NEW HANOVER COUNTY — The development agreement for Project Grace, unanimously approved by New Hanover County commissioners Monday, has the county doling out more for the actual build-out of a combined library and museum, yet saving on interest and receiving a more profitable property sale.
The one-block downtown area bordered by Chestnut, Grace, Walnut and Second streets, will make way for a new state-of-the-art cultural arts center, to include razing the current library and infusing $30 million of private investment into half the property.
READ MORE: County to ink Project Grace agreement with developer next week
While the county is paying less interest than what was proposed in its contract with Zimmer Development Group last year — which was quashed by the Local Government Commission in the fall — leaders say it will end up spending more on construction due to rising costs and inflation.
The estimated price tag from Zimmer last July was $48.8 million to build the library and museum, including contingency; this didn’t include the financing portion of the lease.
The county was expected to pay Zimmer a roughly 5.5% interest fee — though not “explicitly” stated in the former agreement — to total $80 million over 20 years, or $4 million annually. It would then be deeded ownership of the structure once paid off. The county would have also paid $4.25 million in city taxes over 20 years, totaling $84.3 million.
Construction expenses are up 25% for Cape Fear Development Partners’ new proposal of $60.5 million. This would include construction of the three-story, 94,000-square-foot library and museum, as well as improvements to the adjacent parking deck. It does not include furniture, fixtures, equipment or exhibits. The agreement also puts ownership of the public facility into the county’s hands from the start, meaning no taxes are due to the city.
The new bid-out cost will not exceed $60.5 million; it includes construction at $54.1 million, a 3.5%, or $2.2 million developer fee, and $2.1 million in contingency.
The county would take out limited obligation bonds at about 3.5% interest, or roughly $24 million additional over 20 years, to cover the cost.
Therefore, the new public-partner partnership will have the county spending roughly $84.5 million, as opposed to the prior plan of about $84.3 million.
“It is $12 million higher in construction, but we’re saving $7 million [in interest] by leveraging the county’s triple-A bond rating,” chief financial officer Eric Credle told commissioners Monday. “The ideal scenario would have been to use debt last year.”
However, Credle noted Zimmer was the only company to answer the request for proposals on the project and required the lease structure.
“So, the delay in the Local Government Commission vote is costing us $4.5 million more?” commissioner Rob Zapple asked.
Last year the LGC delayed the vote by two months, according to the county, which submitted its Memorandum of Understanding for approval in July. A vote was not taken until September.
Port City Daily reached out to State Treasurer Dale Folwell for comment; a response wasn’t received by press.
The total cost, however, can be reduced, Credle said, when accounting for the $3.5 million south parcel property sale to CFD following the completion of the library and museum. Zimmer would have paid $2.5 million for the parcel, the appraised value at the time.
CFD will invest $30.1 million to construct a mixed-use structure. Over the course of 20 years, an estimated $3.7 million in property taxes will come back to the county.
When CFD reviewed design plans, it discussed value-engineering savings with county staff. This includes doing away with items that would not be noticed by the average visitor, according to chief facilities officer Sara Warmuth. Removed were a reading terrace, staff terrace, and additional lighting that could be built on later.
Mike Brown, CFD partner and Cape Fear Commercial senior vice president, said the company identified 27 areas of opportunity to reduce the price, between $3 million and $4 million. But final expenses will be approved in July after the project is bid for construction.
Diana Hill, who has been outspoken against razing the library to build anew, took to the podium during the public hearing noting her “disappointment” in what she called a “six-year debacle.” The plans for Project Grace first began in 2017.
“The good news is we’re about to save $20 million because we have a different developer who isn’t trying to line their own pockets,” she said. “The bad news is we still plan to abandon a building to build a small, glass building 100 yards away, continue to hide the history of the African Americans — who were 56% of population prior to 1898 and since overcome all the hurdles put front of them — use accessible and valuable property at the Cape Fear Museum for research and storage instead of enhancing that property to further our history, limiting the availability of downtown parking to visitors, and causing much more traffic on one of the main arteries into downtown Wilmington.”
CFD noted in April that doing an adaptive reuse on the project was not viable, as it would cost taxpayers more money and likely the county in the end.
“It really would be a full reconstruction on top of the core concrete deck, plus an expansion,” Brown explained, noting it’s more than merely renovating the current space.
The library also would have to close during the process, whereas now it will remain open while construction is underway on one portion of the block before the library and museum move into the new facility, to be located on the north end. CFD will turn the south side into a mixed-use development; the county is requiring any residential element to include 5% workforce housing.
Improvements made to the parking deck — to be shared between the county and developer — would essentially enclose part of the structure. The current open-air deck will directly abut the new library and museum, and would require updated code requirements for airflow if closed off in part.
“Depending on the south side, it could be totally enclosed,” Warmuth said of the parking deck. “It would be a benefit — it’s an eyesore, in my opinion — to have beautiful buildings wrapping around it.”
The parking deck, with about 630 spaces currently, can be re-striped to add another 30 or 40 spots, according to county manager Chris Coudriet. Right now, some spaces are leased out to two downtown hotels. Assistant county manager Lisa Wurtzbacher said the “likely” solution is to rent out additional spaces to CFD for its private development.
The county will continue to own and manage the deck and retain revenue from leased spots. Details on spaces needed and which floors would be dedicated to the public and private sides are still up for debate.
County staff will present a formalized budget with additional details on the new plans or Project Grace at a July commissioners meeting. It’s expected to go to the LGC in September.
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