Thursday, June 13, 2024

County to take first step on tackling Project Grace alone

The county will still move forward with constructing a new library and museum downtown but fund it through debt financing. Commissioners will vote Monday to approve a budget amendment to buy design plans from Zimmer. (Port City Daily/file)

NEW HANOVER COUNTY — The county is going solo on a portion of a contentious project five years in the making — at least for now. County commissioners will vote on buying the design and construction plans for Project Grace, effectively ending its public-private partnership with Zimmer Development Company.

The Nov. 14 commissioners meeting will include consideration of a budget amendment for $2.5 million to purchase the developer’s plans. While the price was ultimately agreed upon, county staff had been discussing options to cut costs for the developer, which could have changed the ultimate outcome to taxpayers. 

READ MORE: Roadblock for Project Grace won’t stop county officials from pursuing its plan

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

Also, to be discussed by commissioners next week are plans for the existing Cape Fear Museum at 819 Market St. The design for Project Grace includes combining the Cape Fear Museum and downtown library into a new facility on Grace Street, between 2nd and 3rd. 

The county stated in its agenda a vision to repurpose the current museum facility as a possible extension of the new one or to use in its current capacity for museum operations. A master study plan is in process to make sure the needs and uses of the facility are adequately captured, a county spokesperson said.

The Monday vote for buying Zimmer’s design plans for the new structure is a formality, as the county had already signed a memorandum of understanding with the developer a few months ago. It included a provision that reimburses Zimmer for its work. Without the plans, the county would have to dole out additional funds to contract another firm for new blueprints.

The financing agreement in the public-private partnership, or P3, was rejected by the Local Government Commission — which oversees government financing — in September.  

Now the county will pursue the public project on its own through debt financing and revisit working with a private developer for the mixed-use Chestnut Street portion on down the road.

As noted by the county from the get-go, the P3 was an effort to control what happened on the “private” side of the county-owned block. The vision included the public half to house the new civic arts structure to house the library and museum. Zimmer fronted all costs for design work and construction documents to create the new building.

The private half would be constructed by Zimmer, totaling a $30 million investment for a hotel, retail and residential, including up to 5% workforce housing.

The county would have leased the civic arts building for $4 million annually for the next 20 years, totaling $84 million. The county’s lease was locked in back in June, but pandemic-related supply issues and federal tax rate hikes were increasing costs on Zimmer’s end.  

County manager Chris Coudriet first discussed options for reducing the facility budget to keep expenses down for Zimmer in August, according to internal emails obtained by Port City Daily. The LGC pushed its vote to approve or deny the proposal over the summer twice.

“The delay is costing the developer money and by extension the taxpayers,” Coudriet wrote county leadership and commissioners on Aug. 10.

Coudriet suggested updating the MOU to purchase Zimmer’s plans for $500,000 more to cover additional design work that would cut back on construction costs. The county manager originally floated $3 million instead of $2.5 million.

“Zimmer is supportive of this, and it keeps them engaged in the project until we get some final resolution from the LGC,” Coudriet wrote.

In follow-up emails, Coudriet noted Zimmer wanted to “lock the interest rate immediately after LGC approval,” which county commissioners had pushed the LGC board to place on its September agenda.

He also said if the commission were to reject the plans or the developer were to pull out, his recommendation would be to hold off on rebidding the project for up to a year to allow interest rates and market conditions to cool.

Inevitably, Zimmer’s original interest rate increased and Coudriet suggested “the most obvious” path forward were design changes to reduce the cost. 

“We need to ask Zimmer to work with LS3P on changes that save final money in the cost of construction,” he wrote.

Not quite two weeks later, the topic was broached again with another approach to battle inflation. According to an email from Coudriet on Aug. 22, commissioners Deb Hays and Rob Zapple met with Landon Zimmer and Tucker “to reframe options around the county absorbing increases in design costs.”

The resulting proposal would have the county engage in a separate contract with the LS3P for modifying plans for $500,000. Coudriet noted this would avoid having to amend the MOU again — for the third time — since it would be an individual agreement. Essentially, they settled on $209,325, according to county spokesperson Jessica Loeper.

“This type of architectural contract does not require board approval as long as funds are available in the budget, which they are,” she wrote to Port City Daily Tuesday. “At this time, no work is being done under this contract until a path forward is determined.” 

Project Grace has faced multiple iterations since its first memo was created in March 2021; it was updated again this June. The buyout provision for the county to retain ownership of the building plans increased 30% from its origination and also included language that tied the LGC to the outcome.

LGC chair Dale Folwell told the county the burden should not fall on the LGC’s shoulders as to whether more taxpayer money is spent by the county. The provision was ultimately removed at Folwell’s request in a third amendment to the MOU, signed in September.

During the August LGC meeting, where the county presented its plans in more detail, Zimmer representative Adam Tucker told Folwell his company had already spent $1.5 million and needed to be paid for its work.

The next month upon the LGC formally considering the P3 deal, no one on the board seconded a motion for approval of the lease, in effect quashing the public-private partnership agreement.

The county will still need to go before the LGC to move forward with its debt financing to fund the construction of the new library and museum.

[Ed Note: The article has been updated to include items from the commissioners’ agenda, released Wednesday, regarding intentions for the current Cape Fear Museum.]

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