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Downtown Market Report: Service District Has Foes, Friends

By JP Finlay, posted Apr 1, 2011

Talking with most downtown stakeholders, the problems are clear. Cleanliness. Graffiti. Vagrancy. Panhandling. Alcohol consumption. Nuisance crime by day, violent crime at night. What is not clear, and often controversial, is how to fix it.
A recent proposal from Wilmington Downtown Inc. attempted to remedy some of these ills. The proposal called for the creation of a Municipal Service District. The MSD would tax downtown property owners 10 cents per every hundred dollars of taxable property value. With the tax money collected, the MSD would then serve the downtown community exclusively, hiring people to pick up trash, remove graffiti and work on vagrant and panhandling issues.
“It’s the right answer for the problems people are complaining about downtown,” said City Councilman Kevin O’Grady.
The recent MSD proposal generated much interest throughout the downtown community. Though many expressed support for the idea, a significant opposition mounted against the proposal. The opposition was vocal, buying newspaper ads and appearing on television to speak out against the MSD proposal.
The fight for control
More than 140 downtown stakeholders declared the MSD “just plain wrong” in a recent full-page advertisement in the Wilmington Star News. Tom Harris, who owns the Front Street Brewery, sponsored the advertisement and served as a leader of the opposition group.
“I strongly support doing an MSD in Wilmington. I think we badly need it, but it needs to be planned,” Harris said. “I wanted to see the MSD slowed down, temporarily pulled off the market, to give the stakeholders a chance to get involved.”
“It needs to be controlled by the people paying the taxes, not the executive committee of Wilmington Downtown Inc. I’m not saying that WDI shouldn’t be involved with the plan, they are the logical fit to run the plan, but the ultimate control needs to be with the stakeholders because they are the ones paying the taxes,” Harris said.
“The MSD has been planned for 10 years. It’s in the Vision 2020 plan,” O’Grady said, mentioning the long-term vision the city council put together for Wilmington.
 “It’s a fight over control. (Everyone) knows it’s a good idea. They know it’s the right idea for downtown,” O’Grady said.
The current proposal calls for Wilmington Downtown Inc. to oversee the MSD plan with City Council approval. WDI would then hire an outside vendor to provide the services. This process is quite common throughout the country and locally in cities like Raleigh and Charlotte.
“They know the business,” said John Hinnant, the executive director of Wilmington Downtown Inc. of the companies that will bid to run the Wilmington MSD.
“They know how to engage homeless people. They know how to clean graffiti. We’re not reinventing the wheel. Nobody has confidence and stewardship in downtown. This program will do that,” Hinnant said.
“Blaming others is not getting us where we need to go as a community,” said Dave Spetrino, a downtown landowner and board president of WDI.
“This is not a new, crazy thing. Our goal is to give the city council a roadmap to build an MSD around. The council has the final say, remember that,” Spetrino said.
“What’s been lacking, not just on the MSD, is an adequate degree of communication and collaboration between WDI and the stakeholders. My personal involvement in the petition was really about that issue,” Harris said.
“Even under the WDI proposal, ultimately city council is responsible for that money. I’ve emphasized to WDI to pay attention to the democracy factor. A criticism is a few people make decisions instead of a group. We want a broad board with a lot of interests,” O’Grady said.
“We’ve asked WDI to circle around and talk to the people opposed and get their support,” O’Grady said.
“We just need to back up and talk to the people who would be paying for the thing and then move forward,” Harris said.
Where does the money go?
Another contentious issue, assuming the MSD proposal passes through city council, will be how to spend the collected money. The bulk of the tax revenue would be spent on “ambassadors,” the actual people hired to pick up trash, clean graffiti and deal with vagrant complaints.
Restaurant owners and retail shops want more money spent on marketing. Property owners and business leaders want public safety to be the number one issue.
“When I go in and ask a banker or an insurance company, they don’t tell me that downtown needs more marketing. They want their employees safe. PPD isn’t concerned about the same things Tom Harris is concerned about,” Spetrino said.
Harris counters that his restaurants spends $150,000 a year in advertising. He said that he sees a direct net revenue increase of more than $1 million from that advertising budget.
“If we had that $150,000 to advertise downtown as a whole, we could increase tax revenues exponentially more than $1 million. Increased net sales downtown, a very conservative figure would be $15 to $20 million. I think that would be setting the bar low,” Harris said.
Harris said that the bulk of MSD money would go towards ambassadors dealing with vagrants, panhandlers or the homeless downtown.
“We don’t invite the vagrants to come downtown. I don’t think we should have to pay to deal with them. I think this is a cost that should be paid by the community at large, not just downtown,” Harris said.
“One thing (MSD) opposition wants I cannot support is a city-wide tax. I can’t ask shop owners on College Road for taxes to support their competitors,” O’Grady said.
Hinnant tells a story of recruiting a company to move its offices to downtown Wilmington. Speaking with the business owner, concerns over the safety of female employees walking to their cars at night came up. Hinnant said that with the MSD a service would be provided to walk employees safely to their cars.
“We’re here to provide an enhanced service. The most popular service is an escort to your car,” Hinnant said.
“There is going to be a tension between landowners and shop owners,” O’Grady said.
Who will pay, and how much
One thing supporters of the Municipal Service District like to point out is that the plan can be changed. If enough people want to increase the marketing budget, that can be tweaked. Problems with the ambassador work hours can be adjusted.
However, one thing that cannot be adjusted under the MSD plan is that downtown property owners will pay increased taxes. The MSD needs to be funded, and that funding comes from the tax increase.
“I’m opposed to any tax increases. I don’t think in this environment we’re in we can afford to put people under any more pressure than they are in,” said J. Michael Hutson, the owner of 11 and 13 Market St. in addition to the deli bearing his name across town.
“If they want to tax the actual businesses creating a problem, that’s one thing, or charge them a fee. But to tax the individuals that aren’t involved with those bars doesn’t seem fair,” Hutson said.
Spetrino said, “I don’t want to pay more taxes either. It’s not like I’m some guy who wants to pay more taxes. I already pay a lot of taxes, but I can’t keep complaining about the things I don’t like unless I’m willing to make the effort to utilize my time and resources to improve the quality of life downtown.”
Spetrino would stand to pay more than $20,000 if the MSD proposal was made into law.
“Obviously there are a number of problems and challenges facing downtown and the MSD can constructively help face those problems. The tax increase is very minimal,” Harris said. Harris, who owns the building at 9 N. Front St. in addition to the restaurant, went on to say that base tax rates in Wilmington are low for the age of the city as compared to older cities across the state.
According to the WDI proposal, the tax increase would cost the property owner of the Dixie Grill on Market Street $212 more a year. The Hilton Wilmington Riverside, on the other hand, would be on the hook for more than $15,000 annually. Andrew Sims, Hilton Wilmington Riverside CEO, signed the anti-MSD petition.
“If we’re going to tax people down there, we need to have the property owners in support of it. From what I have seen, we do not have that support. Based on the comments I’ve heard from different people, I just don’t think we’re there yet. I commend WDI for starting the discussion, but I don’t think we’re there yet,” said Wilmington Mayor Bill Saffo.
“I don’t like it when people tell me they like something, and it’s important and good for the community, but not right now,” Spetrino said. “If not now, then when? If now is not the right time, what needs to occur so it is the right time?”
“Property owners need to take responsibility,” Spetrino said. “That’s what (MSD) has consistently responded to, across the country. You can’t do it with volunteers. You have to have some sort of mechanism in place to keep it going next month, next year and then next decade.”
“We have a means to address the downtown problem. I think this is the time to be a little bold,” O’Grady said.
“If this was a shopping center, a landlord would take care of things by assessing a fee. The city is not a landlord. The bottom line on all the complaints is downtown business doesn’t want to pay for it. It’s very disappointing,” O’Grady said.
What happens next
The city council must pass a 2012 budget by July 1. Any proposal for an MSD must be included in the budget by that date, or it will not happen for another year.
“The structure aspects? We can tweak that,” O’Grady said of concerns over marketing dollars and the MSD steering committee. “That’s not the problem. The problem is we’re not getting the buy-in that business owners need to take ownership.”
Lisa Pinckney Flynt runs the marketing wing of the non-profit company that oversees downtown development in Chattanooga, Tenn. Chattanooga is a benchmark city for Wilmington with a thriving downtown. Flynt, a UNCW grad, sees similarities between the two cities.
“I think these are the kinds of things that happen in urban situations. We deal with some of the same issues. Downtown is your community’s living room. You have to be smart about how you design it,” Flynt said.
The Chattanooga downtown group does not use public money, though it is something the organization sees happening in the future as a means of sustainability. New Bern, another Wilmington benchmark city, does use a tax to support its downtown.
“The MSD money was a big factor in the downtown revitalization. We’ve been relentless, but the MSD money was very important to all that,” said Susan Moffet Thomas, the executive director of Swiss Bear Downtown Development, the group that runs New Bern’s downtown.
By all accounts, New Bern has a sparkling downtown. And the empirical data provided by Moffet Thomas underpins the value of the MSD.
In 1980, property values within the MSD were $8.75 million. Fast forward to 2002, and allow for inflation, and the values had moved to $63 million. In 2010, Moffet Thomas said values were over $109 million, and that is after the devastation wreaked on property values throughout the country after the credit bubble burst.
“Most downtowns have MSDs. They understand the importance of it. The end result has been fabulous, we have a fabulous downtown,” said Darlene Thomas, marketing director at the New Bern Chamber of Commerce.
“There comes a time when you have to decide what your image is,” O’Grady said.
“The MSD doesn’t even do that much for me, but it does allow me to attract that many more people to downtown,” Spetrino said.
“Wilmington deserves every opportunity to be the greatest downtown it can be. It doesn’t matter who gets the credit. The goal is start solving the problem,” he said.

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