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Saturday, May 18, 2024

Commissioners amend Project Grace memo with developer 3 days before LGC vote

A county-owned 3-acre block downtown will be converted into a combined museum/library and private development if financing is approved by the LGC. (Courtesy/New Hanover County)

NEW HANOVER COUNTY — An $80-million project to redevelop three blocks downtown is about to go before a state commission after a third revision to a memo between the county and a developer. As a decision nears on Project Grace, county commissioners unanimously approved updates to its lease agreement on Monday at the state treasurer’s request.

The memorandum of understanding between New Hanover County and Zimmer Development Company outlines a 20-year financing term, enabling Zimmer to build a combined Cape Fear Museum and New Hanover County Library. Upon completion, the developer would construct housing opportunities — at least 5% affordable — along with a hotel and retail.

READ MORE: County pens letter to LGC requesting decision on Project Grace by September

Approval of the lease agreement between New Hanover and Zimmer Development Company is on the Local Government Commission’s consent agenda for a vote Thursday. Items on a consent agenda are typically voted on as a whole, as opposed to discussed one-by-one.

“There’s always a possibility a member will ask for something to be removed from the consent agenda to be discussed separately,” State Treasurer Dale Folwell, who chairs the LGC, told Port City Daily Monday.

If that were to happen, the project would be voted on later in the meeting as an individual action item.

Project Grace is one of four financing agreements on the consent agenda, along with eight approvals for general obligation bonds, nine for revenue bonds and one revolving loan.

The P3 has raised some concerns from Folwell and his fellow board members since the county presented its plan Aug. 2. Of utmost apprehension, Folwell said a provision within the agreement — to allow the county to buy developer Zimmer’s design plans if the LGC does not approve the financing — was tying the hands of the state board.

“A governing board should never try to put handcuffs on another governing board,” Folwell said Monday.

READ MORE: State Treasurer: Buyout provision in Project Grace contract ‘tying the hands’ of LGC, among other concerns

The county agreed to remove the LGC reference regarding its ability to purchase the project plans for $2.5 million. The MOU now states: “If either party terminates the agreement, [the county] will purchase the plans for a not-to-exceed amount of $2.5 million.”

Folwell sent a letter to the county Sept. 15 asking commissioners, county manager Chris Coudriet and assistant county manager Lisa Wurtzbacher to consider three changes to the MOU. The other two requests were to not raise the annual lease without further approval by the LGC and for the county to utilize a public or upset bid process for selling half the 3-acre block to a developer.

Folwell wrote in the letter it would “ensure that New Hanover County taxpayers are getting a fair value for their tax dollars and that the project is as transparent as possible without excessive cost or risk.”

The county agreed, if for any reason, the lease amount of $4 million annually were to increase based on change orders, the request will receive additional LGC approval.

“I’m personally extremely concerned about the cost of the lease in relation to what [the county] could build a library for,” Folwell told PCD. “And the developers’ profit margin is excessive.”

If all is approved, Zimmer will receive 8% back in interest and the county could borrow money at roughly 3.25%, Wurtzbacher confirmed at the LGC’s August meeting.

Folwell told Port City Daily in August, New Hanover County’s premier bond rating allows it to borrow money at such low rates, he doesn’t understand why the government entity is partnering with a private developer.

The total lease paid over 20 years would be $80.1 million, plus $4.25 million over 20 years for city property taxes, totaling $84.3 million. After that time, the county will own the library and museum building outright.

In his letter, Folwell asked the county to modify its method of selling the private portion of the county-owned property, which encompasses Grace, Chestnut, 2nd and North 3rd streets .

The MOU allows Zimmer to buy 1.2 acres at fair-market value after the combined library and museum is completed. The developer plans to invest at least $30 million to create a mixed-use component on the property.

The current appraised value of the southern parcel is $2.5 million, but the county will reassess the price before private development begins and Zimmer purchases its portion.

Folwell said he would prefer the county to engage in a public or upset bid process; however, Wurtzbacher told commissioners during Monday’s meeting: “We’re proposing to continue to the use statute afforded to us.”

Under Session Law 2017-86, House Bill 397, the county was granted permission to enter into a private sale for fair-market value “for one downtown development project,” specifically enacted for Project Grace. The legislation was added to a bill in process, sponsored by Rep. Frank Iler, regarding the removal of property in the town of Carolina Shores.

“We don’t need a law to tell you what’s right and wrong,” Folwell told PCD, in response to the county rejecting his third MOU recommendation.

Wurtzbacher expressed the county’s desire to have control over what is built on the land. With an upset bid process, the property would be sold to the highest bidder and the county would not have the authority to determine what’s done with it.

“Under normal circumstances, if you sell a property, you can’t put covenants or conditions on it,” she explained to the LGC last month. “With the P3 model, we’re allowed to put restrictions on the land we sell to the developer and control the timing on when that taxable investment is made.”

Folwell iterated to PCD he thinks the county-owned downtown block is “one of the most valuable pieces of property” in the region.

Wilmington resident Diana Hill is slated to make the trip to Columbia, N.C., to publicly oppose Project Grace at the LGC meeting. As of Monday, Hill’s “Save Our Main Library” petition had 1,849 signatures.

She is the only person signed up to speak at this time on the public-private partnership and will be allotted 4 minutes.

“I plan to highlight the misinformation that was presented to the Commission at the August meeting,” Hill wrote in an email to commissioners, city council and media. “And will present the actual and factual information surrounding the demolition, downsizing, and confining of the Main Library and Cape Fear Museum.”

Her main concerns revolve around what she considers are unnecessary downsizing and demolishing of downtown buildings, some historic, the costs associated with co-locating the library and museum, as opposed to expanding, and the lack of transparency she said the county has offered throughout the process.

“We’re getting very close to the time that the LGC will determine if the current plan for Project Grace is the appropriate plan,” Hill wrote to PCD. “We do not think it is. We would ask that [the LGC] would work with us to come up with a plan that won’t include these two public service education facilities as part of the development.”

For instance, she notes the current 100,000-square-foot library, to be razed, offers more space for modern technological installations for public access than plans would allow of Project Grace. The P3 design includes the library maintaining 36,827 square feet and the museum having 42,086 square feet, with an additional 5,992 square feet shared between the two.

If the LGC approves the county and Zimmer’s agreement, construction is slated to begin later this year and take two years to complete. Once finished, Zimmer will begin redevelopment of the southern parcel of land.

“If we were to win approval from the LGC, it’s only for the lease,” Coudriet reminded the board Monday. “The work is not done.”

The LGC meets Thursday at 1:30 p.m. County officials will attend remotely, unless the item is removed from the consent agenda ahead of the meeting, a county spokesperson confirmed.

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