Schewel says city-county incentives system ‘irrational’

jwise@newsobserver.comAugust 23, 2013 

JENNY WARBURG — Jenny Warburg

  • Hotel, hospital, history

    The 1926 McPherson Hospital, on Main Street between Watts Street and Buchanan Boulevard, occupies the site of Durham’s first hospital, Watts Hospital, which opened in 1895. Watts later moved to a new campus on Broad Street, now the N.C. School of Science and Mathematics.

    Dr. Samuel McPherson Sr. established his namesake hospital for care of eye, ear, nose and throat disorders. According to Wendy Hillis, executive director of Preservation Durham, “In its prime, over 50,000 patients were seen and over 2,000 operations performed on site annually.”

    The building has been vacant since 2004 and, since Concord demolished two later-added wings in 2009, the original structure has stood in the midst of an idle construction site, its doors and windows covered and its condition deteriorating.

    “It’s a very important missing link right now when you enter downtown from the west … a blighted sight on what is otherwise a glorious drive into downtown,” Hillis said.

    The future of the McPherson site has been in question ever since the hospital moved to new quarters, and the $29.5-million Concord project has been years in the making. Trinity Park neighbors are glad to see something about to go up there.

    “We went into this expecting we would get the Taj Mahal,” said neighbor Linda Wilson. “We didn’t quite get that but we’re very happy with this project.”

City Council members voted to invest $1.3 million in Concord Hospitality’s hotel development last week. Durham County is chipping in $400,000.

City Councilman Steve Schewel doesn’t think that’s right.

“I don’t feel it’s working out well for us in this relationship,” he said before voting for the incentive. “We’re getting the raw end of the deal.”

The city’s incentive is to be paid out over eight years, beginning after construction ends. Tax revenue from the hotel is estimated to have netted the city $446,634 when the eight years are up.

Durham County, though, comes out much better. Its net comes out more than $3.1 million.

In other words, for every dollar the city puts into Concord’s proposed Residence Inn by Marriott, it figures to get back about $1.37. For every dollar the county puts in, it gets back about $7.75.

Durham County’s property-tax rate is 77.44 cents per $100 valuation, the city’s rate is 56.78 cents per $100. The county gets 57.5 percent of total occupancy-tax revenue, the city 42.5 percent. The county share of total sales taxes is 58 percent to 42 percent for the city.

According to figures compiled by the city’s Office of Economic and Workforce Development, over the eight years, fiscal 2013-14 through 2020-21, estimated revenues at current rates are:

• Property tax:

City: $640,736

County: $1.48 million

• Occupancy tax:

City: $621,174

County: $1.33 million

• Sales tax:

City: $516,990

County: $713,937

• Total:

City: $1.78 million

County: $3.52 million

“They’re getting a lot more bang for their buck,” Schewel said.

The county commissioners denied Concord a $775,000 economic incentive but approved a $400,000 historic preservation grant for rehabilitating the 1926 McPherson Hospital structure and incorporating it into the hotel.

“I don’t blame the county commissioners for driving a hard bargain, but I do think we’re in a situation where we should have a common purpose and we should have a common strategy and it should make financial sense for the city and the county,” Schewel said.

Schewel has pointed up disparities between city and county investment on several occasions since taking his council seat in 2011, and some other council members have raised similar concerns. (Not including Mayor Bill Bell, a former chairman of the county board.) The Concord case prompted him to say the current situation is “irrational.”

“The way the city and county offer differential incentives has no rational basis and exhibits no common purpose,” said Schewel, who teaches part time at Duke University’s Sanford School of Public Policy.

There are cases when one elected body chooses to “incentivize” a project when the other does not, but for “the projects that we all think we ought to incentivize ... at the very least they ought to be split 50-50,” Schewel said.

City and county funding policies are clashing on some other fronts. After the city decided to cease contributing to a sheriff’s warrant-control program, the county cut its appropriation for the shared planning department. County Commissioner Michael Page has said the city should reconsider nonprofit grants, which the county makes annually but the city has discontinued.

“We need to figure these things out,” Schewel said. “It’s not good for Durham’s residents (for us) to be working at cross purposes.”

Wise: 919-641-5895

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