Jul 30, 2010 (The Virginian-Pilot - McClatchy-Tribune Information Services via COMTEX News Network) -- VIRGINIA BEACH -- Town Center, the city's recently constructed downtown, fell in value for the first time this year after nearly a decade of growth.

The 10 blocks of office towers, shops, restaurants and residences dropped in assessed value by 4.7 percent, according to records from the city's real estate assessor's office. Citywide assessments this year declined by 6.5 percent.

The Studio 56 condominiums, Cosmopolitan Apartments, Dick's Sporting Goods and the One Columbus Center office building proved to be particular drags to Town Center, with values there dropping by 15 to 25 percent.

The data indicate that even Town Center, which started as a public-private partnership between the city and developer Armada Hoffler in 1999, is not immune from the economic downturn, said Charles Phillips, a real-estate appraiser who recently retired from the City of Virginia Beach.

Beach officials have long touted the increase in its assessed value as a sign of Town Center's success. In 2003, the area was worth $18.5 million; this year the assessor pegged its value at $381.6 million.

The city has invested nearly $84 million into the first three phases of the project. The City Council has agreed to put in another $60.1 million into Phase Four, which is currently stalled as Armada Hoffler secures financing.

The increase in assessed value and real-estate taxes at Town Center and the surrounding area go toward paying off the city's investment into the project.

Beach Finance Director Patricia Phillips said she's not worried about the decline right now.

"For the time being there is sufficient funds to make debt payments," Phillips said. "This is part of the business cycle."

Town Center's initial growth exceeded the city's expectations and allowed Virginia Beach to build a financial buffer for when times got tough, Phillips said.

The Town Center fund has about $2 million in savings, she said.

The tax increment financing district, which includes the core of Town Center and surrounding parcels, will bring in about $6 million in revenue this year, while the city's debt payment is about $5 million, Phillips said.

The decreasing assessments, however, are not a good sign, especially with some buildings falling as much as 25 percent in value, said Beth Allen, a critic who has studied Town Center for the Virginia Beach Taxpayer Alliance. The alliance advocates for lower tax rates.

"It can't be this volatile thing, where we have enormous success when the economy is strong and this plunging down when the economy is down," Allen said. "It's too dependent on the overall economy for the survival."

There is no possibility that the city will default on its debt; officials would find other ways to pay for it, said Vice Mayor Louis Jones.

The debt is ultimately backed by Beach taxpayers. Still, city officials said it would take many years of declining assessments in Town Center before they would worry about how to pay for this project.

"My projections are anticipating a slow growth scenario and we're still in the black," Phillips said. "We would have to rethink that if the world entered a major depression."

Deirdre Fernandes, (757) 222-5121, deirdre.fernandes@pilotonline.com

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Deirdre Fernandes

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