Could Henrico arena include indoor track?

An indoor arena that features 12 basketball courts, an indoor track complex and the ability to convert a portion into a 4,500-seat convocation center doesn't exist in the United States, according to Henrico County officials.

At least not yet.

But the first one might be built at the site of Virginia Center Commons mall, if the Board of Supervisors ultimately follows the stated desires of two of its members.

Henrico officials already are planning to build a 220,000-square-foot arena and convocation center at the site.

At a work session Nov. 26, supervisors approved a budget for the facility not to exceed $50 million and also agreed to spend $8.3 million of that amount to purchase from The Rebkee Company the 25-acre site (mostly encompassing the former Sears building) on which it will sit.

Earlier that evening, supervisors Tyrone Nelson (Varina District) and Frank Thornton (Fairfield) encouraged County Manager John Vithoulkas to direct staff members to consider ways to fund the inclusion of a track complex, too. Both men have heard from a number of constituents who support such an addition. The only significant indoor track in the region is at the aging Arthur Ashe Center in Richmond.

"Even if it's another phase, let's go ahead and start to talk about that," Nelson (the board's chair) told fellow supervisors and Vithoulkas. "Even if it morphs into a bond referendum or another PPEA [Public-Private Education and Infrastructure Act project], or whatever, let's make sure we have enough space."

Vithoulkas indicated that he would bring details about such an addition to the board at a later date.

Including track capabilities as part of the arena project would require either the reduction of its total number of basketball courts from 12 to eight or the expansion of the arena by at least 50,000 square feet, according to Recreation and Parks Director Neil Luther.

County officials are leery of the former option, since a primary goal of the arena is to attract indoor basketball and volleyball tournaments, and having a capacity of 12 basketball courts (convertible to 24 volleyball courts) is viewed as a primary attractant. But the latter option would necessitate additional funding beyond the $50 million the board authorized last week.

The city of Virginia Beach is in the process of building an arena similar to the one Henrico officials envision; it also includes 12 basketball courts and originally was planned to be about 200,000 square feet in size and cost $40 million.

But city officials opted to add an indoor banked track complex, which added about 85,000 square feet and $32 million in costs to the project. The Virginia Beach Sports Center is scheduled to open in the fall of 2020. It also will include seating for 5,000 people but will not offer the type of convocation center setup that is important to Henrico officials, who want to be able to host high school graduation ceremonies at their arena.

The county hosts its graduations at VCU’s Siegel Center during three days each June; last year, it spent nearly $70,000 to do so. It expects to spend the same amount next June, according to school system spokesman Andy Jenks.

A good use of taxpayers’ dollars?
During a public hearing about the $50-million arena budget Nov. 26, Henrico resident Tom Wood told the board that he wasn’t sold on the idea that the arena would be a wise investment.

“Seems that the idea of having basketball tournaments and volleyball tournaments is a good idea, but how thin are we slicing the pie?” Wood asked the board. “When there’s a facility in Rocky Mount, North Carolina, a facility in Virginia Beach, we’re going to build a facility. Who’s next, Spotsylvania, Stafford? I don’t think it’s a good use of taxpayers’ dollars.”

If the arena will prove to be such a solid financial investment, Wood told supervisors, a private developer should be willing to pay for its construction and operation. He suggested that the board conduct a financial feasibility study of the proposal before acting.

Six years ago, when Rocky Mount was considering building a similar but smaller arena, a consulting firm conducted such a study for city officials there and concluded that the arena would produce a net operating loss between $315,000 and $642,000 annually during the first 10 years of its existence. The same study found that of five other similar municipal arenas in the nation, four were operating at an annual loss of between $131,000 and $700,000.

The Rocky Mount Event Center opened in October 2018, and during the current fiscal year, which ends June 30, officials there expect it to generate about $1.83 million in revenue – only about a third of what they’ll spend during the same time to operate it and pay off a portion of the debt incurred to build it.

In part to avoid such potential operating expenses or losses, Henrico County is structuring its arena deal through the Virginia Public-Private Education and Infrastructure Act, or PPEA.

The county will pay for the construction of its facility (and retain ownership of it) but then turn its operations over to Rebkee, which in turn plans to use a management company. Those two companies will be responsible for all annual operations costs and will be able to set rental fees and otherwise market and operate the arena as if it were their own.

In exchange for fronting the construction costs, Henrico will receive guaranteed use of the arena at specific times (for example, for high school graduations and use by community members and local sports organizations).

The Henrico Economic Development Authority plans to sell bonds to finance the county’s initial construction obligation. Though Rebkee and its management company would keep revenue from the arena’s operation, Henrico would benefit from the economic impact of visitors (through the county’s meals tax, hotel and lodging tax and sales tax, among others).

A study conducted by Richmond Region Tourism for Henrico County recently concluded that the county is missing out on at least $33 million in economic impact annually from indoor sports tournaments it could attract if it had sufficient space. Luther told the board Nov. 26 that Henrico could book basketball tournaments for 30 weekends a year immediately if it had the space.
For Nelson, that’s proof that an arena would thrive here.

“The number that we hear every year about what [financial impact] we miss out on is enough evidence,” he said. “I feel confident with the info we’ve got that we’re moving in the right direction,” he said.

‘There’s going to be some real interest’
So, is Henrico building an arena primarily as a quality-of-life benefit for its own citizens (without regard for whether its financial investment will pay off) or primarily as a way to profit from sports events?

Nelson believes it’s not an either-or answer.

“I think both,” he said. “And I think it will [succeed]. I trust our tourism people. . . when [they] say that 30 weekends will be spoken for and the building isn’t even out of the ground yet.

“There’s going to be some real interest in our facility – not just regional, but national. We’re aiming at a United States market, we’re aiming at an up-and-down-the-East-Coast market. Right now, there’s no one out there that has everything we’re trying to do.”

Municipal indoor track/field house facilities are rare nationally; of the 602 indoor track facilities in the nation, only 20 are not affiliated with a college or university, Luther told the board.

Liberty University in 2017 opened a high-end, 107,000-square-foot field house, which includes a banked track and other amenities. George Mason University in Fairfax also has a field house complex. The Virginia Beach facility would join those two as three of the primary facilities in the state for use by collegiate and youth track athletes.

Henrico officials would like to attract track and field meets – and capture the financial benefits that would come with them – but Luther told the board earlier this month that attempting to incorporate a track within the existing arena plans could be counterproductive financially. That's because the track, basketball and volleyball seasons overlap, and the latter two seasons tend to attract more tournaments, more participants and more visitors than the former.

Funding for a second phase of the arena – which could include the track if the board eventually decides to move forward with one – likely would come from a bond referendum that voters could face as soon as 2021, but more likely in 2022 or 2023, Nelson said. County voters approved a $419.8-million referendum three years ago, but a number of new infrastructure projects (including two new elementary schools just added to the school system’s five-year capital improvement program; a number of other school rebuilds and renovations; and, potentially, a new facility to house prisoners with drug offenses) are on the horizon.

There’s no rush to add a track to the arena, Nelson said – but he believes doing so at some point could help Henrico create a space that’s unique nationally.

“I don’t see the market catching up to us,” Nelson said, “and even if it does, we’ll already have carved out a niche.”

Henrico officials intend to have a final agreement in place with Rebkee for the construction of the arena by sometime in March at the latest, Luther said. Construction could begin shortly thereafter and be completed within 18 to 24 months.