Published: Nov 13, 2012 07:00 PM
Modified: Nov 13, 2012 04:08 PM
Developers have big plans for 400 acres on Page Road. They just need a little help from the city to get started.
Not cash, and not a tax break. Actually, what Reader & Partners of Orlando and Tri Properties of Durham want would be a first for North Carolina.
It’s called a “Special Assessment District,” and they made their pitch to the City Council last week.
“It’s a unique situation,” City Manager Tom Bonfield said, and council members gave assent for the developers and city administrators to keep talking.
The developers’ plan is the size of a small town: 500,000 square feet of office space, 150,000 square feet of retail space and 1,300 residences. Called “Bethpage,” the site is at the northwest corner of Page and Chin Page roads, between the Research Triangle Park and Raleigh-Durham International Airport and near the Brier Creek development in Wake County.
According to Jeff Lay, a Reader & Partners vice president, the project could potentially produce more than 4,000 office jobs and 200 retail jobs and, at buildout, add $550 million to the city-county tax base.
Rezoning for the project was approved in 2007 and the developers have been trying to start building ever since, Lay said. The problem is money.
Their rezoning terms require the developers to build about $7 million worth of infrastructure, mostly road improvements, before any tenants or buyers may occupy, and start paying for, offices, stores or houses. Financing isn’t what it was in 2007. Banks aren’t interested in loaning, and other private lenders are charging as much as 18 percent interest, Lay said.
“Even for a 100,000-square foot office building, to try to front $7 million, the math doesn’t work," said Patrick Woodruff of Tri Properties, which developed the Imperial Center office park in Durham.
“A special assessment district is one way for us to get this up and moving ... at no cost to the city,” Woodruff said.
Charlotte bond lawyer Brent Jeffcoat said North Carolina authorized special assessment districts in 2008, but so far no one has used one – mostly because there hasn’t been much development since the economy “sort of blew up,” he said.
According to a UNC School of Government report ( bit.ly/ThSlby
), designating a special assessment district allows a city to issue bonds with, with the beneficiary – in this case, Reader & Partners and Tri Properties – assessed a charge to service the debt and repay the city for administrative costs.
If the assessment turns out not to be enough to service the debt, the city has no legal obligation to make up the difference.
“If the deal fails, the city can wash its hands,” said city Finance Director David Boyd. But – if Durham did wash its hands, Boyd said, the city’s credit rating could suffer, and there would be a moral obligation to make good on the bonds, whether the law requires it or not.
On the other hand, if the project failed the city would own and could sell the Bethpage property and anything that had been built there to cover liabilities.