By Jim Morrison
Virginia Center for Investigative Journalism at WHRO
A scaled-down Norfolk waterfront casino proposal is facing choppy waters from city leaders who have lost patience with the much-delayed project.
Norfolk City Council members in a recent closed session discussed options for scuttling the city’s agreement with the Pamunkey tribe, which submitted an application for a phased development with a $150 million initial investment, far shy of the upscale $500 million resort hotel, marina, entertainment space, and casino showcased to voters during a 2020 referendum.
City leaders are weighing the risks and rewards to working with a new casino developer, according to multiple sources. The tribe and its partners likely would sue to stop a new developer, possibly delaying the project. But a confidential city legal analysis also suggested opening negotiations with a new partner could create competition, and prod the Pamunkey tribe to move faster. The memo called the approach “kicking the hornet’s nest.”
Meanwhile, a powerful state delegate is pushing Norfolk to move ahead with the casino project, or risk not receiving $465 million in state funding over a decade for the city’s $2.66 billion seawall project, sources said.
The new developments are another chapter in the troubled efforts to develop a waterfront casino next to Harbor Park. The Headwaters Resort and Casino was the first gambling site approved in the state but its development has lagged behind other projects.
The Pamunkey proposal is scheduled to be reviewed by the Architectural Review Board today and will then could be sent to the Planning Commission and ultimately City Council for a vote.
City Attorney Bernard Pishko said the phased development proposed by the tribe “is not provided for under the agreements” with the city. Those include a purchase option for the tribe and a development agreement.
Pishko signaled the city is looking for paths to move the project forward. Norfolk has contemplated the purchase of the property by another developer, he said, adding that state law may not permit competing casino applications for the site. “It is more than disappointing that the development has been delayed,” Pishko said.
At least one state lawmaker is also impatient. At a May meeting of the Downtown Republican Club in Norfolk, Del. Barry Knight, R-Virginia Beach, who chairs the House Appropriations Committee, blamed the city for the delays. Responding to a question, he said he would not back state funding for the city's storm risk management plan because the city had not moved forward fast enough with the casino, according to a source who attended the meeting.
Norfolk City Council in April approved the partnership agreement with the U.S. Army Corps for the $2.66 billion project, pledging the city would pay 35 percent of the cost. The council also passed an ordinance saying it “shall secure” the state commitment to fund half of the city’s $931 million share. The project, which will take a decade to complete, features roughly nine miles of walls, berms, levees, pump stations, and other mitigation designed to prevent a catastrophic flood.
While Knight told the club he blamed the city for the casino project’s delays, city leaders blame the tribe.
Bills providing $40 million for the storm risk project did not make it out of committee on either side of the General Assembly this year. Knight, a backer of casinos and the tax revenue they generate for schools and other projects, did not respond to requests for comment left with his Richmond and Virginia Beach offices.
Norfolk Mayor Kenneth Alexander did not respond to emails and phone calls requesting comment on the casino plan. Other council members declined to comment or did not return messages.
The casino project has been delayed for years. Norfolk voters approved a referendum to build a casino on the site in 2020. At the time, the Pamunkey promised a $500 million investment, down from an initial promise of $700 million, that included a resort hotel tower, restaurants, a marina, and an entertainment space with 2,500 seats.
Asked if the city had gotten an answer why the casino construction had not begun, Pishko said. “The developer has not satisfactorily explained its delay.”
The tribe's projected payments to the city were estimated at between $26 million and $31 million annually. In 2022, Norfolk’s budget director Greg Patrick said the city would use $10 million of the annual casino revenue to pay for the reconstruction of five schools over a decade.
The application filed in June proposes a two-story casino with 45,000 square feet of gaming space, a 180-seat sports bar, and a garage with 1,180 parking spaces. The development would be half the size of the nearby $340 million Rivers Casino in Portsmouth.
Jay Smith, the casino spokesman, said he did not have details on the number of slot machines and gaming tables in the first phase. The initial proposal to the city featured 3,000 slot machines and 150 gaming tables. He also did not have updated revenue projections.
State law requires any casino developer to make a capital investment of at least $300 million. The Pamunkey tribe’s 2020 agreement with Norfolk mirrors that requirement. Smith said that the two phases of the project would exceed that amount. "I don't have a total budget for the entire project, but our vision as we outlined it with the 300-room hotel, resort amenities, all those sorts of things will be part of phase two," he added.
He declined to comment about whether the tribe had heard that council members were unhappy with the proposal. But he added that it met the conditions of a March 1 letter from then-city manager Larry “Chip” Filer outlining how the tribe could move forward.
The tribe did not submit a construction schedule with the June application. Smith said it would supply one after the city completed sale of the land.
The status of the tribe’s license application with the state is also unclear. Only casinos in Bristol, Danville, and Portsmouth have been licensed by the state, according to Lottery Board records. All three signed local agreements after the Pamunkey’s deal with Norfolk,
The tribe’s initial facility application was submitted in 2021, and it is the midst of the licensing process, Smith said. A Lottery Board spokesman did not reply to an information request about the Pamunkey application.
Norfolk could entertain new proposals to purchase the 13.25-acre waterfront site, according to the legal briefing to city council. But the tribe holds a five-year option to buy the property, and any new partnership would come with legal restrictions and challenges.
Smith denied financing challenges were behind the two-phase approach, but he declined to comment on specifics. In a disclosure form filed with The Virginia Lottery in 2020, the tribe said it had received a $20 million loan in September 2017 from Golden Eagle Consulting, the firm backed by Tennessee billionaire Jon Yarbrough.
The repayment of the principal and interest is due on Sept. 15, 2024, according to the public filing. As of April 30, $7.5 million was outstanding. Yarbrough Capital was committed to providing up to $650 million for the development and construction of the casino, the document says.
In addition to paying for casino design and development, the Pamunkey tribe has become one of the state's top campaign donors, making more than $2.3 million in contributions since 2020. Headwaters Casino donated $21,000 to Knight's 2023 campaign, a fraction of the $1.1 million he has raised.
Knight isn't the only state lawmaker the city needs to convince to get funding for the storm risk project.
Sen. Louise Lucas, D-Portsmouth, who won her June primary, is expected to become chair of the powerful Senate Finance and Appropriations Committee. Asked during a stop at a polling place on primary day whether she would back the $45 million annual state funding for Norfolk's storm risk plan, she paused.
"It didn’t get out of committee because I wasn’t chair, but we'll think about it," she said. “We’ll think about it.”