LELAND — So far this year, the Town of Leland has approved the appropriation of $1,025,000 in economic development incentives associated with three residential projects.
Each is a free-market residential development — meaning the incentives are not going to non-profits or private developers with stated charitable or affordable housing goals for the projects.
Related: Leland annexes, offers Highway 17 townhouse developer $400,000 in incentive agreement
When people think incentives, it’s easy to assume that means taxpayer dollars going to businesses or developers (sometimes this does happen).
However, Leland is employing an incentive system that avoids using taxpayer dollars.
Payments for three incentive projects this year will be sourced from System Development Fee revenues– fees developers pay to connect to the town’s existing infrastructure. For each project, the town creates a separate fund to collect these revenues. When certain conditions are met, the town will release an agreed-upon portion of the funds back to the developer in the form of an incentive, per each respective development agreement.
In simple terms, it’s a reimbursement process.
Newly-annexed projects receiving incentives appear in the map below:
The projects
Leland examines each project on a case-by-case basis, Gary Vidmar, the town’s economic and community development director, said. Each development agreement is negotiated between the town and private property owner, according to Vidmar.
“No two projects are identical,” Vidmar said. “Accordingly, the terms of each Development Agreement vary from project to project.”
Still, this year alone, a pattern has emerged. Each incentive appropriation is three-pronged: property gets annexed into town; property gets zoned into town; property gets incentive tied to high-density residential development on Highway 17.
In February, the town appropriated a total of $525,000 in performance-based incentives for ERH Investments LLC for the apartment project, Hawthorne Waterside. Hawthorne Waterside will bring 708 apartment units into the town’s tax base, and upon full-build out, will get reimbursed for installing sewer line infrastructure improvements.
A February town memo on the approval stated $525,000 would be appropriated from the General Fund. However, Vidmar said this was an error. Funds will actually be sourced from the town’s Utility Fund, according to an August budget amendment.
Months later, in May, Leland Town Council approved appropriating $100,000 in incentives to Bishops Ridge. Because of stormwater and flooding concerns in the area after Hurricane Florence, the controversial project had been pushed back and tabled multiple times before its ultimate approval.
Bishops Ridge will add 92-single family townhouse units and extend the town’s sewer service area. The project’s developer will be paid $100,000 after sewer improvements (which include a new pump station) are constructed, dedicated, and accepted by the town.
This month, Council approved $400,000 in incentives for a townhouse project being developed by Buster Development LLC. Buster Development LLC plans to bring 123 townhouse units and will be paid upon the town’s acceptance of sewer utilities constructed to service the development.
In each case, Leland estimates how much sales tax and property tax the new development would bring to the town’s tax base upon full buildout. Over time, the town projects it would earn any incentives it offers back, and then some.
“Town Council has determined that these agreements are in the Town’s best interest as these projects will provide numerous benefits to the Town and its residents,” Vidmar said.
Benefits include, according to Vidmar:
- The expansion of public improvements (streets, sidewalks, utilities, etc.)
- Increasing the number and variety of housing opportunities within the Town
- Increasing employment opportunities within the Town
- Increasing the Town’s tax base.
Incentives
Technically, Leland is not offering reimbursement agreements as outlined by specific general statues.
Leland is using different statutes that pertain specifically to a local government’s ability to enter development agreements. For the three projects this year, Vidmar said incentives are based on §160A-400.22, a statute that empowers local governments to enter into development agreements, and §158-7.1, a statute that grants local governments the authority to offer appropriations for economic development purposes.
The town does not maintain internal guidelines or policies for incentives, according to Vidmar. “The General Statutes provide the criteria and parameters of authorized Development Agreements and economic appropriations for development,” Vidmar said.
Recent development agreements that utilize system development fees to fund incentives are the product of a series of collaborations, Vidmar said.
“The Town Council strives to be a good steward of the taxpayers’ money,” Vidmar said. “Council likewise strives to promote the smart growth of the Town.”
‘Not payments for annexation’
At least in the Cape Fear region, incentives for these kinds of projects are not typical.
But, Leland’s growth rate and annexation practices aren’t typical either; the town is likely one of the state’s leaders when it comes to adding voluntarily annexed land to its municipal limits in recent years.
New Hanover County and Wilmington are for the most part, already developed, while Leland existing and new limits are being developed rapidly.
Spokespeople for the City of Wilmington and New Hanover County both said they could not recall incentives tied to free-market residential projects in the past 10 years. New Hanover County spokesperson Jessia Loeper cited Blendin Meadows, an affordable housing project Cape Fear Habitat for Humanity raised funds for to finance utilities at the site.
Wilmington spokesperson Malissa Talbert pointed to city policy passed in recent years that gives preference to development or city property purchase proposals that include affordable housing plans. Talbert said plans being worked out at the former Wave Transit site for a mixed-use development is an example of this policy in action.
Vidmar said incentive payments are not meant to financially entice developers into annexation. “Incentives are not payments for annexation.”
He explained the town has historically engaged in development agreements associated with projects both within town boundaries and recently-annexed properties.
“The Town can only approve Development Agreements for properties located within its jurisdiction, but the economic appropriations associated with the Development Agreements have nothing to do with annexation,” he said.
“The appropriations are negotiated with respect to the proposed project. From the Town’s perspective, the appropriations are negotiated based on both the immediate and long-term benefits to the Town. If the owner does not develop the property as stated in the Development Agreement, the Town has no obligation to pay (nor will the Town pay) the appropriation specified in the agreement,” he said.
Send tips and comments to Johanna Ferebee at johanna@localvoicemedia.com
