Editor’s note: This article was updated at 5:55 p.m. on May 30 with comments from the developer and town attorney about why taxpayer reimbursement numbers have not been provided to the planning commission and public, as well as updated cost-benefit numbers from the Feb. 5 fiscal impact study.

A Virginia Beach-based firm working with Grange at 10Main developer Joseph Luter IV estimated in January that Smithfield and Isle of Wight County could collectively owe him more than $7 million as their share of what Luter has termed a “public-private partnership” to extend roads, sidewalks and utilities to the 304-home, mixed-use development proposed at the western edge of Smithfield’s historic district.

Luter told the Times last week that he expects that the taxpayer-funded portion, which he says would come from tax revenues generated by the development, won’t be anywhere near that high. But he declined to provide updated estimates, contending he “won’t be in a position to provide numbers” until after Smithfield’s Planning Commission votes on the project.

“We have estimates,” Luter acknowledged at a May 24 meeting of the Planning Commission, but said he had been “instructed” by town officials that “this is for discussion post-zoning” and wouldn’t go into detail despite prodding by Commissioner Dr. Thomas Pope.

“These (latest) projections have not been shared with anyone other than our team, and because they will change again, they are a working draft and will remain confidential,” Luter told the Times by email on May 30. He said that numbers will be made public at the same time a formal funding request is submitted to town officials.

The Smithfield Times obtained the January reimbursement estimates in an email from Venture Realty Group Director of Asset Management Tip Brown to County Attorney Bobby Jones and Town Manager Michael Stallings. The email and several attachments were included in Isle of Wight County’s response to a May 11 Freedom of Information Act request by the Times. The town omitted the email and its attachments when responding to an identical FOIA request, calling the material “proprietary” and related to “tourism development.”

Luter, the son of former Smithfield Foods Chairman Joseph Luter III, told planning commissioners in April that he planned to seek “reimbursement” for costs associated with “public” components of the Grange but didn’t disclose a dollar amount. Luter IV told the Times by email on April 12 he and his design team “don’t know yet” what the final costs would be.

Town Attorney William Riddick, who was involved in the town’s decision to withhold the developer’s January estimates in its FOIA response to the newspaper, told the Times in a May 25 email that infrastructure reimbursement “is not part of their zoning application and will only be considered if and when the project might be approved.”

“The decision about that would be the sole purview of the town council and not the decision of the planning commission,” Riddick wrote. “For these reasons the reimbursement issue is not being considered by the planning commission.”

In another email on May 30, Riddick told the Times, “The Town, by its staff, and as far as I know by any council member or planning commissioner, has not ever and is not now instructing the developer to withhold any information whatsoever.”  

The zoning application includes a fiscal impact study by Ted Figura Consulting that makes several funding assumptions involving Isle of Wight County that county officials say have yet to be discussed.

At the May 24 Planning Commission work session, Pope’s assertion that the project comes with “hidden” costs spurred Riddick’s angry response that nothing “underhanded” was going on.

Luter IV told the Times that when his team submits a “specific request for reimbursement” the exact dollar amount will “be made immediately available” to the public.

“We are simply following a process and fully intend to disclose any request for reimbursement to all vested parties,” Luter IV said.

 

A 2-to-1 cost-to-benefit ratio?

The reimbursement for infrastructure would be in addition to the $2.8 million already pledged by the town and county to build a new farmers market to anchor the development.

Luter III purchased and razed the former Little’s Supermarket and 1730s-era Pierceville farmhouse at Route 10 and Main Street in 2020, and has proposed turning the nearly 57 acres into a development that would include a building to house the town’s farmers market, a hotel, three- and four-story apartment buildings, single-family and duplex homes and commercial space.

Smithfield’s Town Council voted in October, following a closed-door meeting for the stated purpose of “contract negotiations,” to contribute $1.4 million toward the market component, contingent on the development’s approval. Isle of Wight County supervisors, who discussed the matter briefly in view of the public following their own closed session, voted later that month to put up another $1.4 million.

The Luters, in addition to the combined $2.8 million, plan to request the town and county jointly provide an “economic development incentive” for the hotel and “purchase the development’s infrastructure and utilities through a participation agreement,” according to the fiscal impact study by Ted Figura Consulting included with Luter IV’s application for rezoning.

A proposed cost participation agreement attached to Brown’s Jan. 9 email to the town and county estimated the Luters would seek $7.6 million in reimbursements, excluding interest, for roads, brick sidewalks and landscaping, utilities, lighting, four proposed pickleball courts, 20% of the development’s parking spaces, power line relocations, legal fees and administrative and engineering costs. 

The proposed agreement calls for a repayment plan beginning in 2026 and continuing through 2032.

For the first year, the town and county would collectively owe $829,606. This would increase to $1.6 million in 2027, which is listed as the development’s first “stabilized” year, followed by annual payments of roughly $1.7 million from 2028 through 2030. The amount owed would rise again to nearly $1.8 million in 2031 and drop down to $1.1 million in 2032, for a total of $10.6 million.

Venture’s January estimates, Luter IV said, were based on “the entire project” rather than just its public components.

The Figura study, which was last revised Feb. 5, estimates a nearly 2-to-1 benefit-to-cost ratio for the county and a 2.7-to-1 benefit-to-cost ratio for the town. It predicts $1 million in annual revenue to the county by a different “stabilization year” of 2030, compared to $548,575 in annual costs. For the town, it predicts $712,300 in annual revenue compared to $255,000 in yearly costs.

The annual reimbursement payments to the Luters would equate to roughly 75% of the county’s and town’s combined tax revenue from the Grange, according to Venture’s January estimates.

The Figura estimates, which were based on just under 50,000 square feet of commercial space, are likely out of date as well. Luter IV, at the Planning Commission’s May 9 meeting, said that to accommodate the commissioners’ April request that the market building be more visible, his design team had eliminated one of the two commercial buildings that would have blocked the market’s view from Main Street, and reduced the other from two stories to one.

 

How much for just the market?

The Figura study estimates the market building alone would cost $7.8 million, not counting the land that Luter III has proposed to donate. Luter III offered the land, plus $1 million toward construction costs, in 2022 conditioned on the town and county putting up roughly $2.8 million.

The market building would include a proposed brewpub, the owner of which would pay $1.5 million, leaving $2.5 million in construction costs with a yet unidentified source of funding.

The Figura study states it is “understood that the parties are seeking corporate sponsors” and that “any remaining funding gap” would be “incorporated into the participation agreement.”

Because Virginia municipalities are “severely constrained from operating commercial enterprises,” the Figura study anticipates the market would be sold to Isle of Wight County’s Economic Development Authority upon completion.

The EDA “would be able to borrow at 6.5% annual interest” the money to cover the estimated purchase price. The repayment cost “to each locality” would be just over $126,000 annually, or $2.5 million over 20 years, the study states. The “economic development incentive” for the hotel would also involve the EDA, which would issue a grant “equal to the amount, or a portion of the amount, of taxes paid to the locality.”

Isle of Wight County Board of Supervisors Chairman William McCarty, in an email to the Times, said the county had not agreed to fund any portion of the Grange at 10Main other than the $1.4 million it committed last year toward the building of the farmers market.

“The only reason the county is even in them is over this farmers market concept,” McCarty said. “And that is subject to participation agreements and is not necessarily locked in stone in formal agreements.”

McCarty said there have been “no other negotiations” by the county to date concerning infrastructure costs or interest on funds associated with the Grange.

“This is a town project and needs to be seen and treated as such,” McCarty said.

The Figura study, originally dated March 14, 2022, was revised on Dec. 3. The Feb. 5 version is its third iteration and was provided to the Smithfield Planning Commission, but not to the county.

Isle of Wight County Economic Development Director Chris Morello declined to comment on the Feb. 5 version, stating that the original March 14, 2022, study is the only version he possesses.

Morello, however, cautioned against taking any version’s cost estimates as absolute.

Fiscal impact studies, he explained, “are tethered to data and many assumptions at time of publications.”

“The data ages quickly, losing value even more quickly than normal in today’s economy, especially with each passing projection year,” Morello said.

The proposal that the EDA borrow money at 6.5% interest and repay roughly $2.5 million in principal and interest over 20 years “has not been discussed by either the county or the EDA,” Morello said, and “no negotiations have taken place” regarding the incentive for the hotel either.

Judy Winslow, director of the town’s and county’s shared tourism department, says county staff have indicated to her that the plan is for Isle of Wight’s $1.4 million contribution to the farmers market to come from “fund balance,” a term for county money that hasn’t been budgeted for a specific purpose.

“They would not be borrowing any money for that,” Winslow said.

According to Winslow, there has been discussion among town staff that Smithfield’s share of the market funding would come from its remaining American Rescue Plan Act funds.

Smithfeld received roughly $8.8 million in 2021 from the $1.9 trillion federal COVID-19 pandemic relief package, of which roughly $1.8 million remains unspent.

 

Nothing ‘going on behind closed doors’ 

At the May 24 Planning Commission meeting, neither Town Attorney Riddick nor Planning and Community Development Director Tammie Clary attempted to correct or clarify Luter IV’s assertion that he’d been “instructed” to withhold the latest cost sharing estimates until after the planners’ rezoning vote. Town Manager Michael Stallings and Mayor Steve Bowman, in emails to the Times, each denied having told Luter IV or his design team to withhold cost estimates from the commissioners. 

Stallings and Bowman did, however, say that the Town Council has taken the position that its members will not discuss any cost sharing agreement until after the Planning Commission votes on the requested rezoning. The Planning Commission’s vote will serve only as a recommendation when Luter IV’s application goes before the Town Council for a final decision.

Stallings said he hadn’t, as of May 23, shared Venture’s January cost sharing estimates with members of the Planning Commission or Town Council. Pope, however, said he obtained the estimates via an email from a Town Council member that he said “came through FOIA,” and quizzed Luter IV at the May 24 work session about the numbers.

“It’s a multimillion-dollar investment that we’re making. … There’s a hidden cost there,” Pope said.

Pope’s remarks drew a heated response from Riddick.

“There isn’t anything hidden, and that sticks in my craw because I’ve been doing this a long time and the implication that there’s anything going on behind closed doors and underhanded offends me to no end, because I don’t lie, and I don’t break the law and I don’t participate in things that are not legal and I never have,” Riddick said, “and I’m not pointing fingers at you but I just get tired of the implication that somehow there’s some sort of criminal conspiracy going on, because there’s not, and for anyone to insinuate that there is pisses me off.”

Though Pope hadn’t accused the town attorney of wrongdoing, Riddick did face criticism last year from an opponent of the Grange who’d written to Virginia Attorney General Jason Miyares asking for a state investigation of Riddick’s role in helping Luter III acquire Little’s Supermarket and Pierceville in 2020. Riddick’s law firm represented Luter III in both sales, and he remains the registered agent for LSMP LLC, the Luter-owned company that is seeking rezoning for the Grange. Miyares’ office did not investigate, contending the attorney general had no authority to probe the alleged conflict of interest.

Riddick, in an email to the Times, said Virginia law “does allow a municipality to reimburse a developer for costs incurred by the developer for infrastructure that does not solely benefit their project.”

If the town were to consider repaying a portion of Luter IV’s costs, it would be a decision for the Town Council, not the Planning Commission, he said.

Stallings, in an email copying the Times, asked Riddick to review the material FOIA’d by the newspaper ahead of its release for anything “requiring redaction.” That review apparently resulted in the town citing a provision of Virginia’s FOIA law that allows – but doesn’t require – government agencies to withhold information “voluntarily provided by private business pursuant to a promise of confidentiality from a public body” for “tourism development.”

“Proprietary information isn’t defined, but it has been interpreted by others as including financial information,” said Megan Rhyne, executive director of the Virginia Coalition for Open Government.

Virginia’s FOIA law has allowed such exemptions in the past, “because you don’t want your competitors to know what your costs are so they can undercut you,” Rhyne said.

“If they are still negotiating the cost reimbursement items, then there’s a plausible reason for withholding,” Rhyne said.

The county, however, didn’t deem Brown’s email proprietary despite sharing a tourism department with the town. When Pope mentioned the proposed $7.6 million cost sharing agreement from January at the May 24 work session, Winslow said it was the first time she had heard that number.

Stallings contends discussions of any cost sharing agreement would be “premature” until after the Planning Commission votes on its recommendation and sends the rezoning application to the Town Council for consideration.

Determining how to pay for any shared costs is “not your function,” Riddick told Pope.