TIF bonds on hold; Kannapolis hopes for stimulus funds
By Emily Ford
KANNAPOLIS ó Officials hope money from the stimulus package could help pay for projects at the N.C. Research Campus that have been delayed because the city can’t sell $95 million in bonds.
The interest rate for tax-increment financing is so high ó about 12 percent ó that Kannapolis won’t sell the bonds in March as planned, City Manager Mike Legg said.
“No way,” Legg said. “Anything above 7 percent makes us leery.”
The city compiled a list of 17 “shovel-ready infrastructure projects” that total more than $1 billion and distributed it to advocacy groups, coalitions and lobbyists in hopes of landing stimulus funds.
The projects include road, utility and waterline improvements in and around the Research Campus. Many are already designed and could go into construction within 180 days, Legg said.
“This is completely uncharted water. It’s not the normal federal budget process,” he said. “Our approach was to get our list in as many people’s hands as possible.”
In reality, most of the stimulus funds for construction probably will go to the states, with some trickling down to local government, Legg said.
N.C. Gov. Bev Perdue has been an advocate for the campus, and Kannapolis stands a good chance to see funding, Legg said.
“Any money spent on the campus is supporting life sciences, high-tech and the future economy,” he said.
The city is considering issuing a much smaller bond package, probably $30 million to $50 million, when the economy improves, Legg said. The money would build a new public health department for $15 million and reimburse the city and campus developer Castle & Cooke North Carolina about $20 million for projects already completed.
These bonds would be tied to construction already in place on the campus, as opposed to future construction, making them less risky to investors, Legg said.
“The risk is a lot lower when you can see the building, see the tax bill being paid,” he said.
TIF bonds are backed by future tax collections on improved property. Campus founder David Murdock has constructed four buildings in downtown Kannapolis so far.
Ultimately, the city will still issue the original $164 million bond package created in 2006, but over a longer period of time, Legg said.
“We have some breathing room,” he said.
The campus already has major improvements to roads, water and sewer lines and utilities. Developers could build “dozens of buildings” with just that first phase of infrastructure complete, Legg said.
“We don’t have the pressure of the project being in jeopardy,” he said. “We’re in wait-and-see mode like every other real estate deal in the United States right now.”