WILLIAMBSURG, Va. (WAVY) — Ahead of votes to commit millions of dollars towards the development of sports center in Virginia’s Historic Triangle, partner municipalities are being assured of one thing: they won’t make the same mistakes made in Virginia Beach.
In a work session with the James City County Board of Supervisors Tuesday, an advisor hired by the Historic Triangle Recreational Facilities Authority (HTRFA) presented a slide showing key differences between the Virginia Beach Sports Center and the one proposed for Colonial Williamsburg.
Chief among them is the structure of the operating agreement and the fact that it’s being stated publicly up-front that the Williamsburg center will likely operate annually at a $300,000 to $400,000 loss.
Several on Virginia Beach City Council said it was a surprise to them to find out earlier this year that their Oceanfront facility was losing more than triple that amount each year since opening up in 2020. Much of the blame is been attributed to the way the city and operator Eastern Sports Management (ESM) agreed to do business.
While ESM asserted they could turn a profit, the advisor testified that back in 2018, Virginia Beach City Council was given advice that the ESM model likely wouldn’t work.
Advice that was never shared publicly and ultimately ignored.
“You know, I think this is a good learning lesson for a lot of communities and understanding what operators propose to communities and what’s realistic and what’s not,” said Walter Franco with Victus Advisors, the sports and entertainment venue consulting business contracted by both Virginia Beach and HTRFA to help them bring their sports centers to a reality.
HTRFA, made up of the city of Williamsburg, James City County and York County, have the same goal Virginia Beach had years earlier: fill hotel rooms, restaurants and attractions with families and athletes that will travel for sports tournaments, and in turn, generate additional tax revenue.
The “Williamsburg Sports & Events Center,” as it’s being dubbed, would be built by Chesapeake-based MEB on land leased from the Colonial Williamsburg Foundation near its visitors center.
While cost estimates were $45 million last year, the authority is now pitching a larger 200,000-square-foot building with an $80 million price tag. It would include space for 12 basketball courts, which can also be converted to 24 volleyball courts and 36 pickleball courts, a conversion for turf field system, a rock wall and ninja gym equipment.
“I do believe this facility, we will get our money back,” said Scott Stevens, the James City county administrator and HTRFA vice chairman. “May be indirectly through meals tax and sales tax and some of those other things that people that are coming to the community bring with them.”
Currently, it’s predicted the center could generate 42,000 annual room nights at hotels with $1.3 million in additional tax revenue split between the three governments.
Still, though, Franco said losses in the actual operation of sports centers of this type aren’t uncommon. Last week, his colleague told Virginia Beach City Council that similar centers operate at about a $200,000 and $400,000 per year loss, often because of discounts offered to lure tournaments.
“That’s why you know we’ve been working hard with MEB and also with the constituents here so that they understand what the market can bear, what’s realistic,” Franco said. “We’re not here to paint a rosy picture that is going to, you know, make millions of dollars.”
To avoid what happened to Virginia Beach, where City Council resentfully approved spending $6.1 million to terminate their operation agreement last week, Victus is recommending the would-be operator be paid between $150,000 to $250,000 a year in management fees.
Virginia Beach was to pay more than $650,000 annually.
In addition, historic triangle taxpayers will buy the furniture, fixtures and equipment for the center, unlike in the Virginia Beach agreement where the operator was responsible for furnishing the facility.
“The challenge I repeat has been with the operating agreement,” Franco said, adding that their research finds Virginia Beach Oceanfront hotels have seen an additional 50,000 room night stays in a year due to the center.
To make up the operating deficit each year and keep the operating reserves filled, HTRFA is pitching that James City and York County would pay between $300,000 and $800,000 annually.
Williamsburg, on the other hand, would pay 64% of the debt to construct the facility, with HTRFA paying debt on the rest, using money from the additional 1% of sales tax that was added to the Historic Triangle for tourism back in 2018.
All three Historic Triangle governments must vote on the financing agreement for the project to move forward. If that happens within the next several months, it’s estimated the project could open in 2026.