WILMINGTON — The Avenue, the 44-acre development coming to Military Cutoff Road, faced opposition from both the public and the city’s planning staff from the beginning but was ultimately approved. A big part of that outcome? A private economic impact study conducted by UNCW for the developer that promised thousands of jobs, millions of tax dollars, and hundreds of millions of dollars pumped in the economy.
The study was performed as part of a contract between The Carroll Companies, the developer of The Avenue, and the Swain Center, part of UNCW’s Cameron School of Business. The study is private, and was not included in the agenda materials when The Avenue came before Wilmington’s Planning Commission and City Council.
The report was referenced heavily by Attorney Michael Lee, who represented developer Roy Carroll and The Carroll Companies during the final hearing before City Council approved the project; the report played a significant role in Lee’s case, arguing that The Avenue would both create jobs and tax revenue directly, and play an indirect role in the economic growth of the region.
From private to public
UNCW Professor Adam T. Jones, who prepared the report, said the report is the property of Carroll Companies and declined to comment, deferring to the Carroll Companies for information. Carroll and his associates did not respond to emails and calls requesting a copy.
(Editor’s note: UNCW Assistant General Counsel Steven W. Miller confirmed that report was private property, citing North Carolina statute GS §116-43.17. Miller also confirmed that the study was requested by The Carroll Companies in late 2017 and that the developer paid the Swain Center $9,500 for the report.)
The report would have remained private, but in August developer Jeff Kentner, president and CEO of State Street Companies, asked Wilmington’s planning staff for a copy.
In an email to the planning department, Kentner said he had met with Mayor Bill Saffo about the Galleria project — a large mixed-use development planned for Wrightsville Avenue — and that Saffo had suggested enlisting Jones to create an economic impact statement, similar to the one for The Avenue.
The city sent Kentner a copy to review — in the process allowing the public to review it, as well. (You can read the complete report as a .pdf at the end of this article.)
The Economic Impact of The Avenue Development
Jones’ analysis focused on three different types of “economic impact” for The Avenue: the direct effect of the project, the indirect effect, and the “induced” effect.
The direct effect represents the more straightforward economic contribution of the project, the part that is easiest to quantify. Jones’ study presented these figures in three ranges, the probable or average estimate – the figures that were cited most often during public hearings — along with a best-case scenario and a low-end figure.
Overall, Jones’ report indicated a significant economic impact from the development: $130 million in “annual value added” to the region, which – as Jones wrote in the report – represents nearly a third of the county’s overall economic growth in the region in the year prior to the project’s proposal.
The report also claims the project will generate $75 million in labor compensation, wages, and benefits, along with 1,800 jobs.
Lastly, and of particular attractiveness to local government, is the generation of $4.3 million in property taxes and $2 million in local sales tax revenue.
Breaking the numbers down: Employment and wages
The economic benefits were discussed in general terms during public hearings, but some residents questioned what a breakdown of these numbers would look like.
Jones’ report does provide a more detailed analysis than just the executive summary.
Take, for example, employment. Jones listed the top ten job sectors impacted by The Avenue.
Many of the jobs created by The Avenue, according to Jones’ report, will be service industry jobs: 230 restaurant jobs, 200 retail jobs, 120 hotel jobs, 45 other retail positions — at least a third of the positions created will be service industry jobs.
Jones’ report also factors in the addition of government employees – including teachers – in its job creation numbers. The report estimates the need for an additional 145 employees in the education system, as well as 10 additional state and local employees.
Building The Avenue is also expected to generate jobs and labor income – touted at over 3,000 jobs and $170 million in wages. The bulk of that is expected to be created between 2020 and 2023, which will involve 2,250 jobs and $126 million in wages.
It’s worth noting that Jones’ analysis includes “the sum of employee compensation and proprietor income” in these labor income figures. In other words, the report includes the estimated income from newly constructed businesses as part of the projected construction-related increase in total wages for the area.
These construction jobs are temporary; by 2023 only 550 jobs will be needed, and by 2025 that number will be less than half, around 250. It’s also worth noting that, throughout Jones’ report, the data “does not distinguish between full-time and part-time employment.”
Only four of the 20 pages in Jones’ report are dedicated to “quantifiable” impacts, like the direct amount of wages and business generated by The Avenue, and the indirect amount of business generated supplying The Avenue (for example, regional wholesale food companies to supply restaurants in the development, local furniture store sales to furnish the 500 apartments, etc.).
The bulk of Jones’ report covers “non-quantified” impacts, including “induced” impact — perhaps most importantly, the “spillover effects to other property values.”
Jones tracks real-estate trends to suggest the possible impact on local property values of building The Avenue. He examines the increase in property values surrounding several mixed-use developments in the years after their construction, including the North Hills project in Raleigh and the upscale overhaul of the South Park Mall in Charlotte.
These are non-quantifiable because, as any researcher will tell you, correlation does not mean causation.
“Caution should be taken in interpreting the data as a causal relationship,” Jones writes, referring to a relationship where A causes B.
Despite this caution, Jones does go on to directly suggest that luxury mixed-use development does increase surrounding property values.
“It is possible that unobserved factors are driving both the quality commercial development and the increase in residential real estate values,” Jones writes. “However, because of the complementary nature of development, it is unlikely that the increased growth in real estate values would be possible without the quality commercial development to support rising residential values.”
Essence of Place
The final section of Jones’ report is entitled “Essence of Place,” and is an argument that the project will attract future businesses to the Wilmington area; Jones’ argues that The Avenue will effectively act as a recruitment tool to advance economic development beyond the city’s current capability.
“Firms choose to locate where services and amenities are available to support their employees and visiting clients and managers: The Avenue, and specifically the Westin Hotel, is a step in this direction,” Jones writes.
Jones does not provide evidence for this claim, other than a list of cities where a Westin hotel has been built. Jones’ report points out that the average per capita income and the average compensation for a job in Wilmington is more than $30,000 below the “Westin average.”
Jones simultaneously admits that building a Westin will not lead to increased income or wages in the area while also arguing that it will “contribute positively” to regional economic development
“It would be inappropriate to conclude that locating a Westin hotel [in Wilmington] will be the catalyst for significant income growth,” Jones writes, but adds, “the hotel is one part of the business service package that will help make the area attractive for firms paying above-average wages.
Send comments and tips to Benjamin Schachtman at email@example.com, @pcdben on Twitter, and (910) 538-2001.