Home Debt New $300M courthouse may strain city’s debt policy

New $300M courthouse may strain city’s debt policy

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For decades, the city of Richmond has operated most of its judicial branch out of the John Marshall Courts Building.

As the years rolled on, the nearly 50-year-old building, located at 400 N. 9th St., has fallen into disrepair.

When the Commonwealth of Virginia Department of General Services Division of Engineering and Building evaluation found in Oct. 2021 that the building was not state code compliant, the city’s planning department began working on a plan to consolidate all of the city’s court complexes — some residing in Manchester — in one central downtown location. 







The exterior of John Marshall Courts Building on 12/1/2019




In the meantime, the project has gone under the radar as little has been presented to the public and no proposals have been brought before the city council for consideration.

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That was until Chief Investment Debt Officer Michael Nguyen briefly mentioned the project, with a $300 million price tag, as a potential breaking point for the city’s 10-year 60% debt payout ratio policy during a Thursday afternoon Finance and Economic Development Committee meeting.

Essentially, the city has adopted a few policies to keep its debts in check. These include only borrowing 10% of what it makes in a fiscal year and ensuring that any debts it takes on will be at least 60% paid off in 10 years.

“When the administration and the council decide to borrow funds, that impact is felt for the city and commits future administrations and future councils to spending priorities,” Nguyen said.

For example, the city authorized the purchase of the Carpenter Center, now the Dominion Energy Center, in 2007. It’s not scheduled to be paid off until 2030. 







John Marshall House

04-01-1973 caption: ‘Favored’ site for proposed Richmond courts building would skirt Marshall House. A city-owned block in Richmond’s Civic Center area includes the 1790-vintage home of the former Chief Justice John Marshall is heavily favored to become site for proposed $6.5 million Richmond Courts Building.




While the city’s debt policies helped improve the city’s financial status, including raising its credit rating, a $300 million project could have a drastic impact.

A credit rating is similar to an individual’s credit score. The city has an AA rating, which is one notch below the highest AAA rating a locality can have. The higher the rating, the more the city can borrow with less interest, Nguyen said.

A $300 million courthouse, if completed by the proposed 2029 date, would result in the city paying an annual $19.5 million debt payment. With this being one project in a long line of planned city projects, this could delay other projects if it becomes a priority.

“I think the more important part of this equation is the affordability. So, one way to think about this is that we can take on a lot of debt but, the ultimate issue lies with can we afford to pay that now and in the future years to come,” Nguyen said. “That affordability part is a decision that could squeeze out or crowd other spending priorities.”

With the courthouse project slated to go before the city council sometime this year, council members will need to decide what they plan to do. Planning and consulting for the project has already cost $1.6 million, according to a quarterly report issued by the planning department.

In Aug. 2021, a committee was formed to oversee the courthouse project. The following year, all of the city’s circuit court judges unanimously requested that the new courts building be located at the John Marshall Plaza site within the city center plan — an ongoing initiative to rezone downtown and redevelop city-owned properties.







JURYBOX4

Jury box in John Marshall Courts Building in 2001.




Currently, the Department of Social Services is located in the John Marshall Plaza and is in the process of finding new office space.

Once relocated, the plaza will be razed and the site prepared for construction of the new courts building, a project summary and scope memo reports.

While several council members had questions regarding the city’s ongoing debt capacity, no one mentioned the overall cost of the proposed facility.

The newly modernized Virginia General Assembly building cost roughly $300 million to complete. In Loudoun County, Virginia’s reported wealthiest locality, its Board of Supervisors recently approved the construction and renovation of its 92,000-square-foot courts complex for an estimated $100 million.

According to Richmond’s Department of Real Estate Assessment, the John Marshall Courts Building sits on 1.08 acres of land, and as of 2024, its total assessed value is $15.8 million. As it is a city-owned building, it is considered a tax-exempt parcel.

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