NEW HANOVER COUNTY — While the state-appointed authority to oversee financial transactions for North Carolina governments approved two projects Tuesday, the treasurer and chair of the board voted against both.
READ MORE: Is $68M a fair price for city purchase of Thermo Fisher building? LGC hears city’s pitch
The move left some local New Hanover County and the City of Wilmington officials thinking the region has a target on its back.
The Local Government Commission rubber-stamped $25 million in limited obligation bonds for multiple projects, including an $11 million building purchase for the county to be passed to Cape Fear Community College.
The state entity also signed off on $70 million in limited obligation bonds to the city to purchase the Thermo Fisher building and downtown campus.
State Treasurer Dale Folwell — also making a 2024 governor run — had a lot of criticism about both deals. One city council member, Luke Waddell, said the treasurer was overstepping his authority.
“Treasurer Folwell has wielded his power inappropriately, particularly in his dealings with Wilmington and New Hanover County,” Waddell released in a statement after the meeting. “For unknown reasons, our community has drawn his attention — perhaps because of our success — and now a Raleigh politician is trying his hardest to knock us down to size. This kind of behavior is often displayed by bullies who seek to diminish others.”
In response, Folwell told Port City Daily he starts each meeting with a clean slate.
“I don’t come into these things with any type of questions where I have some assumptions about the answers,” Folwell said. “I come into these hearings with the vision to see what I’m seeing, humility to listen to what needs to be heard and courage to ask questions that need to be asked.”
During the meeting, Folwell said he was “still very uncomfortable with the price” of the Thermo Fisher campus, the fact that the city didn’t have a buyer’s agent advocating on its behalf, and expressed his concern over conflicts of interest in the deal.
“There’s a lot of swirl going on in New Hanover County and Wilmington,” Folwell said at the meeting.
He has been particularly disagreeable toward the city and county over recent dealings, though has not denied any of the city’s financing.
The LGC has, however, challenged the county to rework its deal on the public-private partnerships of two projects: the new government center and Project Grace.
With both, Folwell said the county’s triple-A bond rating — meaning it can borrow at “the lowest interest rates” in the state — made him question why third-party developers were involved.
Folwell told Port City Daily the “drama” all started with the county’s new government center, a process which began in 2020. The new center opened in March this year.
The LGC forced the county to change its initial deal as a public-private partnership, saving what Folwell said was “$20 million for taxpayers.” Instead, the county decided to issue bonds.
“[W]e’re getting criticized for something the county could have figured out with a crayon on the back of a napkin,” Folwell said on a call to Port City Daily Wednesday. “But then it just goes on and on from there at every turn.”
Though the LGC didn’t approve or deny the financing structure of Project Grace, which had the county paying back a developer upfront construction costs over 20 years, it lacked a second for a motion to move forward. The county was forced to change gears.
As a result, New Hanover has entered into a new partnership with Cape Fear Commercial, which puts ownership of the combined library and museum in the county’s hands at the onset. County officials have touted multiple times the new agreement and financial structure should be “more favorable” to the LGC.
“What’s so discouraging is the fact Wilmington and New Hanover County have the opportunity and potential of being a beacon in terms of local government, in terms of transparency, competency, governance and rooting out all conflicts of interest,” Folwell told PCD.
Folwell started off Tuesday’s conversation — after encouraging everyone to “grab your popcorn” — asking the city to consider partnering with the county on a new space for the library and museum it plans to build.
City manager Tony Caudle told the LGC he had approached the county about Thermo Fisher, instead of purchasing the Bank of America building to house Cape Fear Community College programs, but it was already nearing closing. However, discussions had not arisen between the two entities regarding the library and museum, though Caudle indicated he would ask.
Waddell said Folwell is overreaching into decisions local governments should be making.
“It is the local communities, not the state government, that possess the knowledge and understanding needed to act on specific local issues,” he said. “This is precisely why we have local elections.”
Waddell continued to note the LGC’s role is facilitating financial needs and stepping in when a government faces challenges.
City leaders went to the LGC on May 2 about Thermo Fisher, assuming a vote would be made; the board heard the city’s presentation and lobbed questions for over an hour. LGC spokesperson Dan Way said it was intended to be an informational presentation only.
According to an email obtained by PCD, the city reached out May 17 asking if it can expect a vote June 6 and was told “there were no updates at this time.”
“Unfortunately, Treasure Folwell has twisted and politicized the Commission’s narrow role, targeting Wilmington and New Hanover County directly,” Waddell said. “They have demanded unwavering obedience and submission, possibly because we dared to assert our right to self-governance. Treasure Folwell’s actions have needlessly (and I believe purposely) complicated our task at hand.”
Waddell is not the first representative to blame the LGC for project “complications.” When Project Grace was not approved, commissioners said it was due to the LGC postponing a vote for so long it made the process more difficult and cost more in the long run. The new deal has them paying $12 million more for construction due to rising inflation, according to chief financial officer Eric Credle.
Folwell voted “no” to each of Tuesday’s deals. Yet, both items still passed: the city’s Thermo Fisher building purchase in a 7-1 vote and the county’s reimbursement for the Bank of America building in a 6-2 vote. State auditor Beth Wood, who sits on the commission, had to recuse herself from both due to a conflict of interest, she said.
“I am the treasurer and chair of the LGC and I make no apologies for: A) doing our jobs, and B) challenging assumptions and trying to ask the right questions to protect the taxpayers of those communities,” Folwell told PCD.
When asked if the LGC and Folwell personally receive more complaints or resident feedback regarding New Hanover County and Wilmington, he said it was a “horse race” among them and Elizabeth City.
During the meeting, only two people called in during public comment — both inquiring about the Bank of America building purchase.
‘Concerns are still there’ with Thermo Fisher deal
The city is still in its due diligence period on the $70 million purchase of the 12-story Thermo Fisher building on North Front. The 12.5-acre campus comes with two adjacent vacant parcels and a 100-space parking deck.
Currently only occupied by Thermo Fisher, the building would allow the city to consolidate multiple departments currently spread out around town, in turn streamlining services.
The city plans to occupy five floors — originally the top ones, but as of Tuesday city manager Caudle told the LGC he was not sure which levels. The remainder will be leased out to Thermo Fisher on two floors and other businesses and organizations not yet announced.
Folwell questioned the price tag, especially since the city did not have a buyer’s agent involved in the transaction. The city found out about the property through the open market and contacted the seller’s agent, Cape Fear Commercial, Caudle responded.
“It’s important to understand, the only reason this building is even on the market is because corporate America is not showing up to physically work in buildings, so in some respects Wilmington may be the only person to ever, ever, ever have an interest in this building,” Folwell said.
He added he didn’t think anyone within 200 miles could really use that much space — 370,000 square feet. He also expressed concern if Thermo Fisher was off the market, it would take away the opportunity for a business looking to relocate to Wilmington to purchase it.
Caudle said economic development agencies have indicated a “world-class headquarters” would likely not move to the area “because of access to and from air,” and that other class-A buildings are still available.
The due diligence period is slated to expire at the end of June, when the city will lose its $500,000 deposit, should it decide against the purchase. Council still has to vote to approve the purchase, but funding has been allocated in the fiscal year 2024 budget.
Folwell questioned if one member of council should be allowed to vote. Council member Charlie Rivenbark is listed as a senior vice president of Cape Fear Commercial. Rivenbark cast a vote on approving the deposit for the purchase contract in January.
“How does the city to allow someone like that who works for the company representing the seller and there’s no buyer’s agent, to even vote on that at all?” Folwell asked.
Rivenbark assured the city he is an independent contractor and stands to gain no financial benefit from the property’s sale.
While Folwell pressed he still should have recused himself from the vote, Caudle explained the statute doesn’t require it unless a financial interest is involved.
Multiple LGC members — Mike Philbeck, John Burns and Nancy Hoffmann — agreed.
Philbeck said, according to the rules, he’s not even sure Rivenbark is allowed to recuse himself, as he has an obligation as an elected official to vote.
“He has a duty to vote on the issue,” Caudle said. “Many times board members will recuse themselves simply because of the appearance of impropriety.”
If the vote is approved, the city plans to sell off surplus properties it currently occupies. Folwell asked specifically about using an upset bid process and asked not for a “bureaucratic” answer but a “common sense” one.
“We’re built on the principle of sunshine and do everything in our power to get the maximum amount of return on the sale of those properties,” Caudle explained. “It’s crucial, not that we need the money back into our fund or to make the model work, but we believe it’s imperative to get top dollar for those pieces of property.”
The city plans to do a sealed or open bid process, depending on what each property is most suited for, he added.
While the Thermo Fisher building would not be included in future tax collections once city-owned, the city’s surplus nine buildings would come back on the rolls once sold.
“My concerns are still here,” Folwell said before the vote.
It passed 7-1, Folwell dissenting.
By Tuesday night, city council voted to approve moving forward with the purchase, slated to close in July.
Mayor Saffo congratulated the staff and the city manager for representing the city at the LGC meeting and making the deal happen without a tax increase.
“Mr. Caudle was the quarterback on this one today,” he said. “He was Tom Brady.”
Ahead of the unanimous vote, Rivenbark read a statement addressing the LGC’s concerns from the meeting. He disclosed he met with city attorneys, who assured him there was not a conflict of interest under North Carolina law.
“I’m an independent contractor with Cape Fear commercial, and all of my compensation comes from transactions in which I am personally involved. And I am not personally involved in this one,” Rivenbark said. “It is my duty as a member of this council to participate in the consideration of this matter and to vote on it. Let me say one more thing — I just want to make one thing clear to council and to the citizens here and the ones watching at home because it is important to me and the people I work with at Cape Fear Commercial that there is never any question about my integrity as a public official or about the integrity of my colleagues at Cape Fear Commercial.”
Legalities of the CFCC building
Also on Tuesday’s LGC agenda, the county sought approval on bonds that would cover multiple projects, including for park improvements, building upgrades, replacement of a law enforcement facility and vehicle purchases.
The state board questioned only one though: the purchase of the Bank of America building downtown.
The county closed on the property April 13, purchased out of its fund balance for Cape Fear Community College. It is asking for the bonds to reimburse its fund balance.
LGC member Paul Butler was concerned the purchase of the building had not come before the state entity prior to the county doling out funds for it.
“Now you’re looking at a matter of a term called ‘reimbursement,’ which I have not seen that word used on projects since I’ve been on the LGC,” Butler said. “It’s a little like I’d rather ask for forgiveness than permission.”
County manager Chris Coudriet said it was “common practice” — which county’s bond counsel Rebecca Joyner agreed with. The county uses cash liquidity to buy large assets with the expectation of financing it and reimbursing its funds.
The commissioners’ policy is to retain 18% to 21% in unassigned fund balance, which Coudriet called “good financial practice.” However, he said if the LGC expects a different practice, he would be open to guidance.
Folwell said 21% fund balance is “below the state average.” According to the LGC, in fiscal year 2019, municipalities in North Carolina averaged a fund balance available of 46% of annual expenditures.
“It’s the policy of the board,” Coudriet said. “We do everything we can to retain at least 21%. And any amount that accrues over goes to pay for other capital and capital outlay on an annual budget.”
One of the main issues surrounding the deal came from public comment by Wilmington resident Neal Shulman. He said a state general statute calls for schools to be funded through state appropriations or a voter referendum.
“They didn’t do that,” he said. “They used operating money; that in itself is fraud and embezzlement.”
On a call with PCD Wednesday, Shulman said he spoke with two attorneys and the UNC School of Government about the building sale and the county’s proposal to be reimbursed. “Each said it should have never happened,” Shulman said.
He would not share their names for clarification.
“It scared the living shit out of the CFO, county manager, county attorney,” Shulman said of his comments at the meeting. “They didn’t know what to say.”
Joyner responded on behalf of the county during the meeting.
“I’ll just say the county has the authority under [general statute] 168-20 to issue obligation bonds, which is the authority that money comes from,” she said.
Shulman immediately shot back.
“It specifically says ‘schools,’” he said, before Folwell closed the public hearing.
The county pointed PCD to general statute 115D-33: “Notwithstanding any present provisions of this Chapter, the tax-levying authority of each institution may at its discretion and upon its own motion provide by appropriations of nontax revenue, tax revenue, or both, funds for the support of institutional purposes as set forth in G.S. 115D-32; but nothing herein shall be construed to authorize the issuance of bonds without a vote of the people.”
State auditor Wood, even though she didn’t vote, asked about the legality.
“Can you really approve something if you don’t know if it’s in compliance with the law?” she asked.
LGC attorney Cindy Aiken said the board is not liable for voting on a debt transaction not in compliance with the law; the responsibility falls on the municipality seeking the financing to ensure it’s legal.
The deal was brought to the county by Cape Fear Commercial.
“Now we know Cape Fear Commercial got a percentage of the Bank of America sale, Cape Fear Commercial will get a percentage of the PPD building, and the person behind the wheel of Project Grace — again Cape Fear Commercial,” Folwell said to PCD.
The building purchase was delayed due to an ongoing lease for 14 surface lot parking spaces being handled by the courts.
“We wanted to secure the entire block where the building sits, but we weren’t able to reach an agreement, so there was a delay as it went through court proceedings,” Coudriet explained. “The board decided to carve out [that property] and has first right of refusal to go back and purchase those.”
The Bank of America Building will be renovated, to the tune of an estimated $14 million, and used by CFCC to expand its nursing program and increase other allied healthcare courses.
Coudriet said CFCC is graduating about 100 nurses per year, “far short of what the region and community needs.” Commissioner chair Bill Rivenbark said Novant has indicated it needs 1,000 nurses “right now.”
When asked how many nurses the community had currently, no one knew the answer.
READ MORE: County’s building purchase for CFCC is aimed at the nursing shortage. Here’s how it could help.
The college will go through the design process needed to upfit the building for its classes. It will then come back to the county with actual costs for the work, which will take place in stages over several years.
Folwell questioned the condition of the building, claiming a law firm recently left due to water leaks and environmental issues.
The county’s chief financial officer Credle said it was the first he heard of such issues and pointed out a building assessment reported the structure in good shape.
Folwell wanted to have two separate votes: one for the CFCC building purchase and one for the remaining bonds; however, they are lumped into one.
“I’ll be voting no to the whole thing,” he said.
It passed 6-2, Folwell and Butler voting against.
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