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Wednesday, May 29, 2024

Wilmington taxpayers are putting over $25 million into Riverplace. Where’s the money going?

Artist rendering of the River Place development, currently under construction. Mellow Mushroom is the second confirmed restaurant tenant in the project. (Port City Daily photo / Courtesy Cape Fear Commercial.)
Artist rendering of the River Place development, currently under construction. (Port City Daily photo / Courtesy Cape Fear Commercial.)

WILMINGTON — The City of Wilmington’s public-private partnership for the development known as River Place has been touted by elected leaders as an innovative project that will benefit residents and visitors alike.

From restaurants to retail, office space to residential, the development will have a little bit of everything. But what exactly are taxpayers pitching in for when it comes to the project?

The city first agreed to a Purchase and Development Agreement (PDA) of approximately $75 million with a city input of $19 million, with the rest coming from East West Partners, a private company. But in 2017, before construction had even commenced the price of the project jumped nearly $8 million; city council later voted to increase the city’s maximum input to $24.2 million. Currently, the city’s investment is $25.6 million, including $2 million from the city’s capital improvement fund for work on Grace and Chesnut streets.

The project site is located at the now-demolished Water Street Parking Deck, which was in poor shape prior to its demolition.

According to the city’s website (which has not been updated to account for project changes and cost increases), when River Place is complete, the project will consist of:

  • “25,633 square feet of commercial space including retail shops and restaurant and bar space, primarily on the ground floor
  • Approximately 171 residential units (for sale and/or lease)
  • 403 parking spaces, a minimum of 174 [later reduced to 168 after cost overruns] of which will be reserved for public use. The city’s cost to construct the new parking facility is estimated at $19.7 million, not to exceed $20.7 million [later increased to over $25 million]
  • Residential units will ‘wrap’ the parking deck on the Water Street side, masking view of the parking from Water Street
  • The facility will not exceed current zoning height restrictions of 132 feet”

But as the development is a public-private project, the public-funded portion of the project is to cover the costs of the parking deck demolition and construction of the new deck.

“To be clear, the City’s investment in the project is strictly to cover costs related to the demolition of the Water Street Parking Deck, reconstruction of the new parking deck and its 168 public spaces, and the opening of Chestnut Street between North Front Street to Water Street,” Margee Herring, a public relations spokesperson representing East West Partners, wrote to Port City Daily in March 2019.

Similarly, Deputy City Manager Tony Caudle explained the city’s proposed costs in 2016.

“Mr. Caudle stated that the City will be responsible for costs including all
demolition, on-site utility relocation, a portion of the foundation associated with the deck; deck construction; access to and from public areas, and adjacent street enhancements,” according to City Council minutes.

Despite saying the developer would bear the costs for the Bijou Park extension, it appears the City of Wilmington is paying for a portion of that.

He also explained what the developer was responsible for.

“He noted that the developer’s cost includes residential and commercial construction including a portion of the foundation; Bijou Park extension; and third-floor public plaza area,” he said.

Yet, when you look at a later presentation regarding the major changes in city costs, the very first item is for the Bijou Park extension (the city would end up owning the area, which it intends to turn into a public park, however it had to shift hundreds of thousands of dollars around to pay for it).

Price per space

The breakdown of average cost per parking space as broken down by WGI ‘s Parking Solutions division. (Port City Daily/WGI)

The city has agreed to spend more than $25 million for the project in taxpayer money for River Place.

If you take the 168 spaces Herring refers to and divide that by $20 million it comes out to roughly $120,000 per public parking space. However, it is not entirely accurate to do so since the demolition of the previous parking deck as well as the opening of Chestnut Street was also included in the $25 million-plus city portion of the project. The demolition cost was estimated at $370,215 in the construction budget presented to city council in August 2017. Reopening Chesnut Street was part of the $2 million capital improvement package.

By Caudle’s own presentation, a standalone parking deck would have cost the city significantly less money to build. However, it is worth pointing out that while the costs are seemingly high, the city will make money through taxes, the rental of parking spaces, and the sale of the air rights.

“He [Caudle] gave a breakdown of the value of the proposition, estimating that construction of a standalone parking deck would cost about $12 million today. He pointed out that the majority of the debt on the $7 million overage of this project could be covered by revenue from air rights, ground lease and property taxes,” according to meeting minutes.

But as time goes on and prices change due to inflation, the average cost per parking space for a parking garage is around $20,000 according to a national design firm for public infrastructure, WGI.

“As of March 2019, our statistical data indicates that the median construction cost for a new parking structure is $21,500 per space and $64.77 per square foot, increasing 5.1% from March 2018 when the median cost was $20,450 per space based on our historical database,” according to a WGI report.

At this rate, adjusted for inflation and the 2019 market, the 168 parking spaces would cost $3.61 million to construct.

It’s worth pointing out that Caudle’s estimate appears to be for a deck containing around 400 spaces, the same number as the River Place project — but all the spaces would be public. This estimate would be on the high end, $30,000 per space, but closer to the industry averages reported by WGI. A parking deck with 168 spots, the same amount of public spots in the River Place project, at that same rate would be around $5 million.

As construction nears completion in the new year Port City Daily will continue to follow the project and all of its costs by requesting purchase orders, change orders (budget adjustments that fall under the threshold for council approval), and more.

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