The Link: LINK

The Story: An informal survey conducted by the Virginia-Pilot newspaper indicated that CenterPoint may already have enough City Council support for its industrial park along Holland Road.  While the project isn’t officially to be voted on until January 2, six of the eight council members had positive things to say about the project.

The Analysis: The big issue with this project has never been about the current or future zoning of the CenterPoint land.  It has been, and continues to be, about who is going to fund the necessary improvements to Holland Road.  There is also a lingering question of how much those improvements will cost.  CenterPoint claims +/- $53 million.  The States numbers come in closer to $94 million.  In either case, CenterPoint has proposed to pay just $3.96 million of the total.

I think it is important for Suffolk to seriously examine if this is the best use of taxpayer dollars.  Everyone agrees the project is a good one.  CenterPoint is a top notch developer and has done a great job of designing the project.  However, the taxpayer costs seem very high and the anticipated returns low.

The article indicates that Suffolk anticipates approximately $3 million in tax revenue from the project.  If we pick a road cost somewhere in the middle of CenterPoint’s numbers and the States (say $73.5 million), that works out to a return on cost of just over 4.3%.  Granted, that’s better than a Treasury bill right now and there would be other future improvements along Holland Road that would boost the tax rolls further.  As a reference, that would mean that the State would effectively invest $12 PSF into the CenterPoint project ($73.5 million less CP’s contribution divided by 5.8 mSF).  But, with cash as a finite resource, are there better options for Suffolk and the State to spend that money that would have a higher return?

What about funding the Nansemond Parkway widening?  Using rough numbers for the total build out of Northgate and the cost to widen Nansemond, that project would yield a return on cost of approximately 8.7%. (+/- 2.5 mSF of product, $0.51 PSF for taxes, $15 million for road improvements)  That’s just one project and I am sure there are many more out there that are just as viable.

Is it an status play to say you have a 5.8 million SF industrial park in your City, or is it a prudent use of taxpayer funds?