County unsure of Whitted subsidy needs
The deputy county manager who is riding herd on the Whitted Junior High School redevelopment says it will be “several weeks” before local governments know whether they might have to raise their $7 million contribution to the project.
The project cleared a big hurdle this month when the N.C. Housing Finance Agency awarded it $631,210 in federal low-income housing tax credits.
Whitted’s Atlanta-based developer, The Integral Group, can use that to attract millions in private-sector investment in a project initially expected to cost about $21 million.
But Integral likely has a hole in its balance sheet because the N.C. General Assembly unexpectedly decided to let a different tax credit, a state subsidy for the redevelopment of historic properties, expire at the end of the year.
Neither the developer nor local officials saw that coming last year, when they were told Integral’s financing assumed the county would contribute $1.5 million, the Durham Public Schools $5 million and the city $500,000 toward converting the 1922-vintage building into a pre-school and apartments for the elderly.
“If the low-income tax credits were approved last year, perhaps the historic [preservation credits] would not have been an issue,” Deputy County Manager Lee Worsley said. “But the timing is what it is. We’ll all regroup and we’ll all put our heads together and see how we can keep it moving forward.”
The county owns the former Whitted School and picked Integral to spearhead work on the project.
Whitted is near the city’s Rolling Hills/Southside redevelopment; officials expect Integral’s project to complement the city’s. But saving the building is a priority in its own right because it started life as Durham’s first high school for blacks.
Worsley’s mention of a year’s delay alluded to the fact that Integral didn’t get the low-income housing tax credits the first time it applied for them.
State officials ration them, reserving a hefty share for projects in North Carolina’s two largest counties, Wake and Mecklenburg.
Durham usually only gets housing tax credits for one project a year, and in 2013 that turned out to be a competing proposal for a 60-unit apartment complex on a new site near Hope Valley Farms.
That project’s developer, Jim Yamin, has also asked for city subsidies. He’s told the City Council he shouldn’t be penalized for beating out Whitted in the 2013 credits competition.
Worsley, meanwhile, said county officials intend to confer with Integral’s team to see where the project’s finances stand.
“The ball is in their court to let us know what issues they’ll be facing,” he said. “We’ll take a look at it and provide the [county] commissioners with recommendations on next steps.”
The General Assembly’s decision to let the preservation tax-credit program expire was a surprise because the program had received a high-level endorsement from Gov. Pat McCrory and majority support in the N.C. House.
But N.C. Senate tax-law specialists, adhering to Republican tax ideology, argued that it would be more market-neutral for the state to eliminate such tax-credit programs.
The actual effect of the expiration is anything but market-neutral, however, as it favors suburban development and new construction. Both are less expensive than center-city projects or the large-scale renovation of existing buildings.