Richmond water crises test city, but growth stays strong

Despite two water utility emergencies in the first half of the year, business leaders in the Richmond area say they are still bullish on the region’s economic growth.

In January and May, the city was forced to announce boil water advisories after service disruptions at its water treatment plant. For nearly a full week at the start of the year, Richmond’s 230,000 residents lacked running water, and schools, offices and businesses were closed for several days. In May, the advisory was lifted after two days, but the second disruption left some residents and businesspeople with shaken confidence in the city’s ability to provide clean, drinkable water.

Henrico and Hanover counties, two of the city’s largest water customers, also were impacted by the disruptions and had their own boil-water advisories in January. Officials from the counties also said the city was slow in informing them of the problem, a complaint echoed by city residents.

Meanwhile, the Virginia Department of Health and a consulting firm hired by the city after the January water crisis agreed that the city had been warned to make repairs and updates to its water treatment system years ago and failed to do so. In short, the crisis was “completely avoidable,” according to the VDH report.

Meanwhile, Richmond Mayor Danny Avula, who took office Jan. 1, has cleaned house in City Hall, bringing in a new director of public utilities and other experienced utilities pros. The mayor has tried to ease residents’ fears about future disruptions in service, as well as mend fences with the counties and collaborate with them on solutions.

Despite all the local worry and anger, economic development officials say that they haven’t seen a negative impact in businesses interested in expanding to the Richmond region.

A recent perception study of the area, for which economic developers were polled around the country, was consistent with last year’s survey, says Michael Ivey, vice president of marketing and communications for the Greater Richmond Partnership, which promotes economic development for the city and the counties of Chesterfield, Hanover and Henrico.

“We’ve seen very positive results again this year, where the likelihood of having greater Richmond on their short list … has actually gone up again,” he says. Officials are still waiting for raw data from the survey, but Ivey says that it’s still a good sign after first runs of the annual survey, which started seven years ago, revealed mostly ambivalent attitudes about the Richmond area.

It was a bit surprising, to be honest, because Richmond received negative national press about the water crisis in The Washington Post and The New York Times, Ivey notes.

Even for businesses that encountered challenges during the outages, there are bright spots.

“It’s frustrating as a business owner that there’s now one more reason that people can root against Richmond,” says Will Correll, CEO and founder of Buskey Cider, a craft beverage company with a cidery and tasting room in the city’s Scott’s Addition district. “But in reality, there’s a lot to be optimistic about.”

The water crisis is just one element next to major economic development projects like the $1 billion Lego Group plant, slated to open in Chesterfield County in 2027, and CoStar Group’s $460 million campus expansion downtown.

“I would say success begets success,” Ivey says. “We’ve had a lot of people moving here, and they’re starting to discover that greater Richmond is an affordable, midsize metro where you can get around fairly easily. It’s hip. It’s got a great food scene, a great art scene, and it’s a wonderful place to raise a family.”

Troubled waters

Still, local businesses are recovering from the water crisis. Chris Tsui, founder and president of Richmond’s EAT Restaurant Partners, says about half of his 12 restaurants closed for several days in January and May. The health department offered guidelines to stay open, but Tsui felt it was too risky for everyone.

It was not an easy choice, he says, as three days’ business equates to about 10% of the company’s monthly revenue, which cuts into profits that could be used to invest in new ventures or capital improvements at existing businesses.

He estimated that the closings impacted about 300 of the company’s workers.

“We still paid our salary folks, of course, and we tried to help our hourlies. But being closed that many days, it affected a lot of people,” he says. “I wouldn’t go as far as saying it affected our ability to pay rent, but it did affect our bottom line.”

Correll, Buskey Cider’s owner, says losing revenue in early January wasn’t as harmful as it would have been during a more active holiday period like the Fourth of July weekend, and he’s fortunate that cider production doesn’t require water as an ingredient.

Overall, it’s helped that people still appreciate the Richmond area, Correll says.

“We’re a pretty angsty city. We get pretty pissed off about stuff,” Correll says. “But I think people stayed remarkably positive, considering that we didn’t have water for a long time and it really wasn’t handled particularly well by the city.”

Anticipating the January outage’s impact on restaurants and other small businesses, city officials partnered with the Metropolitan Business League, a nonprofit association that supports business development and small minority-owned businesses, to stand up an emergency grant program for city-based businesses that suffered during the crisis.

More than 100 businesses received grants up to $5,000 from the program, which was funded by $500,000 pledged by Altria Group and Dominion Energy.

Floyd Miller, the MBL’s CEO and president, says the relief effort, which was limited to eligible businesses located in the city, was similar to programs it managed during the COVID-19 pandemic.

“Most businesses that we talked to during the process have been very thankful for the opportunity to apply and just have something out there that could at least help them during that time period,” Miller says. “I think the city did a great job of communicating that there are resources out there.”

While the emergency program offered immediate help to businesses, the city faces a great deal of work and expense ahead to fix the underlying problems at the city-run water treatment plant just north of the James River on Douglasdale Road.

A consulting firm hired by the state estimates that the facility needs about $64 million in infrastructure upgrades.

Although the city bears ultimate responsibility for the treatment plant, many stakeholders have raised the idea of sharing some of the cost burden with Chesterfield, Henrico and Hanover counties, which have purchased water from the city since the mid-1990s.

Regional discussions

Henrico and Hanover officials met publicly in June to discuss potential plans to improve the resilience of tap water distribution and treatment in their communities. While both localities have contracts to buy water from Richmond, they also have their own utility systems that could be improved to make them less dependent on the city’s waterworks.

About two weeks later, Richmond City Council held a meeting with Henrico supervisors to discuss Avula’s idea of forming a working group to study potential regional solutions.

The mayor says there are two driving principles for his approach to the situation: modernizing the city’s water system to improve reliability as soon as possible, while not letting utility bills swell too much.

He says it’s possible for the city to still manage it alone, but that the process could be more efficient if regional partners work together.

“We have a five-year capital improvement plan. And we’re building out the 10-year capital improvement plan,” Avula says.

“But if we had more investment from the region collectively, if we had more investment from the state, we could shrink the amount of time that it requires to actually achieve that modernization, and we would protect the ratepayers in the process.”

In late August, utility directors and administrators from Richmond and the counties of Chesterfield, Hanover and Henrico were set to meet twice to discuss water infrastructure and security.

“This is where I need some group of experts, this idea of the water advisory group, to come together and actually work out those numbers,” Avula says. “Would it actually get us where we need to get quicker? And would it save the ratepayers money for there to be external investment? I don’t see how there wouldn’t be, but I think that’s what the elected bodies are going to need to see before they can make a decision.”

However, the counties have their own priorities and approaches to the water crisis, which likely would include greater oversight.

At their meeting with Henrico County supervisors in June, Richmond elected officials voiced uncertainty about how much oversight these county customers should have over the city’s waterworks, while county officials were wary of city officials’ guarantees that the major crisis is past.

Henrico Supervisor Roscoe D. Cooper III notes that the county has invested $50 million to expand its own water infrastructure, which includes a reservoir in Cumberland County, a new treatment plant and plans for improved distribution lines to parts of central and eastern Henrico that are currently more reliant on the city’s system.

Cooper says he supports the idea of an advisory group, though.

“It’s important that we have these conversations and not just pull away, because whenever you get into silos, then everybody suffers,” he says. “In the interim, we have to have a presence, we have to be able to see what’s going on. I don’t think we need to just rely on what we’re told.”

For Chesterfield, the matter is not as urgent, since it relied on its own water resources when the city outages occurred, and its county supervisors have not met with city councilors.

“We have informed all the businesses considering locating in Chesterfield that the problem in the Richmond and Henrico water supply did not reduce our ability to supply water to our water customers,” says H. Garrett Hart III, Chesterfield’s economic development director. “I have to give our department of utilities and the board of supervisors great credit for the visionary leadership that has ensured multiple water sources for the county.”

Thirsty data centers

Meanwhile in eastern Henrico, where water service was disrupted in January, the growth of data centers and other development in White Oak Technology Park raises serious issues about consistent water access. Meta, Mondelez and other big players are dependent on it, notes Cooper.

Anthony Romanello, Henrico’s director of economic development, says there’s enough water capacity to meet current demand in the business park, but January’s outage in eastern Henrico causes concerns.

“I think for any business to not have water for an extended period of time is a hardship, and certainly not a situation that we want,” he says. “Given those circumstances, we did everything we could with county utilities to work with them, and we’ll continue to do that.”

Whatever actions officials throughout the region take, business owners say they are hopeful that the localities will work together to maintain a positive business climate.

Tsui says there are many great things about operating restaurants in the city, while noting that neighboring localities have also done a lot to encourage economic development and growth.

“This definitely shines a light on how things need to get fixed in the city. Does it shake my confidence a little bit? I would say yes,” Tsui says. “I don’t know what goes on behind closed doors, but it would improve my confidence if Richmond says, ‘Yes, we can use the help.’”

Greater Richmond at a glance

• Commonwealth of Virginia
• VCU/VCU Health System
• Capital One Financial
• HCA Virginia Health System
• Bon Secours Richmond
• Dominion Energy
• Amazon.com

• Altria Group
• Arko
• CarMax
• Dominion Energy
• Markel Group
• Owens & Minor
• Performance Food Group

• Buttermilk and Honey, American fast casual, buttermilkandhoneyrva.com
• Lemaire, New American, lemairerestaurant.com
• L’Opossum, Modern French, lopossum.com
• Shagbark, Southern seasonal, shagbarkrva.com
• Stella’s, Greek, stellasrichmond.com