Richmond leaders sent a letter to the VCU Health System on Monday requesting mediation over a failed 2021 development agreement for the site of a city building at 500 N. 10th St.
VCUHS agreed to pay the city $2.5 million annually through 2045 when it halted the Clay Street Project in 2022. But state lawmakers directed them to cease payments, according to a Joint Legislative Audit and Review Commission report.
A VCU Health spokesperson told Virginia Business in June that $1.9 million had already been paid to the city. But the health system did not make their June 5 payment due to a budget provision.
“The City is prepared to pursue all available options, including litigation, to collect the Guaranteed Obligation payments,” Richmond Mayor Levar Stoney and City Council President Kristen Nye wrote in the Monday letter.
In July 2021, VCU Health signed a lease for a planned building with office space, parking and retail at the site of Richmond’s old Public Safety Building. As part of that agreement, VCUHS committed to pay $617 million in rent over 25 years, according to a JLARC study. Following the city and VCUHS signing an agreement, the project developer — Capital City Partners — said the “project couldn’t be constructed for agreed upon budget.”
In 2022, the health system paid $80 million to halt the project before construction began.
The JLARC report identified several “shortcomings” in the VCUHS project vetting process and separately recommended that VCU’s president should no longer serve as chair of the health system’s board.
In the city’s Monday letter, it asked for a response by Dec. 6.
“This issue has been outstanding for a while, and we're just trying to work towards an agreement — to work towards resolution,” Nye said Monday evening. “We felt like that was a reasonable timeline for VCU.”
Marlon Levy, now VCU Health’s CEO, wrote in an Oct. 1 report submitted to the House and Senate money committees that the health system met five times with city administration to resolve the issue.
Marlon said they are not obligated to make payments to the city.
“VCUHSA’s statutory mission is to provide care to the City’s most vulnerable citizens, not to subsidize government revenue because of [Capital City Partners’] failure to create a revenue-generating project,” he wrote in the report.
Marlon also wrote that the city has received significant value from the deal: $3.5 million from the developer and $4.2 million in savings from the demolition of the building.
