By Hugh Fisher
For the Salisbury Post
CONCORD n The Cabarrus County Board of Commissioners voted 4-to-1 on Thursday to approve tax increment financing as the method by which the county will participate in financing up to half of $168.4 million in improvements in Kannapolis, in an equal partnership with that city.
The vote brings a close to weeks of debate about the divisive funding method, by which property tax revenues from a specific district are dedicated to the repayment of 25-year bonds.”Naturally, I’m pleased that we can begin drawing up the agreements between the city of Kannapolis and Cabarrus County,” Kannapolis Mayor Bob Misenheimer said just after the vote.
“It’s time to start moving forward, and to start doing some things. We’ve been dragging our feet for too long,” he said.
“I’m delighted,” said Lynne Scott Safrit, president of Castle & Cooke North Carolina, developer of the North Carolina Research Campus. Under the tax-increment-financing proposal, improvements in roads and other services would be paid largely with tax revenues from the Research Campus.
Castle & Cooke’s staff will soon meet with city officials to begin working out the legal agreement governing that plan.
“I’m happy that the county has agreed to partner with the city,” Safrit said. “They were diligent with their research and came to the conclusion that this is a great project.”
Although the county voted on May 21 to partner with Kannapolis in making improvements n including new roads and intersections, water and sewer lines, parks and other public facilities n commissioners had disagreed on the method of funding.
Members of the board said they wanted to fully explore all borrowing options, including certificates of participation, or COPs, and general obligation bonds.
Certificates of participate are a form of debt that county commissioners can approve, using county property as collateral, while general obligation bonds require voter approval.
Both options would have placed the burden of repayment on county taxpayers in the event the Research Campus owners failed to pay taxes. Under the tax increment financing proposal, the city of Kannapolis is responsible if that occurs.
Thursday night, the commissioners saw all three funding options presented in a variety of scenarios and learned about the risks and benefits associated with each.
Debate and discussion of the measure lasted about 21/2 hours, with presentations by Cabarrus County’s bond counsel, Stephen Cordell of Helms Mulliss Wicker, and county underwriter Joseph Niggel of UBS Investment Bank.
Cordell and Niggel showed commissioners multiple alternatives involving certificates of participation and bonds, most of which lowered the amount of interest but that also had the potential to require payments out of the county’s general fund in the case of a tax shortfall.
While the tax increment financing plan will cost more in interest, board members had to weigh the risk of using county buildings like schools as collateral.
Commissioner Grace Mynatt brought up a concern about the larger amount of revenue that Kannapolis would receive over time as a result of growth supported by the infrastructure projects.
Mynatt expressed a concern that Kannapolis, as home of the Research Campus, should take on more responsibility for repaying the tax increment financing debt as revenues increase. The city staff has projected Kannapolis bringing in millions in excess revenue each year after about a decade.
However, Edward Boyles of Bank of America, which will sell the bonds to investors, pointed out that a majority of bond debts are refinanced over time as interest rates fall or as additional revenue comes in.
“In my experience of working 20-plus years, I’ve yet to see an original piece of debt run its course,” Boyles said. “The financial condition is only going to get better. At some point, you’ll probably revisit the debt, certainly in the next 10 to 15 years.”
Following the discussion, Commissioner Jay White made a motion to adopt the tax increment financing proposal, with the interlocal agreement and project list to be discussed in the days ahead. Mynatt seconded the motion.
Commissioner Coy Privette cast the lone dissenting vote and said he did so because he felt Cabarrus residents should have been allowed to vote on the measure.
However, when Commissioner Privette raised that objection during the board’s discussion, Chairman Bob Carruth pointed out that in 2004 general elections, voters gave the county government authority to participate in tax increment financing.
“The voters have voted,” Carruth told Privette.
Privette also pointed out that three buildings from the Research Campus will go off the tax rolls after 20 years, five years before the TIF bonds are paid off. He worried city leaders had not taken this reduced income into account.
But Castle & Cooke’s Safrit and City Manager Mike Legg downplayed the impact of those buildings, which will be home to researchers and students from the University of North Carolina at Chapel Hill, N.C. State University and Rowan-Cabarrus Community College.
“It’s a billion and a half (dollar) project, and three buildings are going to be donated to the public,” Safrit said. “That’s really a concern that had no merit.”
Legg said the value of the three educational buildings reverting to public ownership after 20 years is about $100 million, and the tax revenue that will disappear after two decades is negligible compared to the larger value of the Research Campus project.
After the meeting, Chairman Carruth said he was pleased with the results of the meeting, especially the board’s decision to limit county taxpayers’ liability.
“We don’t place our credit rating at risk, and we’re not having to take out a mortgage on our schools to pay for David Murdock’s project,” he said.
Commissioner Mynatt said she only voted for tax increment financing after a lot of thought.”I feel the project is going to generate the funds we need, and we can build enough security into the agreements.”
In the weeks ahead, the City Council and staff will meet to discuss the interlocal agreements that will contractually bind the city, the county and Castle & Cooke, while commissioners will take up discussion of the city’s list of potential projects at their June 18 meeting.
nnn
Contact Hugh Fisher at 704-797-4245 or hfisher@salisburypost.com.