WILMINGTON — Wilmington City Council approved another step in the potential purchase of 12.5 acres downtown on Tuesday. If the $70 million purchase goes through, the financing structure would bring tax increase to city residents.
Finance director Jennifer Maready presented a resolution to finance the Front Street campus, which includes the 12-story Thermo Fisher building, a parking deck and two vacant lots. City council unanimously approved the financing structure.
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“This resolution, for the public watching — this is obviously a highly publicized issue — is simply to get the ball rolling should we decide to move forward with the sale?” council member Luke Waddell asked.
Maready confirmed that was correct.
The city is under a tight deadline for Local Government Commission approval — who oversees the financing structuring of deals within North Carolina’s local governments. It needs to vote by early May.
The deadline for the city to buy the building is July 31. It will wrap its due diligence period on purchasing the property in April.
The $70 million contract would come with a 1.5-cent increase in property taxes. The financing would increase taxes from 39.5 cents per $100 valuation, to 41 cents.
“For every $100,000 value of your home, it would be an additional $15 per year added to your tax rate for this,” Maready said.
Maready explained she was able to adjust the potential tax hike down from a proposed 3 cents based on projected valuations from the county tax record office. Also, while working to solidify the fiscal year 2024 budget, she indicated opportunities could arise to shift some money from fund balance and the city’s general fund to debt service.
The $70 million contract would be divided into three limited obligation bonds. One is for $23.8 million over seven years, with the ability to pay it off sooner without penalty.
“With the [nine] properties council has declared surplus contingent on the purchase, as well as the two properties included, we can use the proceeds to pay down this debt,” Maready explained.
On Feb. 21, council unanimously approved declaring nine city-owned properties as surplus. The city plans to sell off the buildings — currently housing various city departments — if it purchases the ThermoFisher campus and consolidates its 15 department offices in the 12-story building.
The second bond would be for $10.2 million and would also be taxable. The third, for $34 million, is tax exempt.
Since the building would include leasing of office space for private use, the IRS requires taxable bonds equivalent to the amount of leased property value.
“We were conservative in estimating 50% of the financing as taxable and 50% tax exempt,” Maready explained.
A public hearing on the financing contract will be held April 18, followed by an LGC vote on May 2. If all goes as planned, the city would close on the bonds July 12 and anticipate closing on the property July 13.
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