County writes letter to LGC requesting decision on Project Grace by September – Port City Daily | Vette Leader

New Hanover County submitted its financial plans for Project Grace to the LGC last week. Vice Chair Deb Hays has written a letter to the LGC Board asking for a decision on the plan by the LGC September meeting.

NEW HANOVER COUNTY — State Treasurer Dale Folwell is ensuring the board of the Local Government Commission is doing its due diligence before making a decision on Project Grace, which is four years in the making. The state agency that approves local government funding is being asked by a county commissioner to schedule a vote next month.

Vice Chairwoman Deb Hays sent a letter to Folwell after the county unveiled its plans last Tuesday to convert a downtown block into a public-private partnership (P3) with Zimmer Development Company. Folwell, LGC’s Board of Directors and State Auditor Beth Wood listened and asked questions about the plans, which require LGC’s green light to proceed.

CONTINUE READING: State Treasurer: Buyout clause in Project Grace contract, which ties LGC’s hands, among others

Hays asked Folwell to add the project to his approval agenda for his next meeting on September 22. This is the final step before construction can begin, including the demolition of the current library and the Borst Building, located between 2nd, 3rd, Chestnut, and Grace Streets. A new library and the Cape Fear Museum are to be built in its place, which is expected to take two years to complete. It also includes residences and other mixed-use properties to be built thereafter.

On Tuesday morning, Folwell said he had not yet received the letter; nor did he confirm whether he would grant the motion for a decision by the next LGC meeting.

“We are working as diligently and quickly as we can to either formulate answers for the district commission, formulate further questions, develop proposals or put them on the agenda,” he said. “Project Grace has been in the oven for a long time and the fact that it has taken so long should tell your readers that this is a complicated transaction. There is nothing easy about that.”

At last week’s meeting, the LGC board and Folwell requested additional details from county officials in order to make their decision. Questions were asked about how many developers have submitted bids and what the county’s RFP process involved, where Zimmer gets its funding from, the profit margin in the lease agreement, whether the structures would be built with hurricane resilience in mind, and whether the public would be in favour a referendum on obligations to cover development costs.

Most importantly, LGC’s board members have failed to understand why a district in “one of the strongest financial positions in the United States needs to work with anyone,” Folwell said.

Hays told Port City Daily last week that county officials answered each of the LGC’s questions and presented the material “in a thoughtful and thorough manner.” She said it was a productive discussion.

In her Aug. 3 letter to the LGC, Hays noted that Project Grace “was and will continue to be hyperlocal.” The county will enter into a P3 with Zimmer, also based in New Hanover County.

“We believe this project will create space for locally owned businesses to thrive in a vibrant environment while generating new tax revenue for both the city and county,” Hays wrote.

The district will sign a 20-year lease with Zimmer that will cost taxpayers approximately $80 million. Zimmer will oversee construction of the library and museum, as well as a minimum of $30 million for private mixed-use development.

The partnership would “transform the block into a cultural, residential and commercial hub,” according to a comment released by New Hanover County on Friday.

According to internal emails, it’s the first time county staffers have recalled commissioners submitting a unified viewpoint in a comment format, despite having released joint statements on issues such as GenX and with the NC Department of Environmental Quality in the past Chemours correspond .

In the article, the district commissioners expressed their unanimous support for Project Grace and highlighted the benefits to be gained from a P3 model that Folwell called “extremely unique” during last week’s presentation.

District revenue over the two-decade lease is estimated at $11.6 million and includes the district tax from private development, the sale of the southern portion of the property (currently estimated at $2.5 million) and proceeds from 620 parking spaces.

An additional $13 million is expected from room occupancy taxes, sales taxes and city taxes.

The LGC is responsible for reviewing and voting on “part of the proposed development”, the lease. According to the comment, the LGC “must ensure that the lease itself places the county and taxpayers in the best financial position given the parameters of the market and the county’s financial condition.”

State law states that the LGC will approve an application based on five criteria of the proposed plan: if necessary or appropriate; if the amount is reasonable for the intended purpose and not excessive; whether the government’s debt management procedures and policies are good and all debt is managed in accordance with the law; that any tax increases are not excessive; and the proposed bond can be marketed at reasonable interest rates.

During the meeting, Folwell challenged the amended LOI by the county and Zimmer for an included buyback provision. If the LGC rejects the funding plan, the county can still purchase Zimmer’s designs for up to $2.5 million.

Folwell asked if there was “an appetite” to remove that provision, saying he felt the board’s “hands were tied.” He didn’t think the onus should fall on LGC to spend additional taxpayers’ money if the plan were rejected. The county said this was a required part of the agreement and would ensure detailed plans of what the library and museum building would include were already in place.

Liza Wurtzbacher, deputy district manager, said Monday that while the LGC must approve the lease terms, it does not have to approve the MOU. The LGC only approves letters of intent based on four specific criteria related to the length of the contract and the amount of funding involved.

The county’s chief financial officer, Eric Credle, further stated: “[B]Since the LOI is not an asset purchase/lease agreement that extends beyond five years, LGC approval is not required.”

The buyback plan allows Zimmer to recover up to $2.5 million in expenses, or just what the developer has spent to date. The county’s comment confirmed that only what the developer spent would be paid.

“If we were to start fresh outside of a public-private partnership with Zimmer, the county would have to bear the cost of the design and construction plans,” the comment reads. “So this provision is not unreasonable – it just ensures that we can proceed with the project and the plans that we have now.”

In response, Folwell reiterated that including the buyback provision in the MOU was unnecessary and that it “raised a red flag.”

Folwell confirmed that the LGC has no legal obligation to approve the MOU, but it does play a role in its decision-making.

“You don’t need our approval to spend that money, so why put it in there?” he asked. “I think it brings another layer of complexity to an already complex deal.”

Folwell told Port City Daily he was still unclear which law the county follows: “Public-Private Partnerships Act, Angered Bids Act, or Downtown Development Act.”

“[F]or so many statutes flying around here,” he said, “I had it written down and I’m sorry I didn’t mention that they should make it clear what statute they’re operating under. And I’m sure [others] had the same question.”

In many cases, there are provisions that may apply to Project Grace.

The county confirmed that it is guiding its plan based on the statute of the downtown development partnership: “a form of public-private partnership specifically targeted at downtown projects that the county is authorized to use by specific statutes.” “

The BIll 397 home was adopted in 2017 on behalf of Project Grace, which allows the county to conduct downtown development and frees it from the obligation to fund 50% of total public-private facility costs.

Without the P3 model, the county would have said it had no control over what was developed on the southern portion of the block if the land were sold outright. Zimmer has agreed to build a hotel, housing units – including at least 5% workers housing for 10 years – and retail stores.

“We would not have the guaranteed private investments in a set timeframe that will create additional business opportunities, new homes for our hard-working residents, and more accommodations for our tourism industry, which is growing at double-digit rates year on year,” the op-ed said.

The LGC questioned why the county didn’t use a traditional financing method and borrowed the money through a loan process.

“We would lose all of the tax revenue we mentioned that would continue in perpetuity after the 20-year lease,” the op-ed said. “This revenue offsets what it would cost to finance the project and what we would pay through rent; and financially, this model is the best way forward for our downtown block and community.”

If the LGC rejects the budget, the county can request a public hearing. A Hearing Officer will be appointed to chair the meeting and then make a recommendation to the LGC.

“We don’t want to say no,” Folwell said. “But we’re in the business of spelling ‘know’.”

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