City of Alexandria, Virginia
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MEMORANDUM
DATE: SEPTEMBER 18, 2013
TO: THE HONORABLE MAYOR AND MEMBERS OF CITY COUNCIL
FROM: RASHAD M. YOUNG, CITY MANAGER /s/
DOCKET TITLE:
TITLE
Consideration of a Resolution Authorizing the Issuance of Refunding Bonds by the Industrial Development Authority for Virginia Tech. [ROLL-CALL VOTE]
BODY
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ISSUE: Resolution authorizing the issuance of revenue bonds by the Economic Development Authority of Montgomery County, VA to assist the Virginia Tech Foundation to finance or refinance various facilities owned or to be owned by or leased to the Foundation or affiliated non-profit entities controlled by or under common control with the Foundation of benefit to, and in connection with its support of, the Virginia Polytechnic Institute and State University and its programs, located in Montgomery County, Virginia, as well as in Rockbridge County, Virginia, Arlington County, Virginia, the City of Roanoke, Virginia and the City of Alexandria, Virginia.
RECOMMENDATION: That City Council adopts the attached Resolution (Attachment 1) as recommended by the AIDA.
BACKGROUND: Virginia Tech's presence in Old Town Alexandria dates back to 1980. In 1981, following a successful pilot program in Old Town, the College of Architecture and Urban Studies (CAUS) formally launched the Washington Alexandria Architecture Center (WAAC). In 1985 the Virginia Tech Foundation purchased a building on Columbus Street where the WAAC was located until 1991, the year the Foundation purchased the center's permanent home at 1001 Prince Street.
The Rectory and the Gallery located at 207 S. Patrick Street were purchased by the Foundation in 1986. The Rectory houses the American Institute of Architects (AIA) offices and the Gallery serves as a limited capacity dormitory for students in the region.
In 2001 the Virginia Tech Foundation also purchased the building at 1021 Prince Street. In 2003 the Metropolitan Institute (MI) at Virginia Tech was launched to conduct basic and applied research on national and international development patterns and a number of graduate programs moved into the newly renovated building.
The WAAC expanded its footprint again in Old Town in January 2011, leasing a corner property at 901 Prince Street, one block east of its main building. This leased space includes studio, seminar, and office space for National Capital Region faculty and students in the landscape architecture and architecture programs.
With the addition of the 601 Prince Street facility, 400 students are now enrolled and attending classes at the WAAC in Old Town each semester.
DISCUSSION: On September 3, 2013, the Industrial Development Authority of the City of Alexandria (AIDA) passed a resolution (Attachment 2) authorizing the issuance of revenue bonds by the Economic Development Authority of Montgomery County, VA pursuant to the Industrial Development and Revenue Bond Act, Chapter 49, Title 15.2, Code of Virginia of 1950, as amended, in such amount up to $45,000,000 as may be necessary to finance or refinance the cost of such facilities and related issuance costs.
An aggregate principal amount of the Bonds not to exceed $4,000,000 will be issued, and the proceeds thereof used together with other funds of the Foundation in the City of Alexandria, Virginia, to finance or refinance the acquisition, construction and equipping of the approximately 12,000 square foot facility known as the 601 Prince Street facility, to be used by the University for instructional purposes.
The Code and the Act require that a public hearing be held in connection with an issuance of revenue bonds and that the issuance of the revenue bonds be approved by the governmental unit having jurisdiction over the area in which any facility receiving financing from such issue is located. Because the proceeds of the bonds will be used, in part, for facilities located in the City of Alexandria, the approval of the City Council is required in order to permit the Virginia Tech Foundation to finance at this time.
FISCAL IMPACT: The AIDA charges administrative fees to applicants based on a published fee schedule. The fee is used to partially fund the operating costs of the Alexandria Economic Development Partnership (AEDP). The AIDA will receive a fee of $3,500 for this project, which falls under the "Ministerial/Legal actions not involving any issuance or financing, however defined" category within the schedule.
Since these are conduit revenue bonds, any costs associated with them will not be obligations of the AIDA, the City of Alexandria or the Commonwealth of Virginia. The City is not obligated to repay the bonds or the interest on the bonds. The bonds do not contain any pledge of the City's faith and credit. The obligation rests solely with the Virginia Tech Foundation. Under federal and State law, eligible non-profits such as this organization can avail themselves of tax-exempt financing for financing real property acquisition, if such non-profits finance their projects through public authorities such as the AIDA.
The fiscal impact statement submitted by the Virginia Tech Foundation (Attachment 3) signals the organization's intent to request a full real estate tax exemption for the property at 601 Prince Street. This building represents continued expansion of Virginia Tech's footprint in Old Town- the Foundation owns three other properties (all of which are exempt from real estate taxes) and one leased facility. The lost tax revenue from the tax exempt status of the 601 Prince Street property is estimated at the current tax rate to be approximately $22,000.
University officials describe Prince Street as a mini-campus for graduate programs of Virginia Tech focused on architecture, planning and design. According to a report published by the State Higher Education Executive Officers under the State Policy Resource Center (SPRC), "The Economic Benefit of Postsecondary Degrees," the median income of individuals with graduate degrees (Master's and Ph.Ds) exceeds the median income of those with only a Bachelor's Degree by nearly 50%. Higher wage earners provide an economic benefit both from a business attraction standpoint, as well as from the increased spending power. A report released by Weldon Cooper Center for Public Service on September 5, 2013, detailed the economic impact of the state's public higher education system. According to the report, for every $1 that Virginia spends on higher education, there is $1.29 produced in new tax revenue and more than $17 in increased job-creating economic activity.
ATTACHMENTS:
Attachment 1 - Proposed Council Resolution
Attachment 2 - Notice and Certification of Public Hearing
Attachment 3 - Fiscal Impact Statement
Attachment 4 - September 3, 2013, Resolution of the Industrial Development Authority of the
City of Alexandria
STAFF:
Laura B. Triggs, Chief Financial Officer and Director, Department of Finance
Stephanie Landrum, Executive Vice President and Chief Operating Officer, Alexandria Economic Development Partnership