Stalled bond issue costs 18 jobs at Cabarrus health department
By Emily Ford
KANNAPOLIS ó Troubled bonds that were supposed to pay for a new health department and other improvements around the N.C. Research Campus have cost 18 public health employees their jobs, an official says.
Dr. William Pilkington, director of the Cabarrus Health Alliance, said he had to lay off the workers because the tax increment financing, or TIF, bonds were never issued.
The bonds were supposed to provide $168.4 million for street, utility and other projects, including $15 million for a new health department.
“I would have been able to save those positions, probably every one of them,” Pilkington said.
The health alliance serves as the public health department for Cabarrus County.
The layoffs took 12 full-time and six part-time employees, including a pediatrician, an immunization nurse and a death and birth certificate clerk.
Pilkington said he could no longer afford the positions because he’d spent more than half a million dollars planning the new health department, money the TIF was supposed to reimburse.
“I’ve put out close to $600,000 that we could have used on public health,” he said.
The TIF bonds were supposed to fund water and sewer upgrades, traffic improvements and other infrastructure projects around the Research Campus, a $1.5 billion biotech complex in Kannapolis created by Dole Food Co. owner David Murdock.
The bonds also would have generated $15 million to build a new health department across Dale Earnhardt Boulevard from the Research Campus, where Sherwin-Williams Paints stands.
But the economy tanked just before the city of Kannapolis issued the first bond package, and the market for unrated bonds has never recovered.
Before the city called off the bond sale, Pilkington had already spent nearly $600,000 on architect fees and site preparation costs, including purchasing two homes near the paint store.
When the TIF stalled, Pilkington had to lay off the employees, he said.
Tax increment financing bonds allow cities and counties to borrow money without voter approval for public projects. The increase in property value from the development district goes to pay off the bonds.
After a yearlong struggle, the city of Kannapolis and Cabarrus County agreed in 2007 to the TIF and $168.4 million in projects. The county insisted that the new health department be included.
Now, county commissioners and city council members must decide whether to pursue a different, more traditional way to finance the building. The city probably won’t issue the first TIF package for at least a year, city manager Mike Legg said.
Pilkington said he can’t wait that long to be reimbursed.
“This is hurting us,” he said.
Constructing the building now would save money, he added.
Construction costs have plummeted during the recession. Pilkington said he has a bid of $8 million for the project that once was projected at $14 million.
Commissioners on Monday agreed to consider dedicating this year’s revenues from the TIF district to finance a new health department. The City Council will take up the issue July 13.
If officials agree, the city would use the TIF district revenues, likely between $1 and $2 million, to obtain traditional financing totaling about $26 million, Legg said.
That loan would pay for the new health department and reimburse, in part, millions of dollars the city and Research Campus developer Castle & Cooke North Carolina paid up front for utility and street improvements.
Legg called the county’s willingness to include these reimbursements “very positive news.”
“Castle & Cooke and the city both have obligations that we would like to resolve,” he said.
The city could even end up owning the new health department building. If the loan requires collateral, the county “has no objections to the city owning the CHA building,” said county manager John Day in an e-mail to Legg.
Day questioned whether the Health Alliance jumped the gun by designing the building and putting out bids before the city issued the bonds.
“They’ve spent half a million dollars, and they didn’t have the money from the TIF,” he said. “If they hadn’t done that, we wouldn’t be doing this.”
Day agreed that Pilkington was able to find “good prices in this market” and “didn’t have any reason to believe that there would be a delay in the issuance of the TIF bond.”
“But on the other hand, they spent $500,000 of their fund balance, which has had a somewhat detrimental effect on their finances,” he said.
Day predicted it will take two years to issue the TIF.
“That market is gone,” he said. “No one is willing to take that kind of risk. That’s the riskiest type of municipal debt that’s out there.”
Legg defended the Health Alliance’s decision to plan the building before the TIF was issued.
“I don’t fault them at all for proceeding,” he said. “That was a reasonable approach to take.”
Pilkington said he started preliminary work on the building last summer because the city was confident in the bond sale.
Even if officials come to an agreement in coming weeks on a new way to finance construction, the Health Alliance likely won’t break ground for at least three more months.
Pilkington said his bids will expire and he’ll have to start over.
“At this point in time, I guess I feel kind of like when my doctor told me I had cancer: hope for the best but expect the worst,” he said. “I’ll believe it when I see the money.”