By Hugh Fisher
For the Salisbury PostKANNAPOLIS ó The Kannapolis City Council gave the final go-ahead to issue $168.4 million in bonds for public improvements in support of the North Carolina Research Campus at Monday’s meeting.
Pending approval by the North Carolina Local Government Commission at its meeting on April 1, the first issue of up to $100 million in so-called tax-increment financing bonds is slated for May 1.
The council’s unanimous vote is the last local action required to start the bond issue process.
Prior to the vote, some of the city’s bond advisors addressed concerns that had been raised about recent problems in the financial markets.
Janice Burke, of financial firm First Southwest Company, told the council that, although the Federal Reserve has cut some interest rates recently, the rates expected on certain types of debt financing have actually gone up.
Instead of the approximately 5 percent interest rate in effect when the tax-increment bonds were first discussed, rates are currently hovering around 7 percent.
“This has nothing to do with Kannapolis or the Research Campus project,” Burke said.
Instead, Burke said that fallout from the ongoing mortgage crisis was having a ripple effect in other markets.
The good news for Kannapolis is that interest rates may fall between now and May, and the second issue of bonds next year has an even better chance of carrying a lower rate.
“We’re hoping that the market will have settled down,” Burke said.
She also told council members that the bond issue contains a clause that allows the city to refinance the bonds if interest rates fall dramatically.
The council also unanimously approved a revised agreement with developer Castle & Cooke under which that company will construct portions of the Research Campus infrastructure to meet their needs.
Unlike most city projects which go through a public bidding process, some projects that directly affect the campus ó including some utility and street projects ó will be overseen by Castle & Cooke.
For these projects, Castle & Cooke will not solicit bids locally. The agreement gives Castle & Cooke the ability to select contractors from a list of “qualified contractors” it has chosen.
Instead of being opened in public, bids will be opened in the presence of the Kannapolis city engineer. And the agreement explicitly states that Castle & Cooke is not obligated to choose the lowest bid.
In exchange for this freedom, Castle & Cooke agrees to ensure completion of more than $70 million in “phase one” utility, roadway, landscaping and parks projects ó those considered most vital to the Research Campus ó even if bond revenues do not cover the total amount.
The most recent list projects a $4.3 million shortfall between the amount bonds will cover and the cost of the projects. Under the agreement, Castle & Cooke will make up that difference by funding projects itself or being reimbursed by the city.
Councilman Richard Anderson expressed concern about giving a company the ability to approve bids for projects in this manner.
“This is the first time I can recall in my 17 years sitting on this council that we have done this,” Anderson said.
But Anderson also expressed his support for the Research Campus and the projects and went on to vote in favor of the agreement.
City Manager Mike Legg acknowledged the agreement with Castle & Cooke is unprecedented.
“There is a lot of trust in this agreement,” Legg said. “But I think the city and the citizens get a lot out of it by ensuring that these projects get done.”
But he also reiterated that many of the “phase one” projects ó including new waterlines and other utility work ó have already been completed or are under construction, with Castle & Cooke footing the initial bill pending the bond issue.
In other business, the council:
– Voted unanimously to approve the rezoning of 2.3 acres at the intersection of Jim Johnson Road and N.C. 73. The land will be rezoned for commercial conditional use and is slated to contain small retail stores and restaurants.
The Kannapolis Planning Commission had approved the rezoning by a 6-2 vote at its meeting Feb. 6, but a resident’s appeal brought the matter before the council.
– Discussed the Annual Action Plan for allocating $26,439 in Community Development Block Grant funds to one of four possible projects.
Three of those projects would involve building sidewalks in neighborhoods or near Woodrow Wilson school; a fourth would construct bus shelters at high-traffic stops.
One of these projects will be chosen prior to the April 28 council session.
Contact Hugh Fisher at 704-797-4245 or hfisher@salisburypost.com.