Monday, September 26, 2022

Project Grace rejected: County to regroup on library-museum redevelopment plans following lack of LGC support

The LGC denied the contract between the county and developer Zimmer for the financing structure of Project Grace. (Port City Daily/Courtesy New Hanover County)

NEW HANOVER COUNTY — A downtown development project five years in the making raised concerns from the state financing board for its “unique” approach; however, Project Grace as structured will not move forward. 

The financing agreement between the county and Wilmington developer Zimmer Development Company continued to raise concerns by the Local Government Commission during its Thursday meeting; the LGC was to give final authorization on the financing of Project Grace. It did not pass with support from the nine-member board.

READ MORE: Catch up on all PCD Project Grace reporting

Member Vida Harvey made a motion for approval and silence filled the air. 

“The motion fails for lack of a second,” said State Treasurer Dale Folwell, who chairs the LGC. Essentially, the county’s project was denied on the technicality of never making it to a full vote.

The public-private partnership for the redevelopment of a 3-acre, county-owned block downtown was slated for a vote at the request of commissioners. Folwell removed it, along with two other items, from the meeting’s consent agenda — usually voted on as a whole with no discussion — based on input from the board. He said it required further discussion.

The LGC had concerns about the financial structure of the lease agreement, the burden on taxpayers and the private portion of the development being negotiated without an upset bid process.

Project Grace was the last action item, following a 3.5-hour meeting. Only one person spoke out, Wilmington resident Diana Hill — who has advocated against the project as part of Save Our Main Library.

Hill raised her concerns about the demolition of a viable library, the cost to taxpayers and the destruction of historic property. She had 4 minutes to speak, but her time turned closer to 15 minutes.

County leadership and staff was in attendance via phone and made a last-ditch effort to present their case.

“Vote up, we’ll move on with Zimmer; vote down, we’ll move on with somebody else,” commission chair Julia Olson-Boseman said confidently. “We, as the commission, want to be able to move forward with this project.”

Olson-Boseman and county manager Chris Coudriet rebutted Hill’s opposition.

“As the chair said, the commission believes in this enough and understands the value proposition, it wants to own the final plans to proceed with redevelopment of this lot,” Coudriet said.

Before a motion was made, Folwell warned his fellow board members he would not support the project.

“I will be voting against it, but I promised the chairwoman I’d put it on the agenda,” he said, followed by a message to county officials: “I am sure we will continue to be in dialogue.”

The county entered a deal with Zimmer in 2021, following a two-year process seeking requests for qualifications, reviewing any submissions and ultimately asking for proposals from interested firms. Since then, it’s been a tumultuous journey with three MOU versions, community support and opposition and questions about the financial undertaking.

The framework was laid that Zimmer — the only one to submit a proposal in response to the county’s RFP — would manage construction of a new building combining the county’s library and Cape Fear Museum, purchase a 1.2-acre parcel of the block at fair market value and invest $30 million.

The complexity of the memorandum of understanding between New Hanover and Zimmer, as well as the financing agreement crafted, has caused Folwell and the LGC to question the projects’ validity and necessity over the last few months.

The biggest head-scratcher, according to Folwell, was the 8% profit margin Zimmer would be receiving over a 20-year lease with the county versus the county’s ability to borrow money at 3.25%. 

Additionally, county representatives explained the overall goal was to have control over what was built in the private development, adding to the community’s benefit and increasing the county’s tax base.

“[Without it] we cannot guarantee a community investment within 36 months; that there will be a residential component, let alone set aside 5% workforce housing,” Coudriet said. “We cannot guarantee a hotel generating room occupancy tax to the benefit of the City of WIlmington. We can’t guarantee any investment.”

Folwell also said the MOU’s provision allowing the county to purchase Zimmer’s plans for $2.5 million should the LGC not approve the financing was “handcuffing” the state government entity. In a letter sent last week, he asked the county to amend the MOU to reflect the LGC’s connection to that condition, which the county agreed to.

The treasurer also asked the county to consider an upset bid process for the private development side of the project, citing the property as valuable enough to get more than it’s worth over a private negotiation.

The county disagreed and stood by its negotiation plans with Zimmer.

“I’ve been continually concerned about a county as prosperous as New Hanover that the transactions seemed to be so complicated and all my efforts along the line have been increasing transparency and increasing governance on the deal,” Folwell said.

As the county stated during the meeting and has said in the past, it will continue to pursue a new library and museum facility; it will just have to pivot in its approach.

After the meeting, the county sent a press release noting it will purchase the full design and construction documents from Zimmer for the library and museum facility for $2.5 million. 

“Then the county will assess next steps, including the cost of issuing debt to build the facility and the timeframe for when to proceed,” the release said. “As additional information is known, the community will continue to be kept informed.”

A more in-depth report of the LGC’s meeting and discussion and the county’s response will be published this weekend.


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