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Rendering of aerial view of Monumental Arena development (image courtesy of JBG SMITH)

(Updated 12/27) An economic impact report released last Friday said the new Potomac Yard arena would create 30,000 jobs and more than double the economic output of previous development plans.

The report came from HR&A Advisors, a consultant hired by the Alexandria Economic Development Partnership AEDP in June as a technical advisor.

The memo to AEDP from HR&A Advisors notes that the findings are based on Monumental Sports & Entertainment operations information shared by AEDP that shows statistics from arena and performing arts venue events.

The report looks at the economic impacts of the development, from construction impacts to economic output and tax revenue.

According to the report:

Key takeaways from this analysis are provided here, with additional detail on
methodology and findings provided in in the sections below.

  • Development of an entertainment district would generate approximately 30,000 permanent jobs
    for the Commonwealth of Virginia.
  • An entertainment district is projected to generate roughly 2.5 times the economic output of
    what would otherwise be built based on current development plans.
Potomac Yard development without Monumental arena vs with the arena (image via AEDP)

The permanent annual economic output of Potomac Yard sans arena vs Potomac Yard with the arena, according to the report, is $3.5 billion vs $8 billion. Over the next 30 years, the report says the ongoing economic output is estimated at $93.8 billion with the arena as compared to $36 billion without the arena.

Some of that revenue to the city and the Commonwealth would go to paying off debt borrowed to build the arena. According to Mayor Justin Wilson:

The debt borrowed by this public entity will be paid by three streams of money.

First: a private stream. Ted Leonsis will pay, first of all, a $400 million downpayment and a rent payment. That rent payment will be used to pay off that debt.

Second: the city will take a portion of the new tax revenue that comes from this development and we will use it to pay off a portion of this debt borrowed by that authority.

Third: the Commonwealth will take a portion of its tax revenue coming off this use and they will use it to pay off the loans used to construct it.

This is exactly the way we funded the Potomac Yard metro. We funded it using the tax increment of development that happened in Potomac Yard.

The summary is available online.

Whether the arena goes forward remains to be seen, Alexandrians were quick to raise concerns about the transportation impact and local leaders followed suit in the days after the announcement.

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Target in Potomac Yards (image via Google Maps)

While people around the region have been discussing the proposal to move the Washington Capitals and Washington Wizards to a new Potomac Yard arena, Alexandria Economic Development Partnership President and CEO Stephanie Landrum said one of the most popular questions she’s been getting from Alexandrians is “What will happen to the Target?”

The Target (3101 Richmond Highway) at Potomac Yard was controversial back when it opened, according to a Washington Post article from 1997.

Nearby residents quoted in the article said they were concerned the strip mall project would create more traffic for their neighborhood and clog Route 1. The article contains eerily familiar accusations that neither the developer nor the City of Alexandria have adequate plans to deal with traffic.

Some bemoaned the death of plans to bring the Washington Redskins (now the Commanders) to a new stadium at Potomac Yard; others said the shopping center was too large and unsightly.

The 1997 article notes that the shopping center was designed as an “interim” project to last around 20 years.

Now, with that interim use likely to be replaced with new development, Landrum said there’s widespread concern about Target going away.

“I don’t mean this facetiously; one of the biggest questions we’ve gotten is: what is going to happen to my Target?” Landrum said. “We want to acknowledge that our city loves our Target.”

Mayor Justin Wilson noted in an earlier meeting with the Del Ray Citizens Association that the Target at Potomac Yard “does extremely well” and will likely return in some capacity in the development process — though it might be scaled down.

“That was always an assumption, that we’d, in the future, have a more urban Target,” Wilson said. “What that looks like still needs to be determined in the future.”

Landrum said the plan was always, even pre-arena, to redevelop the current Target building.

“Our community, development partner, and Target are aligned in trying to find a future location for Target in a reimagined Potomac Yard,” Landrum said. “To be clear, that has always been the vision for the site, this project aside.”

During the same discussion, Landrum noted that tickets to Capitals and Wizards games might be slightly cheaper in Alexandria thanks to the city’s lower taxes.

“I don’t want there to be any confusion that somehow coming to events here is being structured as more expensive,” Landrum said. “Our admissions tax rate is a tiny bit lower than the current sales and tax use rate that people pay in D.C. So, that’s for the fans.”

Image via Google Maps

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Sculpting at The Art League (image via The Art League/Facebook)

The redevelopment of the Montgomery Center has pushed some businesses out of Alexandria or out of business, but a clever re-use of an old funding authority may help The Art League survive.

The Art League is scheduled to get City Council authorization tonight (Tuesday) for a funding mechanism that should help the nonprofit set up a new headquarters at 800 Slaters Lane. The Slaters Lane location will be one of three Art League facilities, with another coming into the Muse development and the other being the Torpedo Factory.

The funding is part of the Council’s consent calendar, meaning it’s almost certain to be quickly approved, but behind the scenes: the funding is a first-of-its-kind use of a half-century-old Industrial Development Authority (IDA).

While the lease hasn’t been signed yet so nothing if finalized, it looks likely that the Art League will set up in the old ABC Imaging shop on Slaters Lane. The lease on the current space in the Montgomery Center has been extended to July 1, 2024, with a move to the new headquarters sometime that summer.

“Our expectation is that it will probably take three months to get through drawings, engineering and approval process for the construction aspect of the project,” said Suzanne Bethel, the Art League’s executive director, “and another three months for construction.”

Bethel said the new location is “a unicorn” that fits nearly all the changing needs of The Art League. The nonprofit has seen an uptick in community members looking to use large-scale equipment, the kind of things that can’t be done online and most individuals can’t afford to do at home.

“We’re seeing interest in those classes because hands-on training with equipment, using large-scale equipment average person can’t invest in — we’re seeing a lot of enrollment in those areas,” Bethel said. “We were delighted to identify a local warehouse space… The venting, size, and square footage to accommodate that is important. [The Slaters Lane location] is a unicorn.”

Launching a new headquarters is costly, which was where the IDA came in.

Industrial Development Authorities were first implemented as part of the New Deal during the presidency of Franklin Delano Roosevelt. The idea was to use them to help jurisdictions rebuild and put investment into specific areas. They can issue tax-exempt bonds to borrow at lower interest rates and fund improvements.

Jennifer Atkins, chair of the IDA of Alexandria, said supporting the Art League as it resettles in a new home is the first time the IDA has flexed that side of its authority in the organization’s 60-year history.

“The IDA has been around in Alexandria for a very long time,” Atkins said. “It was set up in the 1960s. In Alexandria, it was only ever used a small number of statutory powers, like bond financing. That was how we used it for a long time.” Read More

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Alexandria City Hall (staff Photo by Jay Westcott)

Personal security cameras, speed cameras in school zones, summer youth employment programs and eviction prevention funding are just a few of the final additions included in the fiscal year 2024 budget by the Alexandria City Council on Tuesday.

Council approved funding a $20,000 program to encourage businesses and homeowners with a “small incentive” to set up security cameras to deter crime, as well as increase their coordination with the Alexandria Police Department.

“I like the concept,” Mayor Justin Wilson said. “I think we want our residents to partner with us in providing this kind of neighborhood visibility.”

Other additions include $490,000 for five speed cameras at school crossing zones around the city. Last year, Council approved $400,000 for the speed camera program in five school zones.

Not all of the requests made the final cut. Vice Mayor Amy Jackson’s request to give the Alexandria Commission for Women $20,000 for it’s 50th anniversary event failed to gain consensus.

Council also took $657,629 from the budget that was intended for the Northern Virginia Juvenile Detention Center (200 S. Whiting Street), pending proposals from City Manager Jim Parajon to find alternative uses for the facility, pursue regional partnerships for facility use and optimize capacity for the underutilized space.

The full list of additions to the budget are below.

  • Out of School Time Program (OSTP) staffing ($200,000) This increases paid leave and benefits for part-time staffing with the city’s Out of School Time program.
  • Fee waiver for OSTP participants ($15,000) — This would fund a waiver for program participants eligible for SNAP and TANF.
  • Speed cameras in school zones ($490,000) — This adds five photo speed cameras to school crossing zones prioritized by the city’s Department of Transportation and Environmental Services
  • Childcare services ($50,000) — This will provide child-minding services at City COuncil town hall events, as well as select board, committee and commission meetings.
  • Additional eviction prevention funding ($150,000) — This would increase the current funding level of $100,000, all of which will “reasonably assist 40 households in FY24,” according to the city.
  • Central coordinator for immigrant affairs/refugee settlement ($110,000) — This would explore a new position or series of positions that could advance efforts to connect immigrant communities with information, resources and services and address the city’s challenges with immigrant populations.
  • RPCA Mental Health Pilot position ($75,000) — These funds would go toward developing a Department of Recreation Parks and Cultural Activities pilot program for youth mental health services.
  • Summer youth employment program ($214,943) — This would expand the program by 50%, to serve 255 children (85 more than the current program).
  • Study for local housing voucher program ($250,000) — This would add funding for a study on a voucher-like program that stabilizes housing and enables access for low-income housholds across the city’s private rental market.
  • City library security ($70,000) — This funding maintains library security staffing at current levels.
  • Department of Aging and Adult Services ($19,000) — This fills the gap created by Virginia budget formula changed related to the Older Americans Act.
  • DASH service line expansion on Line 33 ($120,000) — This would expand DASH Line 33 service from once every 60 minutes to 30 minutes on Sundays, easing connections to the new Potomac Yard Metro Station.
  • Visit Alexandria advertising ($78,000) — This additional funding can be used by Visit Alexandria for any sort of media, online or print advertising, either regionally or nationally at their discretion.
  • City Council aide compensation increase ($5,300) — This is a 2% scale compensation adjustment.
  • Private security camera incentive program ($20,000)
  • Continuation of AEDP economic recovery manager ($147,208) — The ERPM is responsible for creating and administering AEDPs Business Association Grant program, which supports Alexandria business associations as well as other ARDP rogramming to promote economic recovery.
  • Rental inspection program enhancement ($136,000) — This allows staff to evaluate non-compliant multi-family rental properties.

The budget will be approved on May 3 and go into effect on July 1.

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As the Alexandria Economic Development Partnership works through programs aimed at helping to strengthen the city’s business communities post-Covid, some in the organization and partnering groups are working to ensure there’s a greater diversity of voices in the new order.

A new grant program, the ALX B2B Business Association Grant Program, aims to help prop up business associations across the city to make them more active and helpful for their communities. The city-funded grant program is in the process of distributing $535,000 in grant funding across eight associations.

AEDP Economic Recovery Manager Senay Gebremedhin and Kevin Harris, former City Council candidate and head of the new Alexandria Minority Business Association, said the goal of the grant program is in part to use the pandemic recovery to help address issues around diversity that predate and were exacerbated by Covid.

Gebremedhin said AEDP’s goal is to use the funding as a boost to business associations to get them to a place where they can be healthy and independently sustainable long-term, without relying on backing from pandemic recovery funding to provide higher levels of service.

“When we built out the program, we intentionally built out sustainability as a core purpose,” Gebremedhin said. “The funding was short-term, so applicants had an understanding that they needed to continue services beyond the funding period.”

The grant funding is going to eight different organizations, ranging from established groups like the Alexandria Chamber of Commerce to brand new organizations like Harris’ Alexandria Minority Business Association.

  • Alexandria Chamber of Commerce
  • Alexandria Minority Business Association, Inc.
  • Del Ray Business Association
  • Eisenhower Avenue Public-Private Partnership
  • Old Town Business Association
  • Old Town North Alliance
  • Social Responsibility Group
  • West End Business Association (WEBA)

Many of the organizations have been volunteer-led, and Gebremedhin said in the past they’ve struggled to sustain initiatives without proper funding or infrastructure support. Even among the more established organizations, Gebremedhin said nearly all of them have seen leadership turnover in recent years.

While the program distributes funding to regional associations like the Del Ray Business Association, the new Social Responsibility Group and the Alexandria Minority Business Association target specific issues within the sphere of local economic development. Gebremedhin said the Social Responsibility Group works with AEDP on communications with local business incubators.

“One of the priorities for our group is creating peer relationships,” Gebremedhin said. “The Social Responsibility Group has a much broader agenda, but our work is narrowly focused with them on one of the pillars of their agency… incubators and building resources for emerging businesses in Alexandria.”

According to Harris, not all businesses have been able to participate in influential policy discussions between the city and the business community. He said he hopes the Alexandria Minority Business Association gives new minority voices a similar chance to weigh in.

“When things are rolled out, there is some communication with other business associations to weigh in on how things are rolled out,” Harris said. “There is a need for that in the minority community.”

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The City of Alexandria is still mulling over what to do with the Torpedo Factory, but one way of paying for the expensive additions could lie in a program started under FDR.

At a meeting of the Waterfront Commission, representatives from the Alexandria Economic Development Partnership (AEDP) outlined one potential path to financing the Torpedo Factory overhaul as part of a “public real estate entity.”

Christina Mindrup, VP for commercial real estate at AEDP, said the partnership has been considering the creation of a new public real estate entity that could help “unlock new financial resources” to assist with arts development in Old Town North, some of which has been stalled and fallen behind the pace of attached developments.

Mindrup said that AEDP is working with the city to assess whether this public real estate entity could absorb the Torpedo Factory.

“AEDP working with city manager office to evaluate whether [Torpedo Factory Art Center] building could be included with assets financially managed by public real estate entity in Old Town North,” Mindrup said. “We’re now exploring options for expanding role of the real estate entity to include governance of TFAC.”

The topic of TFAC changing governance has been a touchy one, but Mindrup said the change could open up a new source of funding in the Industrial Development Authority (IDA) of Alexandria. The low range of cost estimates, essentially the “do-nothing” build with only the most basic of needed repairs and improvements, is still estimated at $16 million. Cost estimates for more substantial improvements range up to $41.5 million.

“For those who don’t know, the Industrial Development Authority has been around forever,” Mindrup said. “It’s been around back to Franklin Delano Roosevelt. It was used to help jurisdictions rebuild and put investment in the area.”

Specifically, Mindrup said the IDA can issue tax-exempt bonds to borrow at lower interest rates to fund improvements. It’s a program already in use at other developments, such as the hospital development at not-Landmark Mall.

“This would become a financing tool to help us fund improvements towards the Torpedo Factory,” Mindrup said. “It’s really just a low-interest loan that’s a tool for non-profits.”

AEDP leadership emphasized that the program is just one of several tools being considered, but AEDP President and CEO Stephanie Landrum said one benefit is it could be a revenue source outside of the already strained city budget.

“[We were] asked , as the city is looking at particular governance models, some of which might create a nonprofit or ownership of building not by the city, what models are available to finance improvements,” Landrum said. “There is a cost for improvements that needs to be made that is large and we do not have the money to pay for it. The only way we’ve been looking for that money is traditional CIP or city budget.”

Landrum said AEDP is examining changes to funding that could be made under a different governance model.

“We’re looking at: if the government model changed, could IDA funding be made available?” Landrum said.

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Hotel Heron, a proposed development at 699 Prince Street, image via Monarch Urban

Local labor representatives have come out in force against potential city funding in the development of the Hotel Heron in Old Town.

A proposal spearheaded by the Alexandria Economic Development Partnership (AEDP) would have the city take some of the tax revenue generated by the Hotel Heron project at 699 Prince Street to pay the project’s bond trustees.

Interior demolition was already underway when the pandemic scared off hotel investment, but an AEDP report indicates that with the city’s loss of hotels over the last few years there isn’t enough of a local market to meet the potential tourism demands if and when that rebounds. A report from AEDP to the City Council said the investment was low risk because the only city money put into the project would be taxes generated from the hotel.

During initial City Council discussions earlier this month, city leaders seemed amenable to the project, although wanted to see progressive standards set and compensation adequate enough for laborers and hotel workers to afford to live in Alexandria. A project presentation also boasted that it would create 19 full-time jobs and 90 part-time jobs.

In the days since the meeting, organizers from various labor groups around Alexandria told ALXnow they expect city involvement in financing the project to come with stronger guarantees of fair pay and treatment of employees.

“The Council should oppose this project,” said Bert Bayou, Director of African Communities Together. “As an organizer of African immigrants in Alexandria, I believe that this money should help keep people in their homes. Creating bad jobs does the opposite, exacerbating the housing crisis and leading to further poverty and hardship.”

The push for higher wages comes after more than a year of protests against evictions following job loss during the pandemic.

“Living in Alexandria is expensive — even if you are making decent wages,” said Southern Towers tenant and organizer Sami Bourma. “If the Council approves this project, they should be ashamed of themselves. They should be standing up for workers like me and creating jobs that help us, not a bunch of part-time jobs that families can’t survive on.”

“Approving this project would be an insult to Alexandria workers,” said Sam Epps, Political Director of UNITE HERE Local 25. “How can the Council justify using taxpayer dollars to subsidize a project that creates just nineteen full-time jobs? Workers coming out of this brutal pandemic deserve better.”

Stephanie Landrum, president and CEO of AEDP, said the project will not only be a sorely needed revenue boost for Alexandria, it will also be a showpiece historic renovation. The building was previously the Hotel George Mason at the entrance to Old Town.

“Tourism is a vital part of Alexandria’s economy,” Landrum said. “Supporting the renovation of a historically significant building at such a prominent location in our historic district today and positioning ourselves to meet and even grow hotel demand as it rebounds is an important tactic in Alexandria’s pandemic recovery. This project also has returned the building to the City’s real estate tax rolls for the first time in at least a generation. The previous office tenant was a nonprofit with a federally-granted tax exemption.”

Landrum said the project was first approved several years ago and demolition started in March 2020, but the developers approached AEDP for help with a funding shortfall caused by the pandemic. The proposed city’s financing also takes up a relatively small portion of the project’s overall cost, so an increase in pay for staff would require the developer to secure funding elsewhere — a prospect that seems unlikely given the need to turn to the city for help in the first place.

“Those challenges continue, which means that any increase in cost, increases the gap needed to be closed by an equal amount,” Landrum said. “Without identifying additional capital or resources, substantive cost changes make the project not feasible.”

Landrum also said the hotelier was chosen as a partner in part because of their paid benefits to employees, wage transparency, opportunities for growth, and their other pro-worker policies already in place.

In regard to public funds being used for the project, Landrum said there’s no city policy in place that requires labor agreements when public funds are used.

“The Council will be discussing this as they consider their own construction and investment projects, as they do not currently require labor agreements, and we would expect that once a policy is in place for the City, it logically will extend to projects they chose to financially participate in,” Landrum said.

Landrum also said AEDP worked with city staff and the developer along previously established city requirements and changing those last-minute as the project comes forward could put it in jeopardy. The explanation is a little complicated, so it’s presented in full below:

For the Hotel Heron project, AEDP, the City staff, and the developer engaged with the state and negotiated this deal according to the terms and requirements that are currently in place. Meaningfully changing a policy for an approved and welcomed project has created a challenging situation that has put the viability of the project in peril. Our role is to explain the impacts of these changes, advocate for the approval of this great project on its merits and work with our elected leaders to set new policies that are clear for new projects moving forward.

To your question about feasibility, labor requirements, prevailing wages, collective bargaining agreements all have implications on a project’s bottom line, so any business or developer needs to understand those costs at a project’s inception to be able to adequately budget for them.

Ultimately, there are no provisions at the state or local level that require labor agreements to qualify for this incentive program. Under Virginia law, the City does not have the power to set its own prevailing wage, but we do support efforts to create one at the state level, as outlined in the City’s legislative agenda for the upcoming year. The conversation about including this requirement is under discussion because we are considering public investment- as explained above, and discussed with recent projects like Landmark Mall, staff’s role is to provide information about the feasibility of making changes, and to outline any costs or implications those changes might have on the project, so that Council can make informed policy and project decisions.

If the City Council wishes to make labor agreements a condition of our participation in this state incentive program, it is up to council members to follow the usual decision-making process to hear from City stakeholders, debate the pros and cons of that decision, and adopt and communicate any resulting requirements. And, of course we would follow applicable laws, regulations, and requirements when pursuing projects, as we currently do.

Alyia Gaskins was the City Council member who first raised questions about fair compensation for employees during the City Council discussion and said she hasn’t fully decided how she will vote but treatment of workers on the project will play a role in her vote.

Since my first Council meeting, I have raised issues from wage theft to worker protections to how economic development benefits small businesses. Unions are about more than wages and benefits they are also about working conditions and the right to have discussions about issues that impact you. The reason I am so focused on preserving the rights of workers is because I believe they are in the best position to articulate what is fair compensation. I don’t presuppose my judgment on these cases so I cannot answer the question about how it will impact my vote. We have time before Saturday. I look forward to working with the developer to find a solution. Ultimately, we have to get to a point when we have greater predictability for all in the development process.

Project zoning and the city’s financing role are scheduled for a vote at the City Council meeting tomorrow, Saturday.

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Heron, a proposed hotel development at 699 Prince Street, image via Monarch Urban

Alexandria’s City Council was overall supportive of an arrangement presented earlier this week to invest — sort of — in a new Old Town hotel.

A proposal backed by the Alexandria Economic Development Partnership would have the city help fill gap-funding for a hotel project at 699 Prince Street that fell through when the pandemic hit. Interior demolition was already underway when the pandemic made it impossible to secure financing on a new hospitality project, said AEDP President and CEO Stephanie Landrum in a presentation to the City Council on Tuesday.

Landrum said the city’s hospitality industry has plummeted over the last couple years and in some cases it’s more beneficial to convert those properties to residential, here Landrum said the city’s economy would benefit more from a luxury hotel.

“We’re seeing what we could classify as obsolete hotels, dated in terms of their age or their amenity base isn’t what travelers want today, or their location isn’t amenity approximate,” Landrum said. “We’ve decided as a city that [hotel conversion] is helping achieve priorities like housing availability, but we need a good mix of commercial projects in the city to balance the tax base. while we continue to improve or encourage hotel conversions in some places, have to encourage hotels to be built in viable locations.”

Landrum said a hotel at 699 Prince Street would generate 500% more revenue to the city than a residential project and require little social or infrastructure uses, with no burden placed on schools and little pressure on park use.

“The cost of people who reside in a hotel is much less than residents,” Landrum said.

The site was once the Hotel George Mason, built in the 1920s but was later converted to offices and served as headquarters for the National Center for Missing and Exploited Children.

Landrum said the financing structure being proposed limits the risk involved for the city. The city, through AEDP, would pay bond trustees out of a 1% cut of the sales and use tax generated by the hotel after the project is complete and begins to generate revenue. The project is estimated to generate roughly $2 million annually in revenue, which Landrum said was a “significant amount of money” for the city to come from one project.

“We are agreeing to support this project, but if this is unsuccessful that debt has no bearing on the city, it’s all on that project,” Landrum said.

But Landrum said while she expects AEDP will likely get “phone calls” from other potential hotel developments if the project is approved, Landrum warned that the circumstances around the city’s involvement with this project were relatively unique.

“This project unique in historic preservation, in size and scale,” Landrum said. “I don’t think a new hotel being built for long-term stay in the West End or to service the new Virginia Tech campus in Potomac Yard will have the same set of circumstances. The number one provision is that you have to prove you have a gap you can’t close.”

The City Council approved first reading of the proposal, which is scheduled for a public hearing at the Saturday, Jan. 22 City Council meeting.

The main concern expressed by the City Council was over the handling of labor on the project. City Council member Alyia Gaskins asked about creating project labor agreements and other progressive labor arrangements for the hotel development, but Landrum said the profit margin is already so slim it’s unlikely the project would be able to support that.

“This project came to us because of a gap in financing,” Landrum said. “A lot of the things you’re talking about unfortunately comes at an additional cost. We’ve talked a little about this… we understand how real and impactful those additions are. For a project of this scale to enact some of those things would make the project not feasible. [We’re] talking about a 20-25% increase in cost for some of the labor concessions.”

The project presentation boasted that the project would bring in 19 full-time jobs and 90 part-time jobs, but City Council members expressed uncertainty at whether those employees would be paid a wage that would allow them to live in Alexandria.

“I really like the model for this, where what we put into this is based on what we’re getting out of it in terms of revenue,” City Council member Kirk McPike said. “We’re not talking about a dime of city money going forward without coming to us from this project… [but] without paying levels where they could live in Alexandria, we’re not benefitting Alexandria workers.”

Staff agreed to come back at the Jan 22 public hearing with more information about wages for employees at the hotel.

“There are things that as good human beings, citizens, and representatives we want to do but we also need to get projects done for the greater good of the community and what is the cost-benefit of some of these decisions,” Landrum said. “We try to thread that needle right now when there isn’t a clear policy at the council level and brought forward a project we think is obviously a great community good.”

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It will take three-to-five years for Alexandria to economically work its way out of the pandemic, according to the Alexandria Economic Development Partnership (AEDP).

That’s according to a recently released Alexandria State Of The Market 2021 Mid-year Report, in which AEDP outlined business trends and impacts.

“The hardest-hit industries continue to be tourism, restaurants, and retail, and the use of office buildings and mass transit, and attendance at live entertainment venues remain low,” the report said. “The onset of COVID-19 in 2020 not only created new trends but also accelerated those that were already underway and hastened the demise of others. That said, it is expected cities will bounce back in three to five years, largely due to the appeal and vitality of entertainment, finance, technology, and education.”

AEDP President and CEO Stephanie Landrum says that business owners have been through the worst days of the pandemic.

“We made temporary things permanent, like the closure of streets, the ability for businesses to use sidewalks,” Landrum said. “The things that we were scrambling to do last year when these first surges happened, we’ve learned how to do all of them and we’ve made them all permanent. We’re in a much better place as a community and as businesses to get through this next surge.”

AEDP has distributed millions in Back To Business grants to businesses all over the city, and has been a hub for relief-related information. The nonprofit has also been central to bringing major business development to the city, including Amazon’s HQ2 and the Virginia Tech Innovation Campus.

“I don’t think anyone was prepared for the level of uncertainty and the length of this pandemic,” Landrum said.

The city has experienced a dramatic drop-off in hotel occupancy and revenues. Mayor Justin Wilson noted in a social media post that hotel revenue fell from $1.1 million in July 2019 to around $200,000 in July 2020, and Landrum believes that hotels emptied by the pandemic could be converted into affordable housing.

More people are also working from home, and the city’s office vacancy rate increased to 15.9% (as of June 2021) over 13.1% in 2020.

The report outlined the following rising trends:

  • Telework
  • Suburban Migration
  • Safety/Health Concerns for Indoor Public Spaces
  • Affordable Housing Crisis
  • Demand for Public Open Space
  • Retail Sector Transformation
  • Concerns about Racial Equity
  • Federal Deficit
  • Use of Bikes and Scooters
  • Worker Shortages

The report outlined these slowing trends:

  • Appeal of Cities and Density
  • In-Person Meetings/ Conferences/Business Travel
  • Experiential Retail
  • Growth of Health/Wellness Establishments
  • Tourist-Oriented Retail/Leisure Travel/Tourism ö Mass Transit Use
  • Apartment Amenity Wars
  • Live Entertainment/Movie Theaters

Retail investments may never fully return to pre-pandemic performance, the report said.

“Typical storefront retail will lose value as customer foot traffic counts decline over an increasing preference toward online purchases and home deliveries,” the report said. “Consumers may forever shift to e-commerce shopping for most apparel, food, and household items.”

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Heron, a proposed hotel development at 699 Prince Street, image via Monarch Urban

This week, the City Council is docketed (items 27 and 28) to review a proposal for the city to, in a round-about way, be involved in the financing of a new luxury hotel in Old Town.

With hotel revenue going into freefall during the pandemic, the prospect of building or renovating hotels in Alexandria hasn’t been a particularly financially appealing option, but a report prepared by Alexandria Economic Development Partnership (AEDP) and city staff said that’s going to be a hit to tourism in the city as people travel again.

At the City Council meeting tomorrow (Tuesday), the Council is scheduled to vote on a “tourism development plan” developed with the Virginia Tourism Development Financing Program (TDFP) to provide gap financing for a hotel project at 699 Prince Street.

The project is coming to the city for financing because the project is below the anticipated yield investors would hope for. According to the tourism development plan being presented to the City Council, the anticipated operating profits for the hotel are between 6.5% and 7% — below the 10% yield targeted by investors for financing before the pandemic. According to the report:

The project’s $69.6 [million] (includes building sale) ancipated cost will be capitalized with approximately $45.2M (65% loan-to-cost) senior construction financing, and approximately $10.27 million of net historic tax credit proceeds. The remaining $14.13 million will be funded through a combination of TDFP proceeds and investor capital.

It’s a somewhat complicated chain of financing, but a graph in the presentation lays out some of the financing web.

Hotel project financing, via City of Alexandria

The tourism development plan laid out to Council also highlighted some of the issues with hotel room supply city-wide. One of the big issues, the plan said, is that residential units are seen as a safer bet than hotels. The report noted that the city has lost five hotels in the last two years.

“The major challenge for Alexandria’s tourism economy is our recent reduction in hotel room supply,” the plan said.”The loss of hotel rooms is largely a result of the booming residential real estate market. With low-interest rates and increasing post-Covid migration from urban centers to suburban communities, the demand for residential housing in Northern Virginia is causing many hotel property owners to convert their properties to residential. As a result of these conversions, Alexandria’s hotel base dropped 17% in the past two years.”

The report also said while there are “upscale properties” in the city, there are no real luxury hotels in Alexandria.

“This proposed development would fill a void in the market and in turn, increase City revenues by increasing our Average Daily Rate,” the report said.

The report also said the new hotel would provide large meeting spaces that are in short supply in Old Town.

Finally, Alexandria would benefit from more hotel meeting space in Old Town. Our largest conference hotel, the Hilton Mark Center, is located on the City’s West End, a 20-minute drive from Old Town. Within Old Town, Alexandria has only three properties that can accommodate a large meeting (200+) — the Westin, the Hilton Old Town and Holiday Inn & Suites. Despite the walkable and historic downtown that many meeting planners and their attendees are seeking, Alexandria loses mid-size meetings to adjacent localities like Arlington, VA and National Harbor, MD.

The report from AEDP and city staff, though, said the expectation is for the hospitality market to rebound this year and next — how the ongoing wave of Covid cases from the omicron variant affects those projections isn’t said.

“In the recent HVS market study, the tables indicate demand for higher-end hospitality that will surpass pre-Covid levels in 2022-2023 and point to continued growth thereafter,” the report said. “Targeted for delivery in the 2023 timeframe, the Project will be well-positioned to capture this demand.”

At the meeting on Tuesday, the City Council will vote both on creating a “tourism zone” at the site to incentivize hotel development and, immediately after, a tourism development plan for the proposed hotel.

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