Bristol Virginia’s CFO and Assistant City Manager Tamrya Spradlin, left, and City Manager and City Attorney Randy Eads, right, discuss in depth about the city’s debt and what’s next for them.
EMILY BALL, BRISTOL HERALD COURIER
BRISTOL, Va. – While no longer labeled Virginia’s “most financially distressed locality,” Bristol Virginia remains on a tortuously narrow path toward fiscal stability.
City finances remain heavily burdened with general obligation bond debt, while officials must navigate the minefield of resolving and closing its embattled landfill. And, nearly ten years after it opened, the city has yet to realize a penny’s profit from The Falls commercial venture.
With all this as a backdrop, Bristol Virginia leaders are beginning work on the city’s 2025-26 operating budget.
The bottom line, shown in the fiscal audit released in December 2024, reflects an estimated $314.4 million in combined, long term obligations.
The total debt per capita is $18,258 for each of the 17,219 men, women and children who live there — more than double the state average of $7,853 for fiscal 2023.
That includes $129.4 million in general obligation bond debt, an estimated $78.8 million in landfill closure and post-closure costs, $30.2 million in revenue bond debt associated with The Falls phase one, $24.8 million in lease debt for its new elementary school, $23.5 million in other long-term school obligations — mostly employee pension and other costs — and $22 million in pension and other post-employment benefits for city employees.
Unlike 2017, when the state Auditor of Public Accounts deemed Bristol the Commonwealth’s most fiscally distressed, the outlook is far brighter, but the road remains challenging.
“The city, under the direction of council and Mr. Eads [city manager Randy] have done an amazing job of implementing financial policies and – most importantly – following those policies. We have an unassigned fund balance goal that we aggressively pursued. We met that and exceeded that, as we prepare for still more unknowns with the landfill,” city CFO and Assistant City Manager Tamrya Spradlin told the Bristol Herald Courier.
The City Council just reviewed and re-approved those policies at its most recent meeting.
“Our unassigned fund balance is actually healthy but that’s because we are preparing for what is to come,” she said.
“It’s important for people to know we still have financial challenges ahead,” Eads said. “We don’t know exactly what the landfill is going to cost us as we continue to go through these projects. In spring of 2019, I advised council the landfill would cost us more than The Falls ever would and here we are. It has cost us a lot more than The Falls ever will.”
Addressing the landfill Its greatest dilemma remains resolving issues at the quarry landfill that was the subject of 2023 legal challenges by the city of Bristol Tennessee and the Virginia Attorney General over environmental concerns. The city ceased accepting trash — losing that revenue stream — and is continues working to ultimately close the facility.
The city is completing a series of projects, recommended by a Virginia Department of Environmental Quality expert panel and ordered by the courts, which will ultimately cost over $35 million.
Implementation began in mid2023 and, that October, the city borrowed $30.7 million in short-term bonds to help fund the work.
That came as the city was five years into a concentrated effort to reign in spending, refinance and pay down some of its long-term debt expenses.
“The fall 2023 bond debt issuance did put the city precariously close to our legal debt [borrowing] margin,” Spradlin said. “When we closed, we were within $3 million [of the limit], but things changed after that…That’s why we didn’t borrow the entire amount because we couldn’t as GO [general obligation] debt. We’re carrying about all the GO debt we can.”
The state prescribes localities can only borrow up to 10% of the appraised value of all property within its borders.
Last spring, the General Assembly and Gov. Glenn Youngkin approved providing $26.5 million to assist with those expenses, which city leaders say is significant.
“The picture for the city of Bristol would be markedly different but for short-term financing and the state assistance that is coming,” Spradlin said. “We would not have been able to borrow the amount [$30.7 million] as GO debt. We feel the use of shortterm borrowing and significant financial assistance from the state has helped us maintain where we need to be and prepare for the future, because we still have some unknowns.”
The original request was for $35 million but the final amount was negotiated down to $26.5 million.
“I want to thank the Youngkin administration for putting that money into the budget for the city and for Sen. [Todd] Pillion and Del. [Israel] O’Quinn for supporting that…If we did not have it, it would be a drastically different conversation,” Eads said.
The city hasn’t received any of that money but is making its first application to be reimbursed for work that has already been completed.
“We are in the process of putting together our first drawdown,” Spradlin said. “We will submit reimbursements monthly. The first is significant, right at $15 million, because it goes back all the way to 2022. Once they get that reviewed and processed, we think the turnaround time will be a little quicker.”
That $30.7 million borrowing consisted of four-year bond anticipation notes which become callable this fall. The deadline to pay them off is 2027. To date the city has spent $20 million of the $30 million but the largest, most expensive project hasn’t been started.
Last year, the state DEQ agreed to modify the consent decree and push the deadline for application of the liner to December 2026 to allow the waste mass and dirt cover to settle.
“The EVOH liner and the storm water management related to that liner has been delayed because of settlement going on there,” she said. “We believe that all of the bond proceeds will be expended once we get into the EVOH liner. We will not have enough bond money, or state money, to cover all of the expenditures. We know some local money will need to be paid.”
That amount is estimated at between $5 million to $9 million but won’t be known until the city puts the liner out for bid, she said.
Closure and post-closure
The $30 million to $40 million in expenditures expected to fulfill the DEQ projects don’t include any funds for closure and post-closure costs.
Federal and state regulations specify a series of steps and ongoing monitoring once a solid-waste landfill is formally closed. Costs will be incurred annually but the most recent estimate for total closure and post-closure cost for the quarry landfill is $78.8 million.
That closure date also remains uncertain.
“Because of the temperatures right now in the landfill are higher than what they need to be, it will take some time for those temperatures to cool down for us to close it,” Eads said.
Among the steps were an expanded system to draw gas out of the landfill, a system to limit odors escaping and a system to monitor temperature and pressure within the waste mass.
Previous landfill and other debt Prior to the 2023 borrowing, the city’s solid waste operation already carried $34 million in general obligation bond debt, which is now expected to be paid off in 2043.
For years the city carried that debt as a separate account because the landfill was generating income by accepting trash. Once that ceased in September 2022, the debt was shifted into the city’s general fund during fiscal 2023.
As part of its long-term financial reorganization several years ago, the city developed and continues to operate a plan to pay off those and other bonds.
“We are still operating off that debt service plan,” Spradlin said. "The intent is the 2023 anticipation notes that we would pay those off as they become callable over time. In essence we still operate off that original plan.
“If, for some reason we didn’t have the resources to do that, we would have to revisit but now that is still our plan,” she said.
In fiscal 2023-24, the city’s total debt service expenditure, under the plan, was $10.6 million.
Currently the city’s annual debt payments will increase until fiscal 2028 and then remain relatively level through 2043, Spradlin said.
Refinancing, as was done previously, is unlikely in the current economic climate.
“I think interest rates would have to decrease significantly,” Eads said. "We refinanced back in 2018 and then some in 2019 and 2020. Those rates are relatively reasonable and I think it will be awhile before rates would get into an area before we would consider refinancing.
“When we have refinanced, we have not extended the life of the debt, which is key because extending the life of the debt just kicks the can down the road even further,” Eads added.
Potential refinancing is one part of an annual review conducted with the city’s financial advisers Davenport & Company.
The failure of The Falls
Back in 2010, a previous City Council began efforts to establish The Falls commercial center on about 100 acres near I-81 Exit 5. After two attempts at securing tax capture legislation, acquisition and site work began in 2012. The first businesses opened in fall 2015.
Today, city taxpayers continue paying off $47 million in longterm general obligation bond debt related to its acquisition, site work, infrastructure and construction – as part of the city’s long-term debt service plan.
The project cost roughly twice that much and all returns are siphoned in multiple directions.
Phase one of The Falls includes Lowe’s, the now shuttered Cabela’s, Sheetz, Zaxby’s and Texas Roadhouse, which was built on the long-vacant tract where Calhoun’s was originally expected to go.
The first phase of The Falls construction – including $17.9 million to build the Cabela’s building as an incentive — was funded by more than $30 million in revenue bonds paid for initially by investors — not residents.
Under this arrangement, all of the resultant revenues from all phase one businesses – real estate taxes, the local portion of sales taxes and all meals and other local tax revenues generated by those businesses — is used to repay those bonds. The city doesn’t retain a penny.
The bonds were issued through the city’s Industrial Development Authority, but the city has no “legal or moral” obligation beyond contributing the tax revenues.
“There is a shortfall on those bonds right now,” Spradlin said.
Cabela’s opened in October 2015 but closed in January 2020, after being acquired by business rival Bass Pro Shops – which operates a store just down I-81 at The Pinnacle in Bristol, Tennessee.
“Obviously, when we lost the revenue from Cabela’s, it had a negative impact on us being able to meet the bond payments,” Eads said.
The first shortfall in making those revenue bond payments occurred in May 2022, a total of $384,000.
“Over time, with the revenues there, the IDA has been able to decrease that shortfall to $204,000,” Spradlin said.
Texas Roadhouse opened in October 2021, which provided a new revenue stream for those bonds. Currently, one tract from the original phase located Southwest of the former Cabela’s, is all the remains unfilled from the first phase.
“This is all tied to the revenues being produced by phase one of The Falls. If there is a shortfall, any payment made goes to pay the previous shortfall. So we’re going to be behind for a period of time until we get other businesses up there to produce revenue,” Eads said, adding the city remains in regular contact with the bond counsel.
Additionally, as part of its agreement to lure Lowe’s from its former location in Washington County, the city paid the county $2.4 million — $350,000 annually – over seven years as compensation. The final payment was made in fiscal 2022.
Another Falls shortfall
The remainder of businesses at The Falls – Hobby Lobby, Aldi, Firestone, Buffalo Wild Wings, Planet Fitness, Dunkin and others are parts of phases II and III, so those sales, real estate, meals and other tax revenues flow to the city.
However, they are still not generating enough revenue to offset the bond requirements, creating another shortfall paid by the city’s general operating fund, Spradlin said.
That shortfall was $2.7 million during the previous fiscal year, less than the $3.1 million that was forecast.
The shortfall for this fiscal year is expected to be just under $1 million due to “modest” revenue growth and reduced debt service requirements for the year, Spradlin said.
This shortfall has been as high as $4 million in some previous fiscal years.
Falls future
The remaining property at the development remains vacant. Two different hotel projects were proposed for a tract between Texas Roadhouse and the former Cabela’s, but neither has yet materialized. And a proposed residential apartment complex also appears to be dead.
“The one hotel developer planning on going on lot 15 is still in the design phase. It’s still a possibility but, at this time, no ground has been broken so we’re in a wait and see mode,” Eads said.
Blackwater Resources, an Alabama-based firm that established the Hobby Lobby store, proposed then withdrew plans for a large scale apartment complex in the center of The Falls.
“The developer crunched some numbers and, based on what it would cost to build apartments, it probably wasn’t feasible to put the rents at a price point for this region,” Eads said.
Additionally, a restaurant that was expected to locate next to the carwash never materialized.
“Our economic development manager Mack Chapman is working daily with developers to bring other businesses to The Falls,” Eads said, who noted that many national retailers continue announcing plans to close stores.
“The retail market is changing. Unfortunately, I think the retail market was changing in 2012 when The Falls idea first developed,” Eads said. “We’d just come out of the 2008-2009 recession. Online shopping was beginning to pick up; people were shopping differently. I think we’ve seen that trend continue and it makes a difference how retailers move forward with real estate projects.”
Bristol Virginia today
Despite all of its challenges, the city’s practice of saving, building back reserves and paying down debt has helped its bond credit ratings continually improve.
Eads, Spradlin and representatives from Davenport & Company met with the rating agencies in late 2023 to advise them of the landfill borrowing. They came away with a Moodys rating of A2 and Standard & Poors is A-plus.
“They felt our financial position was stable and our cash balance was healthy. We had not started to pay for the landfill projects then. They also knew we were talking with the state about assistance,” Spradlin said.
In March 2017, Moodys rated the city at Baa2 with outlook negative.
“We’ve had several credit rating increases since then. We were unsure what rating agencies would say when we went last fall but they also recognized our unassigned fund balance and our cash balance at that time was healthy,” she said.
They also noted that City Council had raised taxes as a step to increase revenue and help with the city’s cash balance.
As part of its 2025-26 budget process, city leaders are expected to finalize the upcoming tax rate by its first April meeting.
A gleaming new elementary school carries an additional $24.8 million in long-term debt but that is classified as lease revenue. While the city is making those payments, the school system provided state funds to offset some costs and it comes with the closure of three older school buildings.
Hard Rock
Another financial bright spot is the freshly opened $500 million Hard Rock Hotel & Casino resort, which began operating in mid-November on Gate City Highway.
While the city divides gaming tax revenues with every other locality in Southwest Virginia, real estate, meals, lodging, a portion of sales and other local tax revenues have begun flowing into city coffers.
“We’re seeing an increase in meals tax, an increase in lodging tax. All those things add together have a positive impact. Property tax will increase due to the development of the Hard Rock Hotel and Casino,” Eads said. “Overall, property value has increased in Bristol and Southwest Virginia.”
Eads expects it will take at “least a year’s worth of data” to see how those numbers shake out.
“Overall, it means more people coming into the city, which is a good thing. As Hard Rock develops, more people come to the city,” he said.
It also provides employment for about 1,200 people.
While Hard Rock is a beacon, there is no celebration yet.
“We have to be cautious about how we spend our money going forward,” Eads said. “Unfortunately we can’t do the things we need to be doing as a city. If you just think about The Falls operating at a $2 million loss every year; $2 million goes a long ways that could fix up parks, hiring more employees, go to things that actually benefit the citizens of the city. We’re just not in a position to do a lot of things we would love to do.”
dmcgee@bristolnews.com — Twitter: @DMcGeeBHC