PHOTO: City Hall (copy)

Fredericksburg has come up with Plan C for funding construction of Gateway Boulevard, which the city has long wanted to see built across one of its few remaining large tracts of undeveloped land.

The roughly two-thirds of a mile stretch of blacktop would connect Cowan Boulevard and State Route 3, and boost the city’s chances of attracting what could be the largest Veterans Administration outpatient clinic in the country to the approximately 90-acre property.

The city has tried and failed to get either state or federal money to build Gateway Boulevard for several years. Now city officials plan to work out a deal with Hylton Venture LLC, which owns the property. It is a subsidiary of Hylton Group in Dale City.

City Council voted 6–1 Tuesday to approve a nonbinding letter of intent that lays out a plan for negotiating a performance agreement with Hylton Venture over the next 120 days. It calls for the company to design and build Gateway Boulevard as a four-lane, divided road.

The city would use tax revenue above the approximately $205,000 a year the property is already generating in real estate taxes to pay for the project instead of borrowing money to build the road itself. That approach is called tax increment financing, or TIF for short.

Bill Freehling, Fredericksburg’s Department of Economic Development and Tourism’s director, told City Council that the road is estimated to cost $16.5 million, which does not include any improvements that would need to be made to Cowan or Route 3. If the VA clinic is built on the Hylton Tract once the road is completed, the city would get about $1 million in taxes, according to an analysis done by Renaissance Planning last year.

The city would pay Hylton Venture back via an annual appropriation to the Fredericksburg Economic Development Authority, which would then pay the Hylton Venture LLC up to a negotiated amount. The number of years it will take to repay Hylton will depend on market conditions, but both parties would seek to have the total repaid as soon as possible.

State code allows City Council to make appropriations of money to the EDA for the promotion of economic development. EDA members unanimously approved the LOI on Monday, and Hylton Venture has signed on as well.

“It’s long been in the comp plan to build this road,” Freehling said. “It would also certainly open the development of the Hylton property, and we think it would significantly advance at least three City Council priorities, including making the city an employment epicenter with the jobs and the development that would come with this land.”

The other priorities would include providing multiple modes of transportation because Gateway Boulevard would have a trail on one side and sidewalk on the other, and would figure in plans for the city’s proposed third fire station, he said.

Hylton Venture is seeking to market the property for development as a home for the U.S. Department of Veterans Affairs’ proposed 400,000- to 500,000-square-foot outpatient clinic and other potential users such as data centers.

The Department of Veterans Affairs began advertising at the end of 2017 that it is seeking “expressions of interest” for outpatient clinic space in an area stretching from Stafford County to Spotsylvania County, mainly along the Interstate 95 corridor. The clinic would be built by a developer and leased to the VA.

Developers, brokers and landowners in Stafford and Spotsylvania also are competing for the clinic, which VA spokeswoman Glenda Powell said in February is expected to bring more than 300 jobs in its first year of operation and grow to an estimated 550 in 2026.

It will replace the two undersized community-based outpatient clinics in the area, enhance and expand existing services for veterans and provide new specialty care.

The Hylton Tract meets the VA’s criteria for the clinic because it is close to both I–95 and Mary Washington Hospital, as well as restaurants, retailers and hotels. City Council paved the way for the property to be eligible about a year ago by amending its zoning to Planned Development-Medical Center.

That zoning requires that a developer get a special use permit to build a data center on the property, which Hylton Venture would now like to see changed to a by-right use.

Developers are increasingly looking for data center sites in the Fredericksburg area, and Fredericksburg Regional Alliance President Curry Roberts told council members during a work session Tuesday that developers would view having to apply for a special use permit as a hurdle and might look elsewhere.

The alliance, a public/private economic development marketing partnership for the region, has been promoting the region to data center developers for several years. They’re an attractive target because data centers generate high-quality, high-paying jobs, and don’t require a lot of support services such as roads and schools.

“No question, we’ve got to think outside the box, because we’re not going to get any state funding,” said Council member Matt Kelly. “Whether the VA clinic comes or not, we need that road to open up that very valuable area of land. With a TIF, we’re not gambling with any money.”

Council member Jason Graham, who voted against the LOI, disagreed.

“I do not want to see us start throwing away potential revenues just because we’ve come to a hiccup on seeing something developed in this current environment,” he said.

Graham added that he is concerned about the impact Gateway Boulevard could have on traffic, how “auto sprawl” could hinder the city’s development, and the possibility that Hylton Venture could come back and pressure the city for more incentives if development doesn’t occur.

Council member Billy Withers said that he realized this proposal is the only way the road will be built, but worried that the entire increase in revenue generated would go into paying Hylton back. He said that he wants a guarantee that the city will reap some of the rewards.

Council member Kerry Devine said that she shared Graham’s concerns about traffic, but added that it may be the price the city has to pay to reach its goal of becoming an employment epicenter. She then asked what would happen if neither the VA clinic or a data center built on the Hylton Tract.

Freehling said Hylton Venture is assuming the risk, and the city would continue to retain the current level of tax revenue.

Mayor Mary Katherine Greenlaw said the property is one of the city’s best assets for commercial development, and is likely to be developed at some point. She said Hylton originally purchased the property with the intent to bring residential development there, but that never happened due to various factors, including the economy.

“I’m so glad it didn’t,” she said. “It is prime commercial property along I–95, and we should make good use of it.”

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Cathy Jett: 540/374-5407