The Charlottesville City Council has given the Piedmont Family YMCA one more year to begin construction of a 70,000-square-foot aquatics and fitness center on the western side of McIntire Park.
The city’s ground lease with the YMCA required construction to have begun by the end of this year, but the project has been delayed by legal issues and an inability to secure funding.
A coalition of local fitness clubs, including ACAC and Gold’s Gym, sued Charlottesville and Albemarle County in May 2010 claiming both localities violated the Virginia Public Procurement Act by pledging contributions to the facility’s construction.
In January, the Virginia Supreme Court ruled that claim had no merit.
“I think the hit the YMCA took when the private clubs sued about this, a suit that was ultimately dismissed, is something that we as a community should feel really bad about,” said Councilor Kristin Szakos.
The YMCA has been unable to secure funding this year, but the chairman of the group’s board of directors told the council at its meeting earlier this week that that may change after the first of the year.
“We don’t have an existing revenue stream to pledge to secure the loan because, until we build the facility, we can’t sell memberships and that’s how Ys generate revenue,” said Kurt Krueger. He added that they cannot pledge the land as collateral because they do not own it.
As a result, the YMCA’s strategy had been to secure funding through multiple banks so the risk is spread out.
“Through no fault of our own, one of those banks had to pull out this summer,” Krueger said. “They have found a substitute bank, but the substitute bank has imposed other requirements on us and we are very close to meeting those requirements.”
Those requirements include a review of the group’s year-end financial statements.
Councilor Dede Smith, who voted against the extension both times, said she wanted to postpone a vote until after the council could see the information.
Krueger said the YMCA is in a chicken-or-egg situation.
“The banks want to know that we’re going to have enough of an extension that it is worth their while on an uncompensated basis to do the underwriting they’re about to do with the financial information we give them next week,” Krueger said.
During the meeting’s public comment period, opponents of the plan asked the council to deny the latest extension. A previous one-year extension was granted last December.
Randy Page, a long-time opponent of putting the facility in the park, told the council there have been too many changes since the lease was executed.
“Carver and Smith recreational facilities weren’t even planned [then],” Page said. “Are we funding our own competition? Is there really room for all of these low-cost facilities?”
Krueger disputed Page’s version of history.
“The reason that council approved the ground lease for us to do this is because it had commissioned a recreational facility needs study which actually showed that with Smith, Carver and us, we still aren’t meeting the projected recreational needs projected [for 2018],” Krueger said.
Councilor Dave Norris reminded councilors and Page that the city made the decision to not renovate Crow Pool, saving taxpayers millions. The city agreed to give $1.025 million toward the costs of constructing the YMCA.
“We’ve lost the memory of why we’re doing this in the first place,” Norris said, a supporter of the project. “This was part and parcel of the city’s overall plan to meet the recreational and aquatic needs of our residents.”
Albemarle County has pledged $2 million for construction costs.
Krueger said the YMCA still has to finalize a construction cost with the contractor, Loughridge and Co. of Richmond. In February he said the cost to build the facility would be $14.77 million.
“We originally thought we could get by with a $9 million building but construction costs went up and the city really wanted us to be able to have a cold-water pool for the Charlottesville High School students to do competitive swimming,” Krueger said. “That required us to build two pools.”
Krueger said the full cost of the project, including design work and equipment, would be about $18 million.
“If they had been able to build it two years ago, the costs of construction would have been less,” Szakos said.
Smith said she is also troubled by the potential risk to the city.
“One of my concerns is, what happens if you can’t meet your financial obligations,” Smith said. She asked if the banks were requiring any bonds.
“They are asking for personal guarantees and we are giving them,” Krueger said.
Krueger said if the facility is built and the YMCA cannot operate the building, the structure will revert to city ownership, according to the lease.
Terms require the city to pay the YMCA for the building when the lease lapses in 2048, though a future council could elect to extend the lease.
Virginia law restricts municipalities from entering into ground leases for periods longer than 40 years.
Smith suggested only extending the lease for another six or eight months, but her four colleagues disagreed and voted to allow the YMCA until January 2015 to begin construction.