Thursday, June 20, 2024

‘A deal is a deal’: Commissioners at odds about paying Zimmer more than negotiated for Project Grace plans

Commissioners agree to purchase Zimmer’s design plans for a future combined downtown library and Cape Fear Museum. (Port City Daily/File)

NEW HANOVER COUNTY — Monday, the county rubber-stamped buying plans for a downtown redevelopment project but not without contention. Zimmer Development Company, the private firm the county was going to partner with for Project Grace, presented the county a bill for $120,000 more than agreed upon in its contract.

Most commissioners were opposed to paying above and beyond the $2.5 million negotiated price-tag for Zimmer’s plans, signed in a memorandum of understanding in June. Vice chair Deb Hays was the only one at the meeting who favored the county’s use of taxpayer money to cover the overage. 

READ MORE: County to take first step on tackling Project Grace alone

The public-private partnership (P3) of Project Grace began in 2021 but came to a halt in late September when the state financing agency, the Local Government Commission, did not approve the lease structure. The P3 would have been funded by Zimmer, with the county reimbursing the firm $80 million over 20 years to build a new combined library and museum civic arts center.

The county planned to pursue the project whether or not its deal with Zimmer passed state muster. The MOU with the developer included a stipulation to buy the plans for up to $2.5 million if the lease fell through. 

Commissioners and county staff exchanged ideas over the summer on ways to offset added expenses, according to internal emails Port City Daily obtained earlier in the month. County manager Chris Coudriet floated the idea of paying Zimmer up to $3 million for project plans —  designed by LS3P — but that never came to fruition.

The county did, however, enter a separate contract with LS3P for $209,325 to cover value-engineering. The goal was to alter design plans to cut back on construction and material costs, which would have ultimately lowered Zimmer’s final bill if Project Grace was built.

An itemized list of the developer’s expenses totaled $2,620,188.95 and detailed third-party payments — roughly $2.2 million to LS3P. Invoices paid, as outlined by Zimmer to the county, included document production, a feasibility study, third-party legal fees, parking deck consultants, civil design, public relations and an environmental consultant.

“Is there any of that that was architectural fees or design fees?” Hays asked at the meeting. “Because we had done some value-engineering; when we did that, we set aside some funds. Is there any of that leftover that we could apply to this additional?”

County spokesperson Jessica Loeper confirmed architectural work contracted by Zimmer is not the same as the county’s separate contract with the firm.

“So any costs associated with LS3P from Zimmer would be for different services,” Loeper said.

Commissioners and county staff expressed concerns over LGC’s delay in voting on the financial structure — the board received the MOU in July but didn’t vote on it until September. Thus, it meant rising inflation affecting the bottom line. While the Consumer Price Index actually declined by 0.3% from July through September, it’s up 3.5% over last year. The feds increased interest rates by about 1% in the same timeframe.

Hays said Monday the current economic state is why the county should reimburse Zimmer’s out-of-pocket expenses in full.

“It was the state treasurer’s decision to hold up the process, and just like in the real estate business, we’ve seen escalating costs for housing, escalating costs to borrow money, of no fault of our own,” commissioner Jonathan Barfield said.

Hays put as much blame on the county and reminded commissioners Zimmer agreed to “stick it out,” even with the LGC delays. 

Barfield stood by his claim that “a deal is a deal is a deal” and was in support of paying Zimmer only the agreed upon $2.5 million.

County staff also recommended doling out the county’s legal obligation, while Hays insisted on seeing through the full cost “in good business faith.”

Barfield fired back citing his own time as a small business owner for 30 years.

“If I’ve agreed to a price, I need to stick to that price,” he said. “If I have cost overruns, that’s on me. We have made what I think is the appropriate deal with them to buy the plans.”

Barfield added it would be Zimmer’s responsibility to keep track of their expenses to not exceed the amount promised.

Commissioner Rob Zapple agreed: “They knew what the limit was, they negotiated and helped set that price and chose to let it go beyond that.”

The developer, Zapple said, could have requested another MOU adjustment to combat additional costs. 

Chair Julia Olson-Boseman and commissioner Bill Rivenbark didn’t offer comment.

A motion to approve the budget amendment, at the proposed $2.5 million, was made by Barfield. Hays offered a subsequent motion to pay the total $2.6 million bill, but it failed without a second.

Commissioners voted 4-1, Hays dissenting, to buy Project Grace’s plans from Zimmer for $2.5 million.

Chief financial officer Eric Credle said county staff will allow other developers to review Zimmer’s plans for ideas and cost-saving measures to resubmit a future design for the county and library. Credle said Cape Fear Commercial has already expressed interest in studying the plans.

Commissioners also unanimously approved a separate resolution to maintain the current Cape Fear Museum building at 814 Market St. in some form or fashion, regardless of future Project Grace plans.

Catch up on previous Project Grace coverage here.

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