NEWPORT NEWS -- Newport News for the first time has turned to a new way to borrow money in order to pay to build roads and water and sewer lines for the massive Asheton development planned for the Lee Hall section of the city.
The city plans to create the so-called Asheton Community Development Authority, which will establish a special tax district that will tax Asheton residents at a higher rate in order to repay the $12 million used to build the roads and utility lines.
City officials hope the 436-acre development, which will include 1,685 upscale houses, town houses, condos and apartments in the northernmost part of the city, will keep and attract wealthy people who sometimes move to the Williamsburg area to find large houses.
The city will hold a series of public hearings in January on the taxing authority. If the City Council creates it, Newport News will follow in the footsteps of Hampton, which created one to help pay for revamping Coliseum Mall. And this week, New Kent County announced a similar deal to pump $85.7 million into the New Kent Vineyards development.
This form of financing is becoming more and more popular, but Newport News officials have pledged to lower its $531 million debt to help it retain its favorable credit rating and continue to borrow money at a lower interest rate.A Wall Street rating agency recently raised concerns about the city's growing debt. If the agency downgrades the city's credit rating, it could cost Newport News about $150,000 per year in higher interest, Gregg Jones, the city's budget director, said this week.Newport News officials say it's too early to tell if the $12 million will count toward the city's debt. "These are new in Virginia," Florence G. Kingston, the city's development director, said of community development authorities. "We don't know how the rating agencies will look at it. It's new territory."Bond experts say the rating agencies could view these taxing authorities in two ways. They could see them as an indirect tax or debt burden for the city since it charges some residents with higher taxes, said Bonnie M. France, a Richmond lawyer who advises Hampton on bonds.But they could also view the move as positive because it brings in more tax revenue.
Asheton is estimated to reel in as much as $6 million a year by the time it's built out in 10 years.France, the attorney, sees more cities creating these taxing authorities, which localities view as a new and creative way to help developers pay for roads, parking lots and water and sewer.Newport News drafted a policy to allow for such an authority about a year ago.In addition to the $12 million for infrastructure, the city also has agreed to set aside a $10 million credit line for the developer. The millions set aside for Asheton and a slight shift in the development's blueprint raised the eyebrows of at least one City Council member. Asheton's developer, L.M. Sandler & Sons Inc. of Virginia Beach, recently added more green space to its plan and changed 23 town house to single-family houses, reflecting more demand for houses than town houses, officials said."I can only trust that the developer delivers what he promised," said Madeline McMillan, one of two City Council members who represents north Newport News.Some residents have worried about the 100-acre buffer between Asheton and two of the city's historic attractions, Endview Plantation and the Lee Hall Mansion. But additional changes are not in the works, said Kingston.The developer will start to buy 125 acres in March for the neighborhood's first phase. Houses will be available for sale in 2008.
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