Friday, April 19, 2024

Leland offers soon-to-be annexed D.R. Horton development $140K in incentives

The Town of Leland is offering developers of the D.R. Horton project Juniper Creek off Old Fayetteville Road a combined $140,000 in incentive payments to complete 48 single-family homes in phase three. (Courtesy/Town of Leland)

LELAND –– After a two-year dry streak, the Town of Leland is offering financial incentives to a D.R. Horton project petitioning to be annexed into town limits.

Between two development agreements, the town could pay D.R. Horton and its subsidiary a combined $140,400 to develop 48 single-family homes as part of phase three of Juniper Creek, a new subdivision in unincorporated Brunswick County off Old Fayetteville Road. 

Upon completion, the new phase will generate an estimated $66,000 annually in sales and property tax revenue for Leland by 2023-2024, according to town estimates. Only the third phase of the development is slated for annexation at this time; the already developed portion will stay unincorporated.

RELATED: In six months, Leland approves over $1 million in incentives

One agreement will pay D.R. Horton, Inc., LLC a lump sum of $108,000 once infrastructure improvements are completed. A second agreement will pay Juniper Creek Development LLC, operated by developer Steve Shuttleworth, $32,400 once nature trails and an expansive 73 acres of open space are completed and a right-of-way on Hidden Creek Drive is dedicated to the town. 

The project was originally approved as a planned unit development by Brunswick County in July 2020. Its vested rights will remain under the town’s jurisdiction.

To be considered by town council Thursday, the offer marks the return of an enticing economic development mechanism the town used generously in 2019, when it obligated itself to at least $3.6 million in incentives among four deals with developers. 

Shuttleworth was among the beneficiaries of the previous batch of deals through Buster Development LLC, in which he is promised a total of $400,000 to develop a 123-unit townhome project off Highway 17, behind the new Tractor Supply. In that deal, Shuttleworth again turned to the town after first moving through county channels for development approval.

Each of the town’s financial incentive agreements differs slightly: Some are interwoven with the completion of infrastructure, others to certifications of occupancy for the final product; most are tied to the landowner submitting a voluntary annexation petition and none involve the provision of affordable housing. 

“Each development agreement is unique in the obligations it requires of both the developer and the Town,” town spokesperson Jessica Jewell wrote in an email. “Many of these agreements allow for the completion of public improvements and infrastructure within accelerated timelines that serve immediate community needs, in conjunction with the Town, or conforming to Town approved plans, thus serving not just future development, but current Leland residents as well.”

Growth path

Compared to its neighbors in the Cape Fear region, Leland has grown far more aggressively in both population base and landmass through annexations over the past decade. 

Annexations were nearly halted in 2012 when the legislature enacted rules that made it burdensome for municipalities to involuntarily swallow properties without property owners’ consent. 

Taking advantage of the built-out spillover growth from Wilmington, Leland has firmed up various maneuvers to lure voluntary annexation applications in recent years, further expanding the town’s jagged and inharmonious edges. 

Leland has expanded its landmass by roughly 7% through annexations since 2019, having added on a total of 1.35 square miles to date, according to figures provided by the town. The latest data released by the U.S. Census Bureau show the town’s population has swelled to nearly 23,000, a 69% increase since 2010.

In January, the town dropped its $450 fee previously charged to those who submitted voluntary annexation applications. 

Two months later, Leland inked a landmark deal with its longtime utility rival, Brunswick Regional Water and Sewer H2GO, allowing the town to latch onto H2GO’s assets through a shared utility ownership arrangement. Through the agreement, the town secured the exclusive right to offer utility service to prospective developers outside of town limits using H2GO’s infrastructure it now has a joint ownership stake in.

(The merits of this agreement were not pre-approved by the Local Government Commission –– Leland asserts no pre-approval was required, contested by Brunswick County leaders, and challenged in two bills filed this session by Rep. Frank Iler.)

RELATED: ‘Give a little, take a little’: H2GO-Leland merger settles competition, raises questions

The town has seen an uptick in voluntary annexation applications this year compared to previous years, with a combined 344 acres already added to its municipal limits or under consideration among at least 17 different annexations. Many of the petitions are arising from what appear to be normal residential owners in addition to various LLCs tied to developers.

“As our region grows, it’s encouraging that property owners and developers see the value in being part of the Leland community and future residents can enjoy the many services and benefits that come from being within the Town,” Jewell wrote in the statement. 

Leland offers various services, including oversight of developments during and after construction, Jewell said, adding that a property owner’s reasons for seeking voluntary annexation may vary.

“Leland is focused on both our existing communities and our future,” she wrote. “We are making investments in both and intend to continue to do so for years to come.”

New funding source

A condition of the utility merger agreement required Leland stop using system development fees in incentive agreements. When the first merger attempt failed in 2019, H2GO’s executive director questioned the legality of the town’s arrangement using system development fees to financially incentivize developers. 

These fees should be dedicated for system capacity and expansion, “not as reimbursements for developer’s on-site infrastructure,” the H2GO director noted in a 2019 lengthy analysis of the proposed merger. Misuse of the funds could lead to higher customer rates, he warned. 

System development fees (previously known as impact fees) are paid for by developers upon connection to a utility system to cover the cost of “captial improvements necessitated by and attributable to” new development, to recoup costs to existing facilities impacted by the new project, or both, per state law.

So in effect, the town set out to reimburse developers for fees they’d otherwise be bound to pay.

In May, the town rerouted its $3.2 million in incentive obligations from system development fee revenues to instead derive from its utility enterprise fund’s existing fund balance reserve. At the time, no incentive payments had been issued. In the town’s latest budget, Leland intentionally excluded the utility enterprise fund in preparation for the merger, leaving management of the fund up to H2GO.

In 2019, the town touted its ability to avoid taxpayer dollars with its incentive-based development agreements through its use of system development fees.

In the Juniper Creek agreements, incentives will be paid for out of the town’s “economic development account,” according to the town memos on the items. “Any new economic development agreement financial incentives are paid through the General Fund, which have a project fund specifically created for economic development purposes.” Jewell wrote in an email.

Revenue sources for these agreements could come from a combination of sales and use tax, property tax, franchise tax, or reserves, the spokesperson said.

Council meets Thursday at 6 p.m. 

Update: This article has been updated to remove an incorrect reference to the town’s utility enterprise fund being jointly owned by H2GO; it is in fact now owned solely by H2GO.

Below find an overview of financial incentive agreements approved in recent years: 

BeneficiaryAmountProjectUnitsApproved date
Juniper Creek LLC, D.R. Horton$140,400Juniper Creek, phase three48 single-family homesTBD
Funston Land and Timber$2.67 – $3.3 millionBrunswick Forest, phase seven and eight1,790 unitsSept. 2019
Buster Development LLC$400,000Ibis Landing123 townhomesAug. 2019
Bishops Ridge LLC$100,000Bishops Ridge92 townhomesMay 2019
ERH Investments LLC$525,000Hawthorne Waterside708 apartment unitsFeb. 2019

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