Manassas Park will be using a combination of payment from the sale of land, proffers, and tax revenue to offset costs for the new downtown development project.
The city is making plans to develop a large area of land between Manassas Drive and the Virginia Express Railway (VRE) station in the hopes that it will gain more revenue by attracting both new residents and consumers to the area.
While finances for every project has not yet been released, a presentation made by City Manager Laszlo Palko does explain how Manassas Park will finance building a city hall building, which is also part of the new development. The structure of the deal offers a look into how the city may accomplish this feat.
If the city’s Governing Body decides to go through with the project, then they would enter into a 30-Year Lease-Purchase Agreement with the McLean based developer Norton Scott. A lease-purchase agreement combines elements of a traditional rental agreement with an exclusive right of first refusal option for later purchase on the home, such agreements are used in rent to own properties.
Because of the agreement, Norton Scott will add over $10 million of their money as well as receive $15 million due to revenues from city land and cash proffer values.
The deal’s structure means that the total amount Manassas Park would owe for the Downtown Development would come to $25 million which would be paid off over the life of the 30-year agreement. The yearly lease payments will be $1 million in the first year and $1.5 million in all subsequent years.
With interest factored in, the total payment will be $46 million.
The combined total would cover both the building and the necessary public infrastructure which would have been $40 million, without interest, had Manassas Park decided to go it alone.
In the first two years, the city will go into a $600,000 deficit from lease payments not equaling its tax revenue. By 2025, the city expects to have a net gain of $400,000 surplus that will continue growing each year.
“My recommendation to the Governing Body has been to use some of that proffer/land value cash to help make up the $600K deficit between FY 23-24 for the lease payments in order to have $0 impact on current tax payers every Fiscal Year,” Palko said.
The new City Hall is scheduled to be finished by July 2023 which is when the annual lease payments would come into effect and would become completely owned by the City by July 2052.
The base agreement between the City and the developer is under review by the city’s attorney to make sure everything is correct and that both Manassas Park and Norton Scott are legally protected.
A vote on the final agreement by the City’s Governing body has been tentatively scheduled for April 30 but could get moved to May 5.
The city has until recently had a long history of dealing with crushing debt, but that debt has been managed to the point where the credit rating company Standard and Poor (S&P) had given Manassas Park an AAA bond rating which puts their credit in good standing.
