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OPINION: Project Grace Lease Agreement 'fair And Affordable'

By New Hanover County Board of Commissioners, posted Aug 5, 2022
It is a moment more than four years in the making and we, as a Board of Commissioners, are unanimous in our approval and support of Project Grace and our desire to move forward with this impactful and transformational project.

That is why we are asking Treasurer Folwell, who chairs the Local Government Commission (LGC) and directs the commission’s agenda, to calendar a vote on the Project Grace lease agreement at their next meeting.

The lease is the financial document that outlines the county’s payments for the development of a state-of-the-art Public Library and Cape Fear Museum on our county-owned land in downtown Wilmington. This facility would enhance the educational resources our county offers for residents and visitors.

The Public Private Partnership that would make this a reality would also include private development that would transform the block into a cultural, residential, and commercial hub. That investment will also generate revenues for the City of Wilmington and New Hanover County, the municipal services district, and the room occupancy fund that supports the downtown convention center – in perpetuity.

Our county staff, representatives from Zimmer Development, and Vice-Chair Deb Hays were able to present to the LGC on Tuesday, August 2. We know this is a complex project, so we appreciate the LGC’s questions and dedication to evaluating this at their meeting, and we believe our staff did a great job of answering their questions and providing clarity around the project.

Vice-Chair Hays has since sent a letter to Treasurer Folwell asking for him to calendar this item for their September meeting so that we can move forward. We are all in agreement as a board that this step is necessary and is a priority.

For context, anytime a local government agency in North Carolina proposes to do a project of sizable cost and of extended duration to the taxpayers through a financing arrangement, approval from the LGC is required to move forward. Project Grace certainly falls under that condition.

In this case, the LGC is responsible for reviewing and voting on one part of the proposed development – the lease agreement between the county and Zimmer Development. They are not responsible for approving the Memorandum of Understanding (MOU) or the development model, but must ensure the lease itself positions the county and our taxpayers in the best financial situation given the parameters of the market and the county’s financial standing. We believe the lease agreement is fair and affordable and meets the review requirements of the commission.

We know there is a question from Treasurer Folwell around a provision in the county’s Memorandum of Understanding (MOU) with Zimmer, which outlines that the county would purchase the project plans from Zimmer for up to $2.5 million if the lease agreement isn’t approved.

This ensures that the county has schematics in-hand for what building the Public Library and Cape Fear Museum would entail. The county would pay the amount it has cost Zimmer to develop these design schematics, renderings, construction documents, and overall plans. This would not be a development fee and we wouldn’t pay for anything more than what has been spent so far, and would allow the county to still proceed with the plans and specs for a new library and museum.

If we were to start over outside of a Public Private Partnership with Zimmer, the county would have to incur the costs of the design and construction plans on our own. So this provision is not unreasonable – it just ensures we can proceed with the project and the plans we have now.

Our county staff, including our museum, library, and facilities management teams, have put a tremendous amount of time and work into the needs and overall design of this public facility. They have thoughtfully considered the best use of the space to ensure that it accomplishes our goals to best serve the community. For all of that to go to waste would be extremely disappointing.

Over the years, Project Grace has taken on many forms, with numerous options considered, updated designs, additional priorities added and a lot of listening to our community – but we have held steadfast in the decision to go forward with a Public Private Partnership (P3) for the value it provides to our community and the ability it gives the county to ensure the best and right uses for the block.

A P3 brings the right people together from the public and private sectors to do something great that can’t be accomplished alone. It’s a visionary way to go about a development, and we hope the LGC understands and embraces that type of vision, even though it may be different from their typical approvals.

Without a P3 on this block, we would not have the guaranteed private investment in a set timeframe that creates additional commercial opportunities, new workforce housing for our hardworking residents, and more lodging for our tourism industry that is growing by double digits year over year. The $30 million added to our tax base, room occupancy tax, municipal services district revenues and sales taxes would not be realized. Outside of a P3, if we were to sell the remaining land in an upset bid process, we would not be able to determine what happens to the land, how it redeveloped, or even when any of that takes place. With the model we have chosen – all of that is guaranteed.

And yes, we could borrow the money through public debt to finance the library and museum facility, but we would be losing out on all of the tax revenues we’ve mentioned that will continue in perpetuity even after the 20-year lease term. That revenue offsets what it would cost to finance the project and what we would pay through the lease; and from a financial perspective, this model is the best way forward for our downtown block and our community.

After years of planning and hard work, we believe we have the best possible plan for how the Grace Street block should be redeveloped. We also believe the lease agreement is fiscally responsible and will lead to a significant upgrade in county-managed services at the downtown Public Library and Cape Fear Museum, while also ensuring the private development on the block has public purposes aligned with the county’s vision.

We take our responsibility to determine the types of public investment in New Hanover County seriously. We have thoughtfully proceeded with this project and are unanimous in our decision, and we ask the state treasurer to calendar this item for the LGC to proceed with a vote on the lease agreement at their next meeting. Our community, our staff, and our partners have earned and deserve the opportunity to proceed and bring this visionary and transformational project to fruition.

We encourage the community to learn more and see additional facts about the project on the FAQ page at NHCgov.com/Project-Grace.
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