Bacon's Rebellion

Democracy Thrives in Sunlight

Parking Drove Richmond’s Gateway Plaza Participation

—

by

James A. Bacon
in ,

gateway_plaza_rendering

There’s a bit more to the Gateway Plaza than I blogged about yesterday. I caught up with Larry Chapman, a partner in Clayco, the company developing the $110 million office tower in downtown Richmond, and asked him why the City of Richmond needed to chip in $11.25 million to make the project happen.

It’s all about competition, says Chapman — in this case, competition with Richmond’s suburbs. The lead tenant, the McGuire Woods law firm, is willing to pay a premium rent to locate downtown… but there is a limit. A key sticking point is the cost of parking. In the ‘burbs, employers don’t have to charge their employees for parking. In downtown Richmond, there is an expectation that $120 month is a reasonable price to pay for parking. But, given the cost of building structured parking downtown, the actual charge would be closer to $350 per month. McGuire Woods has to ask itself, would its employees be willing to pay that much of a premium to be able to work in Richmond?

Clayco went to the City of Richmond and said, “We need some assistance,” Chapman says. “If we bring more taxes to the table, will you help finance and own the garage? When they weighed it all out, they said, ‘Yes’.”

Clayco will finance as much of the parking deck attached to the Gateway Plaza office tower as can be supported by market rates for parking, Chapman explains. The city will finance the rest. Clayco and the city will share ownership of the facility. The city will recoup its investment from the roughly $1.3 million revenue stream thrown off by the project’s property taxes. An intangible benefit, as I argued in the last post, is that the project will improve walkability at the heart of the city’s central business district, supporting property values in the area.

From the city’s perspective, Chapman concedes, forking out $11 million may not be the ideal arrangement. But that’s the reality of the marketplace today. “This is the kind of thing you see all over the country. If the economy was fine, you wouldn’t do this.” But the economy is how it is, so you do. As it is, the city still comes out ahead, with tax revenue exceeding debt payments. “If the project didn’t get built, they wouldn’t get any new taxes at all.”

— JAB

Share this article

ADVERTISEMENT

(comments below)

ADVERTISEMENT

(comments below)

Comments

7 responses to “Parking Drove Richmond’s Gateway Plaza Participation”

  1. Richard Avatar
    Richard

    Wow – cities are now recruiting law firms the way they recruit sports teams. Build the parking garage (stadium) and give the parking fees (concessions) to the law firm (football team). I wonder if there is any deal for the law firm to repay the city when it leaves the building (merger with another firm, a bigger place in the suburbs) before its tax revenues pay for it.

  2. Andrew Moore Avatar
    Andrew Moore

    It’s interesting that the cost of parking downtown is always characterized as “premium” and suburban parking is characterized “free.” In fact, rather than “premium,” downtown parking simply has a much more visible relationship between supply and demand, thus the cost (determined by the market) is more discernible. In the suburbs, the cost of parking is buried in the prevailing regulatory and development costs. Suburban parking is not “free.” Rather, the cost is borne by all of us through the added costs to development and wasteful use of land.

    As an aside, it is ironic that in the suburbs, where parking minimums are strictly enforced by the local government, parking is generally free. In the central business district, there are no parking minimums required and the market determines both quantity and price. Isn’t that the way it should be?

    Andrew Moore, AIA
    President, Partnership for Smarter Growth

  3. larryg Avatar
    larryg

    so I’ve read Andrew Moore’s words and I’m trying to better understand how costs are “real” in the city and not “real” in the suburbs in terms of real dollar costs that can actually be quantified in terms of coming directly out of specific people’s pockets.

    AM sez ” Suburban parking is not “free.” Rather, the cost is borne by all of us through the added costs to development and wasteful use of land.”

    okay.. let’s get some meat on the bones here.

    if you are a business and dollar costs are real – how does this actually work?

    if parking in the suburbs is subsidized – who ends up paying?

    My view FWIW is that you cannot build a 20 story tower ANYWHERE urban or suburban without figuring out what to do with the cars.

    they don’t have parking garages in the suburbs because it’s CHEAPER to build parking lots… but in urban areas where land is much more expensive, parking LOTS for 20-story towers would be not only horrendously expensive but ridiculous – you’d have these mega-huge parking lots punctuated every so often with a 20-30-40 story tower.

    One side issue to also consider – a 20-30-40 story tower with structured parking under roof, is way, way more storm-water efficient than parking lots ……

    I’ve been looking at modern parking lots by the way. they are much, much more efficient than before. the water is shunted to the grass dividers but the grass dividers are depressed to receive and hold the water – but each one does have a central drain to the storm pond. The storm ponds are SMALLER because of the design of the upstream medians that hold, sequester and dissipate the water thus releasing much less volume to the ponds.

    but at the end of the day – this is a prime example of why urban has competition issues with suburban.

  4. Peter Galuszka Avatar
    Peter Galuszka

    I am sorry Jim and this is interrupting my cocktail hour but the hypocrisy of this post is just too much. Everywhere else, whenever the public sector backs private enterprise it is WRONG, WRONG WRONG. But if a big deal Richmond law firm wants to ease the (Omigod!) parking fees downtown with public money that everyone else has to pay it is OK. They are a BIG DEAL law firm, right? Whatever happened to your free enterprise philosophy? Perhaps you might want to make a public confession?

    .

    1. James A. Bacon Avatar
      James A. Bacon

      Damned if I do, damned if I don’t.

      When I criticize government subsidies and support for “economic development” deals, you accuse me of being a doctrinaire libertarian. When I find a deal that may not be ideal from a libertarian perspective but at least offers the prospect of some public gain with minimal risk, you accuse me of hypocrisy.

      Bottom line: Bacon is always wrong, no matter what position he takes!

  5. Peter Galuszka Avatar
    Peter Galuszka

    Got that right!

  6. larryg Avatar
    larryg

    no… but he’s a bit all over the map on govt and it’s role in settlement patterns and economic development. Probably he is not alone on that.

Leave a Reply

Read More