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Amherst County, VA – The historic former school on Phelps Road in Madison Heights may have new life as market-rate apartments in the next few years. Amherst County approved a redevelopment Performance Agreement with an experienced historic rehabilitation developer, Waukeshaw Development, https://waukeshaw.com/  to bring new vitality to the building and community. The former Phelps Road school is a historic property of significance to the Amherst community and Waukeshaw wants to invest at least $5,000,000 to redevelop, restore, and convert the building into 30+ market-rate apartments while maintaining the historic character of the building.
The Board of Supervisors and the Economic Development Authority of Amherst County both approved the agreement with Waukeshaw this week as the first step in the complicated process of redeveloping the building, which has been empty for decades and has deteriorated over time. Waukeshaw has a contract to buy the former school from its current owner and the closing is scheduled for Oct. 27. As part of the process to see if the project is financially viable, Waukeshaw will need to accomplish a variety of steps, such as getting on the state historic register, developing design and build estimates, solidifying its financing, receiving historic tax credits, applying for grants, etc.  If certain key milestones are not met, the County can buy the building from Waukeshaw at a predetermined low price and decide whether the building should be demolished.

If the project progresses to construction, the $5,000,000 renovation should be finished within 3 years of closing. Crucial to the decision-making process for the County was the economic impact and return on investment of the project. Based on the project costs and the estimated 80 residents in the apartments, it was projected that during the construction phase the County would receive $71,044 in tax revenue, 51 new jobs would be supported, and there would be $6,583,839 in economic activity. Additionally, the annual impact of the project when completed would generate $57,051 in new local tax revenue, 14 new jobs, and $1,350,016 in economic activity.

“The EDA saw this as a clear win-win for the County,” according to Calvin Kennon, EDA Chairman. “Amherst County and the EDA want to promote and encourage economic development and vitality in Amherst, especially in this area of Madison Heights that needs redevelopment. This project would be a great start by increasing economic activity, employment, and financial investment.”

As part of the agreement, the Supervisors agreed to rebate up to $400,000 in potential water and sewer fees when the project was completed. If the building was demolished, it would cost the County about $470,000 to gain ownership of the building and demolish it.

Supervisor Jimmy Ayers commented, “If we take half a million dollars in taxpayers’ dollars and tear down the building we will get no return on our investment. At least with this project, we get some economic growth in our County in a positive way and we get a return on the investment as we assist them in our community.”

Waukeshaw has redeveloped multiple properties around Virginia, including several in Bedford: Bedford Lofts and Beale’s Brewery & BBQ. The company also recently bought the historic Amherst Milling Company and intends to preserve the Mill and the bucolic setting and use the one-of-a-kind property as an outpost for its existing Trapezium Brewing Company, based in Petersburg, Virginia. The project is on track to open in summer 2018 and hopes to become the first hydro-powered brewery in the U.S.

Questions & Answers

If the building is turned into market-rate apartments, what is the benefit to the County? This project would allow the historic former school to be restored and kept as an important asset to the community, help kickstart the redevelopment of this area of Madison Heights, and have a significant economic benefit by producing new jobs, new tax revenue, and new economic activity in the County and the business community. If the developer spends $5,000,000 in renovating the building, it is projected that during the construction phase the County would receive $71,044 in tax revenue, 51 new jobs would be supported, and there would be $6,583,839 in economic activity. Additionally, the annual impact of the project when completed would generate $57,051 in new local tax revenue, 14 new jobs, and $1,350,016 in economic activity. This return on investment was crucial to the decision-making process for the County. The developer anticipates that actual project cost will be $7 million, which would have an even larger return.

Will the existing park behind the school remain as a park? Yes. There might be some adjustment of boundaries to the park but the park behind the school will remain a park. This is a point that was clearly expressed in all discussions and is protected in the performance agreement.

What about the potential for an increase in traffic from the project? There will be more traffic than there has been recently, but less than when the building was in regular use. The building was formerly a school for many decades and as such there was a great amount of daily traffic, including large school buses. The roads had the capacity to handle the school traffic; an apartment building of the size proposed will not generate the same level of daily, continuous traffic flow as a school.

Why doesn’t the County just tear the building down and turn it into a park? The cost of demolition is estimated to be $420,000 plus $50,000 to purchase control of the building for a total of $470,000. There is no economic return to the County if it is demolished, as well as losing a unique historic building that has significant meaning to many in the community.

If the school is demolished, would the empty lot become a park? There is no guarantee what the next use of the empty lot would be. The Economic Development Authority (with input from the Board of Supervisors) would have several options to consider in the use of the lot, including selling the empty lot to another developer to build on. Building a new apartment complex would be an attractive possibility to developers, but re-zoning would still need to take place. The empty lot would require maintenance which adds a financial burden on the County. Selling the empty lot would bring new funds to the County from the cost of the land and its increase in tax revenue based on the use of the land (apartments, a business, etc.)

What guarantees do we have that this developer will actually do something with the building? The County has already regained ownership of the school. The agreement gives the developer the opportunity to renovate and has a project timeline that the developer has to follow. If the developer does not meet these milestones, the developer loses his option to own the property and the Economic Development Authority and the Board of Supervisors will have to decide the next course of action for the building.

Who will maintain the property? The developer is responsible for ensuring the building is secure and that the appearance of blight is minimized while it goes through the process of preparing for renovation.

Who will own the building? The agreement with the developer has been signed and transfer documents will be filed with the County Clerk to transfer ownership to the Amherst County Economic Development Authority. If the developer proceeds to completion with the building, it will exercise an option to take ownership.

Is the County going to give the developer money to do the project? No. But when the project is finished and the apartments are ready for occupancy, the County will transfer funds to the Service Authority to offset the cost of upgrading the water lines for the neighborhood and for water and sewer hookup fees—up to $400,000. This investment in water and sewer lines goes directly to the Service Authority and stays in the neighborhood. In addition to the tax revenues, new jobs, and economic activity this $400,000 expense is further offset by increased water/sewer revenues forever into the future from all the new customers in the apartment building.

With this project, we are both doing away with blight and achieving economic development. Making the $400,000 investment is not something we agree to do for any redevelopment prospect. This is a unique situation because of the fact that we have been in litigation for almost a year to achieve Maintenance Code compliance and abate the blight at the school and this settles out the litigation because (1) there will be interim blight abatement, and (2) there will be either a redevelopment or tear-down and consequent elimination of all violations.

Why is the County offering up to $400,000 in water/sewer connection fees? The fees will be paid by the County to the County Service Authority, so the funds will not leave the county. Typically, the Service Authority must charge fees to new users to help cover the capital costs which are sunk into the whole system. The fees can be a daunting impediment to making a profitable property investment. Because this is such an expensive renovation project, the Supervisors have taken a “business-friendly” stance to assisting the project in moving forward. The developer benefits by having more funds available to invest in the project and the Service Authority benefits with an infusion of cash (for other major county projects) and new, paying customers.

Will the $5 million-dollar investment in market-rate apartments have an effect on neighborhood property values? Yes, it should improve property values. A $5 million investment will raise the property value of the school and will be a massive improvement in the appearance of the school. Having this property be a thriving center of residential activity and removing the appearance of blight should raise the property values of land all around the area, and increase the usefulness of the adjacent ballfield and park.

Why is the County agreeing to pay $50,000 if Waukeshaw Development can’t make the project work? Waukeshaw Development was able to buy the property from the last owner for $50,000. This succeeded in getting an uncooperative owner out of the way of development. By offering to reimburse the $50,000 the County has regained title and control of the property. The problem with past developers was compounded by the fact that the County had no control over their activities–with the title in hand and a strong performance agreement, the County is back in the driver’s seat. If Waukeshaw Development is successful in getting financing, getting the property rezoned and obtaining historic property designation, the County will not have to pay the $50,000 at all.

If the school is not rezoned, what would happen next? Waukeshaw Development will withdraw from the project. The school will remain in its present condition until the Economic Development Authority (with input from the Board of Supervisors) decides to demolish it, offer it for sale, re-develop the facility at county expense, or otherwise dispose of it.

The new apartments will all be market rate, but could the owner sell the building and the apartments then become low-income housing? Any owner can sell their property to whomever they please. However, the performance agreement provides that it will be developed with market-rate units, the areas standard price for apartments. Also, one must understand that an expensive renovation could not profitably support low rents. In order to develop the property, it will be required to be rezoned.

Economic Impact of Phelps Road School Redevelopment

Amherst County and the Economic Development Authority of Amherst County (EDA) desire to promote and encourage the economic development and vitality of the County through the redevelopment and preservation of the historic former Phelps Road School, located in Madison Heights, in order to increase economic activity, employment, corporate investment in the County, and generate new local tax revenues for the County.

The former Phelps Road School is a historic property of significance to the Amherst community that will be redeveloped, restored and converted into 41 market-rate apartments while maintaining the historic character of the building and incorporating modern conveniences.

Economic Impact of Construction
The construction of the proposed project is expected to cost $5,000,000 and would include the renovation of the school into 41 residential units. The construction phase of this study is expected to occur in 2019 was accounted for in determining the economic impact.
Impacts are based on local purchase of construction supplies and spending with secondary businesses and service-sector businesses. Some examples of sectors that could see increased economic activity are: Retail-Building Materials, Retail-Gasoline, Truck Transportation and Hotels. The economic impacts presented in this report are specifically for Amherst County.
It is estimated Amherst County could gain a potential of $71,044 in tax revenue during the construction phase of this project (estimated year – 2019). There would be a total economic impact during the construction phase of $6,583,839.

Economic Impact of New Residents
For the purpose of this impact study, the following calculations were used: 41 apartments at double occupancy = 82 persons. The total impact of 41 additional apartment units is estimated to generate 14 jobs, support current employment sectors and generate additional labor income of $374,640 and a total economic impact of $1,364,761. Other employment sectors impacted include full-service restaurants, automotive repair and maintenance, building material and supplies, and retail – gasoline.
It is estimated Amherst County could gain an annual addition of $7,726 in sales tax, $35,703 in property tax, and $3,252 in others taxes/fee/fines from additional households. Amherst County could also gain an annual addition of $10,370 annual property tax to Amherst County as the building will have a higher tax assessment after renovation. The total annual tax revenue for Amherst County would be $57,051.

Summary
The Phelps Road School Development would have several impacts on the County of Amherst. The construction phase of the project would have a significant temporary impact over an estimated one-year period. The remaining impacts would be annual impacts that should show growth year-after-year depending upon economic conditions and tax rates. The impacts of the temporary construction phase and the yearly increase in residential units would be:
Construction Phase: $71,044 tax revenue, 51 jobs, $6,583,839 economic activity
Annual Impact: $57,051 tax revenue, 14 jobs, $1,350,016 economic activity

The 10-year tax revenues forecasted to be generated by the Phelps Road School Development project, including sales tax, property tax and miscellaneous taxes, fines and fees, and the construction phase taxes in year 2019, will be $654,924.

This report was created by the Lynchburg Regional Business Alliance using numbers obtained from the developer of the Phelps Road School Development project. Full economic impact analysis report