Tuesday, March 21, 2023

Cape Fear Habitat for Humanity: Wilmington’s cost for Castle Street project limited to land donation, not $1 million

A rendering of what the mixed-use development could look like at Castle Street (Port City Daily/Hipp Architecture)
A rendering of what the mixed-use development could look like at Castle Street (Port City Daily/Hipp Architecture)

City staff, and Mayor Bill Saffo, both expressed concern over the financial aspects of proposal, but it seems some of those concerns are based on misleading figures.

WILMINGTON — When the Wilmington City Council announced it would be issuing a request for proposals for the redevelopment of the former Wave Transit property located off Castle Street, expectations were high.

There was a fair amount of excitement and buzz surrounding the real estate — and plenty of supposedly interested parties — so, when only one development team submitted a proposal, it came as a surprise. There was initial hesitation from city staff as well as Mayor Bill Saffo, but if you ask the team behind the proposed Castle Place, it’s exactly what the city asked for.

The project would consist of affordable housing, retail, and office space, but hesitation from the Mayor and staff was apparent on Tuesday, mostly because the project would cost the city money instead of generating revenue.

But just how much would the project actually cost the city?

Last week Mayor Bill Saffo voiced his hesitations regarding the project, claiming during a council meeting that the city would be investing about $1 million into the development as opposed to making money off it — but those figures are not exactly accurate.

Steve Spain, executive director of Cape Fear Habitat for Humanity, has offered some clarifications on some of the concerns of local leaders. During the City Council meeting, elected leaders agreed to give the development team more time to iron out funding and other potential issues and bring it back for approval (or denial).

“I think their concerns are based on the amount of city investment they think is involved, not any lack of enthusiasm for the project itself. Fortunately … some of their assumptions about costs to the city are incorrect — although it should be noted that the $1 million figure originated in our response to the RFP under a section entitled ‘Requests of the City.’ The partners in the project will use the time between now and the August meeting to clarify what is expected from the city, as well as firming up other financial commitments,” Spain said.

Somewhat misleading numbers

According to a city presentation, the total cost to the city would be more than $1 million — but that is not funding coming straight from the city’s general fund.

The first part of the cost would be the donation of the property to the development team which is valued at $390,000.

“Our proposal does call for the city to donate the parcel, valued at $390,000. That donation should be seen as offsetting the cost of the environmental remediation ($190,000) and contributing to the affordability of the residential units ($200,000, or $10,000 per unit). This amounts to a very good ‘bang for the buck’ scenario from an affordable housing perspective, and it also reflects environmental remediation expenses the city would incur were it to reuse the property itself,” Spain said.

It’s also worth noting that the city had already agreed to donate this property more than 10 years ago to a different group that never came forward with a plan for the land.

The next ‘cost’ to the city would be in the form of HOME funding provided by Housing and Urban Development (HUD). These are funds that are awarded on a competitive basis and have to be used for housing purposes. That estimate is $450,000 — but again, this is not money coming from the taxes paid to the city by residents.

“HOME funds are provided by HUD to the city for specific housing-related purposes. They are awarded competitively to projects that meet HUD’s criteria. Since City Council can’t direct that HOME funds be used for the project and any HOME funds available at the time of the project will be awarded on a competitive basis, the HOME funds mentioned in our proposal should not be considered as part of the city’s investment. Habitat will be providing sources of backup funds in case HOME funds are not awarded to the project,” Spain said.

The property itself and the buildings currently on it are not in the best condition and initially the group had requested the city pay for environmental costs to clean it up but has since told the city it would pay for these costs itself.

“The partnership has already informed city staff that it will absorb the estimated $200k in environmental cleanup costs, (due to the need for remediating asbestos in the roofs of the existing building and surface soil contamination from the above-ground fuel tank), though the original proposal did ask for the city to contribute to those costs,” Spain said.

It was suggested at the council meeting that if other groups would have known that the city would be putting up money for the project they would have received more proposals but Spain disagrees with this assertion.

“Some concern was expressed by city staff and Council that a new RFP should be conducted, as other parties would have responded had they known that ‘$1 million’ in city support was available. As demonstrated above, the only city investment is the value of a property that it had already given away once and is probably no longer carried as an asset on its books,” he said.

Also, everything was conducted within the limits of state law and was available to anyone responding to the RFP — others simply chose not to submit proposals.

“That investment was available to anyone responding to the initial RFP which required applicants to state under which authorizing statute the property would be conveyed from the city to the applicant, listing those methods available as: NCGS 158-7.1; NCGS 160A-279; and NCGS 160A-457. Our proposal sought conveyance under NC G. S. 160A-514 and 160 A-279, which allow the city to convey the property at any price (including no cost) to a nonprofit for a public purpose. Any other qualified applicant could have chosen the same method of conveyance,” he said.

Ultimately the development team has a few more weeks before it will have to bring the proposal back to City Council and Spain is confident that they will be pleased with the plan once it is complete.

“I believe that the city council will be very happy with the refined proposal that they will see at their August meeting. It will provide the kind of mixed-use, work/live/play development that will be an asset to the neighborhood and provides 20 units of much-needed high quality, affordable housing. And it will be clear that the city’s investment is limited to the donation of the under-utilized and neglected parcel,’ he said.

“In fairness to the City Council, our original proposal was not as clear as it could have been about the cost to the city (and we discovered after submission that we could absorb the remediation costs). In fairness to us, the time to prepare the proposal was less than 6 weeks and called only for a concept, not a fully detailed plan,” Spain concluded.

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