By Emily Ford
eford@salisburypost.com
KANNAPOLIS ó The city of Kannapolis has been dealt yet another blow in its attempt to raise money to pay for infrastructure improvements around the N.C. Research Campus.
After requesting between $25 and $30 million from BB&T in an unusual arrangement called tax increment financing, city staff learned that the bank will approve only $18.5 million and possibly less, City Manager Mike Legg told the city council Monday night.
“This creates a significant dilemma on how to proceed,” Legg said.
The bank’s decision took city leaders by surprise, who had turned to BB&T because it was the only North Carolina bank willing to take on the private purchase of tax-increment financing bonds over 20 years.
“This is certainly a different picture than the one we initially received from BB&T,” Legg wrote in a memo to city council.
The city pursued the bank-placed tax-increment financing agreement with BB&T in place of the original, open-market TIF bonds worth $168.4 million, which were put on hold last year when the economy tanked.
BB&T slashed the city’s $30 million request in part due to the risk incurred because the Research Campus has only one property owner, California billionaire and Dole Food Co. owner David Murdock.
The tax-increment financing deal would depend on Murdock paying increased taxes on his property in the TIF district, which includes and surrounds the Research Campus. The 350-acre life sciences complex focuses on human health, agriculture and nutrition.
Murdock’s real estate company Castle & Cooke is developing the campus.
“Staff stressed to BB&T the reality that it is highly unlikely that Castle and Cooke would walk away from $400 million investment by permitting foreclosure via a delinquent tax bill,” Legg wrote in the memo.
“Staff also stressed to the bank that the revenues are not speculative ó that they are being paid based upon development already in place.”
Murdock has constructed four massive brick buildings in downtown Kannapolis and a large parking deck. Another building is under way.
The bank was not convinced.
“They support the project but decided to reduce some of their risk by reducing the amount,” Legg said.
The bank also balked because TIF bonds have a negative perception in North Carolina due to a failed project in Roanoke Rapids, Legg said. Financing backed primary by new development makes the bank cautious as well, he said.
The city’s requested $25 to $30 million would have funded at least six projects:
– A new Cabarrus Health Alliance building, $15 million
– A tunnel under Loop Road for storm water and pedestrians, $1.6 million
– Downtown waterline replacement, $2.5 million
– Reimburse the city for previous projects, $1.3 million
– Reimburse Castle & Cooke for previous projects, $6 million
– Legal and financial adviser fees, $700,000
In light of BB&T’s decrease, Legg outlined four options.
The city could remove the Cabarrus Health Alliance building from the funding package.
The health alliance serves as the public health department for Cabarrus County. The promise of a new building near the Research Campus finally convinced the Cabarrus County commissioners to agree to the controversial TIF arrangement with the city of Kannapolis.
The city would not abandon the health alliance completely, Legg said.
“We would have to commit to the Cabarrus Health Alliance building in the future,” he said.
Legg said he wants to keep the new building in the package if at all possible, as it would send 200 to 300 workers into downtown Kannapolis every day.
Faced with the possibility of no funding, health alliance officials told Legg they might find ways to cut between $3 and $5 million from their project by decreasing the size of the building, constructing it in stages, renegotiating the bid or finding some internal funding, he said.
The city could consider finding smaller banks willing to take on pieces of the overall plan to “fill in the gaps,” Legg said.
And finally, the city could scrap the TIF idea altogether, which would send Kannapolis back to the drawing board with the county commissioners.
The city must find funding soon or risk losing $2 million in federal grants for the Loop Road tunnel and downtown waterline projects.
After a year of tough negotiations with the county commissioners to arrive at the TIF agreement, city council members said they are not ready to abandon it and directed Legg to find additional banks willing to enter the deal.
BB&T is “reneging on the original agreement,” Mayor Bob Misenheimer said. “Here we’re left in the lurch again.”