Rao: VCU Health wants to end $56 million payment to Richmond (2024)

Virginia Commonwealth University Health is seeking to terminate a deal that pays the city of Richmond $56 million, VCU president Michael Rao said Wednesday.

The health system agreed to give the city a payment in lieu of taxes, or PILOT, as part of a failed redevelopment project at the Public Safety Building downtown.

State lawmakers have called for VCU Health to end the payments, but Mayor Levar Stoney objected, saying the health system should pay what it contractually owes.

“The answer is yes, we are seeking to pull those back,” Rao said Wednesday.

Rao met with the Richmond Times-Dispatch’s editorial board for a wide-ranging discussion that included the fallout of the health system’s failed plan to redevelop the Public Safety Building, a potential racial literacy requirement, student safety and the future of the university.

Rao, 57, VCU’s president since 2009, oversees a university and health system with more than 53,000 employees and two annual budgets that spend a combined $4.7 billion annually. It’s a job for which he earns about $708,000 a year.

VCU Health redevelopment

In 2021, VCU Health entered into an agreement with the city of Richmond and a developer called Capital City Partners to reimagine the Public Safety Building at East Clay and North Ninth streets for $325 million.

But the deal fell through, and VCU Health paid $73 million to exit.

As part of the contract, the health system committed to pay about $2.25 million annually over 25 years to replace the tax revenue the city would have received from selling the land to a private business. As a state entity, VCU and VCU Health do not pay real estate taxes to the city. Even though VCU Health does not occupy the property, it is still cutting the city a check.

Earlier this year, lawmakers drafted budget language calling for VCU Health to negotiate a termination of the contract. Given that lawmakers and Gov. Glenn Youngkin haven’t agreed to a budget, the language has not been put into effect.

A spokesperson for Stoney on Wednesday referred to the mayor’s previous comments, when he said VCU Health should pay what it legally committed to pay.

A significant portion of real estate within the city generates no real estate taxes. According to the city, one-fifth of its real estate is tax exempt, including state and federal property, churches, city government buildings, schools and other nonprofits. The city would gain $100 million in tax revenue annually if those properties paid the real estate tax. Still, the city services those parcels with water lines, sewer, police and fire departments.

“Just because VCU Health System has had limited responsibility for paying real estate taxes historically does not mean that’s the way it should always be,” Stoney said last month.

Rao declined to address Stoney’s position Wednesday, saying discussions between the health system and the mayor should remain private.

For more than a decade, VCU Health has pursued the Public Safety Building property. But it is no longer interested in building a new dental school there – it has chosen another location. The Public Safety Building will always be a property of interest because of its key location adjacent to the health system campus, Rao added.

Though the university gets a free pass on real estate taxes, it provides many benefits to the city, Rao said. Students and staff who live off campus contribute toward property taxes, restaurant visitors pay meals taxes and large swaths of land have been redeveloped.

“A lot of success the city sees is because of VCU,” he said. “I feel really good about what VCU contributes to this city.”

Racial literacy

VCU’s faculty has suggested requiring all students take a class on race. The discussion was heightened earlier this year when Gov. Glenn Youngkin requested that VCU send its racial literacy curricula to the administration for review.

Rao said he has not discussed the classes with Youngkin, and the governor’s administration has done nothing more than review the class material. Rao is not worried that the governor will try to dictate what students will learn.

“I have not talked to the governor at all about this,” he said.

Rao declined to say if he supports the racial literacy requirement, noting that the decision is the purview of the board of visitors, which is considering the topic. One member of the board, Peter Farrell, said he does not like forcing students to take classes that do not advance their careers.

“It’s money and time we’re taking from them,” said Farrell, who made his comments at a board meeting this month in regard to another class the university requires called Focused Inquiry.

Even if the board strikes down a requirement to take the classes, they will still be available to interested students. Rao said he supports the classes, which he said reflect historical reality.

“I have great faith in our faculty colleagues,” he said. “They are teaching real history, not history that’s been prescribed or revised in any way.”

Safety

Last year, two student pedestrians were struck and killed by cars on or near campus, leading VCU police to begin a traffic safety campaign and write more tickets.

Rao said he appreciates the city’s installation of speed bumps in and around campus – the university does not own the roads that cut through campus, and VCU has no say about red lights or speed limits.

Though the city has made an effort to improve pedestrian safety, Rao wants more. He would like pedestrians to have the ability to change traffic lights by pushing a button, so they do not have to wait to cross the road. He would prefer to see better access to campus via bicycle, and strong access via public transit.

University’s future

More than ever, students want their time in college to prepare them for their careers, Rao said. VCU’s engineering and business schools have grown, while the college that houses humanities has lagged.

While the university has spent months considering how to reposition its academic structure, Rao emphasized the humanities will not be eliminated.

“They’re the thinkers,” he said. “They’re the ones who ultimately can do anything well.”

In a perfect world, every student would receive multiple paid internships before they graduate, he said. Instead of working an internship in addition to taking classes, the internship should provide credits toward graduation.

VCU’s campuses have grown significantly in Rao’s tenure. In recent years, VCU Health built the Adult Outpatient Pavilion and a tower for the Children’s Hospital of Richmond. The university reimagined West Grace Street with new residence halls and built a massive new dorm, the Gladding Residence Center, on West Main Street.

As the city’s real estate fills up, buildings likely will need to be erected higher in the future, Rao said. Plans for a new student union could reflect that reality. The university will be careful to make sure taller buildings fit into the existing landscape, he added.

Rao said he does not spend much time thinking about his personal future. Rao was quite young, 33, when he was named president of Central Michigan University. He joined VCU in 2009, making him one of the state’s longest-tenured presidents.

Instead, he spends more time determining the university’s vision, fundraising and meeting with lawmakers. He frequently considers the VCU’s future, its relationships and partnerships.

“For me, it’s an honor,” he said. “It’s a privilege and I never take it for granted.”