Officials from Virginia Commonwealth University and VCU Health System instructed lawmakers on Wednesday they’re reviewing an settlement to pay the town of Richmond roughly $2.5 million yearly in lieu of taxes for a growth that was by no means constructed, after the college paid the town, traders and builders almost $80 million to exit the failed constructing undertaking. 

This article was reprinted with permission from Virginia Mercury

Virginia Commonwealth University President Michael Rao assembly with lawmakers in Richmond on June 5. (Nathaniel Cline/Virginia Mercury)

Officials from Virginia Commonwealth University and VCU Health System instructed lawmakers on Wednesday they’re reviewing an agreement to pay the city of Richmond roughly $2.5 million yearly in lieu of taxes for a growth that was by no means constructed, after the college paid the town, traders and builders almost $80 million to exit the failed constructing undertaking.

In 2021, VCU Health System signed a lease with a developer to assemble the Clay Street Project, which included a medical tower, workplace and retail house and parking on the location of Richmond’s former Public Safety Building at Clay and tenth Streets. At the time, VCU agreed to pay the town a complete of $56 million in lieu of taxes for the $325 million undertaking, which was to be paid out in increments of $2.5 million yearly, in accordance with the Richmond Times-Dispatch.

However, a yr later the partnership ended after the developer and the well being system couldn’t comply with phrases on the price range resulting from unsuitable web site situations and elevated building prices. As a part of the well being system’s plan to cancel the undertaking, it paid $80 million, however the annual $2.5 million funds to the town in lieu of taxes continued. Now, lawmakers and VCU Health leaders are questioning and investigating whether or not the annual funds are authorized.

VCU’s well being system was directed to terminate the funds, in accordance with language included within the lately permitted state biennium price range. Under that measure, the well being system should present a report back to the legislature on the standing of that call by Oct. 1.

“Speaking up to now tense, I believe on the time that this was agreed to, it was felt to be appropriate to do this; within the current tense, that’s being reviewed and why we’re at the moment in conversations with the town about that very matter,” mentioned Marlon Levy, interim CEO of VCU Health System.

According to the Joint Legislative Audit and Review Commission, which conducts evaluation and gives oversight of state businesses on behalf of the General Assembly, VCU Health has made at the least one $2.5 million fee to the town.

Petula Burks, a spokeswoman for the town of Richmond, mentioned in a press release: “The metropolis believes the assured obligation agreed to by VCUHS must be honored. It is a contractual requirement entered into by VCUHS of their very own volition.”

Sen. Jeremy McPike, D-Prince William, mentioned, nevertheless, “you’ll be able to’t tax one thing that doesn’t exist,” throwing in his help for officers to overview the settlement.

“[VCU] has no controlling curiosity at this level,” McPike mentioned. “The solely solution to cross by way of IRS tax exemption to a leasehold is to have an actionable operation of a leased facility or a part of [one], of which it has none.”

Last yr, lawmakers directed researchers to conduct the research and overview the well being system’s response to the Clay Street Project.

Officials from VCU addressed lawmakers following a presentation by the Joint Legislative Audit and Review Commission, which reviewed the roles and tasks of the VCU Health System’s Board of Directors, the system’s governance construction, and the capital procurement course of.

Hal Greer, workers director for JLARC, mentioned the report solely focuses on the findings and proposals to enhance VCU’s capital processing infrastructure. No suggestions have been made relating to the Clay Street Project.

VCU President Michael Rao, who additionally serves because the well being system’s president, mentioned on Wednesday that buying the property was necessary for the system’s future in 2021. But the undertaking grew to become “inconceivable” with nationwide financial pressures akin to inflation intensifying throughout the pandemic.

Del. Mark Sickles, D-Arlington, chair of the Joint Legislative Audit and Review Commission, listens to remarks from Virginia Commonwealth University President Michael Rao on the General Assembly Building in Richmond on June 5. (Nathaniel Cline/Virginia Mercury)

Researchers mentioned VCU Health had improved its capital course of by hiring exterior consultants and revising its capital undertaking course of. Still, they mentioned, extra work is required to develop a long-term strategic capital plan, strengthen a number of insurance policies, and enhance staffing to deal with capital initiatives that may maintain and increase the system’s operations successfully.

Two key suggestions included eliminating the well being system president place and creating two separate positions, VCU Health System CEO and VCU SVP of well being sciences, roles which can be at the moment mixed.

Both suggestions would require adjustments to the Code of Virginia.

Researchers really useful the president’s place be eradicated as a result of it’s a battle of curiosity. The well being system president can also be the college president.

Board members instructed the analysis crew that they consider the college president shouldn’t be the board chair, shouldn’t be capable of vote, and supported eliminating the place. According to JLARC workers, the president has the authority to guage the efficiency of the well being system CEO and suggest compensation for that individual, and might schedule government committee conferences and modify the order of enterprise for the Board of Directors.

Rao mentioned he helps the concept of the place being eradicated.

“These are roles that loads of my colleagues, whatever the construction across the nation, don’t share with me,” Rao mentioned, including that it may be complicated.

JLARC workers additionally really useful that the well being system’s board members have longer phrases, possess experience in further matters related to well being system governance, and be neutral.

VCU officers mentioned after the presentation that plans to deal with JLARC’s suggestions are underway.

Editor’s notice: This story has been up to date with remarks from the town of Richmond.