separate political entity created to finance development in a certain area,” said Evette Caze, Senior Director, Fitch Ratings. “Bonds issued by a CDA are backed by property tax revenue generated within its boundaries, which often represent a smaller subsection of the parent or host government.” 

“In contrast, a special revenue bond is essentially a general obligation of the issuer with an appropriation component. It’s backed by the entire taxable base of the parent government and its legally available resources.”

According to the city, the move would “reduce costs by an estimated $215 million over 30 years, because of a decreased interest rate from 8% to 4%.”  The city also notes that the move will free up approximately $23.7 million in debt capacity. 

Another $24 million in public funds will flow in from a state sales tax incentive program that is set to expire on July 1st. 

The savings comes with a higher risk for taxpayers if revenue projections don’t pan out. 

The stadium will provide a new home for the Richmond Flying Squirrels, a Double A, minor league affiliate of the San Francisco Giants. The team averaged 6,160 in attendance in 2023 ranking them 14th in all levels of the minors.

The Squirrels currently play at The Diamond, which opened in 1985 and holds about 10,000 seats. It’s also home to the Virginia Commonwealth University Rams baseball team.  

The new stadium has a similar capacity, and the deal hinges on the Squirrels and Rams making lease payments to use the facility. Once the new stadium is complete, the existing venue will be torn down. 

Compliance with stadium standards enforced by Major League Baseball is part of the impetus for moving the Squirrels to a new home. 

Richmond joins a host of cities currently wrestling with the challenges of using public funds to support sports arenas and stadiums. 

A $2 billion public private partnership that would have brought two major league franchises to Northern Virginia, a hundred miles away, was blocked by the state legislature. The abandoned move prompted D.C. to issue debt to renovate its downtown stadium.  

As of January of this year, S&P Global Ratings revised its outlook on Richmond’s GO bonds from stable to positive and affirmed its ‘AA+’ long-term rating. It assigned an AA+ rating to the city’s approximately $67.110 million series 2024 GO bonds. 

Fitch Ratings concurs with the grade and marks Richmond’s outlook as stable. Per Fitch., “The ‘AA+’ Issuer Default Rating and GO bond rating reflect the city’s high fundamental financial flexibility stemming from healthy reserves and broad legal control over key revenue and expenditure items.” 

The updated financing proposal also designates the team for managing the design and construction of the stadium. Other major stakeholders include ODELL Construction and the Machete Group. Thalhimer Realty Partner and LOOP Capital are handling developer duties. Davenport & Company is serving as the financial advisor.