For the last year, the big question looming over the Biscuit Run State Park transaction was how much the state paid for the 1,200-acre former development site. Thanks to documents provided to C-VILLE, taxpayers can finally know—at least for now. While Biscuit Run investors sought $41 million total from the state, they have so far received only $21.5 million.
Investors in the former Biscuit Run development requested more than $30 million in tax credits when they sold the land—an amount that would go a long way to covering a $34.3 million loan. Instead, they received $11.7 million, an amount they are appealing, according to documents.
It has long been public record that the Commonwealth of Virginia paid $9.8 million cash for the Biscuit Run property. Yet Biscuit Run investors, in a limited liability company called Forest Lodge, made the transaction knowing that they would receive land preservation tax credits, which aren’t public record. C-VILLE, however, has obtained a copy of a letter from the state tax department that shows that the investors have received $11.7 million in tax credits.
That’s significantly less than they wanted. Forest Lodge LLC investors—who include developer Hunter Craig as well as Dave Matthews Band manager Coran Capshaw and DMB violinist Boyd Tinsley—requested almost $20 million more. Forest Lodge LLC contended that it should receive $31.2 million in land preservation tax credits, based on an appraisal by Patricia O’Grady Filer of Piedmont Appraisal Company that valued the land at $87.7 million.
Had Forest Lodge LLC received the amount of tax credits requested, the entire purchase would have cost taxpayers $41 million—only $5 million less than Biscuit Run developers paid for the property in 2006, at the height of the real estate bubble.
Land preservation tax credits are transferable, and usually sell for between 70 and 80 cents on the dollar. Investors had fallen behind on a $34.3 million loan managed by First Community Bank, headquartered in Bluefield, West Virginia. With $31.2 million in tax credits sold at 80 cents on the dollar along with the $9.8 million, Forest Lodge would have had enough money to cover the loan’s principal.
However, an appraisal produced for the Virginia Department of Transportation valued Biscuit Run at only $12 million, so the Department of Taxation authorized its own appraisal, according to the letter provided C-VILLE. The tax department appraisal put the value of Biscuit Run at $39 million, and the tax department issued Forest Lodge LLC a reduced amount—$11.7 million in tax credits.
Still, with $20 million at stake, the fight is not over, and the results might not be made public. Forest Lodge LLC is appealing that ruling, according to other documents provided to C-VILLE. An appeal goes to the state tax commissioner, Craig Burns, and the results of such appeals are not public. If that appeal is denied, Forest Lodge LLC could appeal the ruling to circuit court.
Reached by telephone, Hunter Craig offered a preemptive “no comment” and hung up before any questions could be asked. Craig is a local developer, vice chairman of the Virginia National Bank, and a member of the UVA Board of Visitors, appointed this summer by Governor Bob McDonnell.
Even though the state acquired Biscuit Run for $20 million less than investors requested, Albemarle County Supervisor Dennis Rooker, a critic of the Biscuit Run deal (though supportive of parkland generally), still thinks the state made the wrong decision.
“As a taxpayer, I would say that I appreciate the fact that they have not paid as much had they would have paid,” says Rooker. “As a matter of principle, the approach that was taken in this case of having the state use the tax credit program to buy development area land is just simply not wise.”
Two-thirds of Biscuit Run was development area land, and Craig had won approval for 3,100 housing units on about 800 acres. The developers were slated to contribute $40 million in cash and in-kind assets like roads, school sites, and parkland, in addition to the tax revenue the project would have generated. Just because the homes won’t be built there, says Rooker, doesn’t mean they won’t be built—only that they’ll likely get built somewhere less conducive to development.
“I don’t blame the Forest Lodge people,” says Rooker. “They were in a rough spot, and they looked for a solution, and they found a way of turning, from their perspective, lemons into lemonade. I really blame the state, because the state should not allow the program to be used that way.”
The land preservation tax credit program will undergo some scrutiny in the General Assembly this year. Republican Delegate Harvey Morgan has already introduced a bill that would cap the tax credit at $10 million annually for any one taxpayer.