Commissioners briefed on Jack Tar incentives

Feb. 10, 2014 @ 08:56 PM

City and county officials are mulling a business-incentive deal worth a cash value of nearly $8 million over 15 years to the prospective buyer of downtown’s old Jack Tar Motel.

The County Commissioners got their first in-public look at the project Monday evening, and concluded their discussion by authorizing further negotiations with the city and the would-be developer, Austin Lawrence Partners.

Monday’s briefing confirmed that Austin Lawrence is interested in the Jack Tar primarily for its potential to support the 26-story office-and-apartment tower it plans to build nearby. The old motel has a 250-space parking deck.

Its spaces will help the company meet the tower’s need for about 360 parking slots, given how tight parking has become in the city’s nearby decks, officials said.

Austin Lawrence’s plan is to renovate the deck and the Jack Tar proper, fitting out the motel with 74 guest rooms, a rooftop lounge and 14,000 square feet of retail space. It will spend about $5 million to buy the property and another $12 million on renovations.

The company’s incentive request is designed to deliver it $6 million in present-day value. The cash outlay would be larger for the two governments to account for inflation.

Commissioners signaled that they like the project, but aren’t necessarily sold on a 15-year payout or on sharing the costs of the incentive package 50-50 with the city.

In downtown, “we’ve seen a whole lot of changes, and it’s been changes for the good,” said commissioners Chairman Michael Page. “When you look at the long-term investment down the road, I just see this being a plus for the community.”

As is usual, the incentive payments would play out as a give-back of some of the tax revenues local officials expect from the proposed development.

The properties involved in the tower and Jack Tar projects now generate about $42,500 a year in tax revenue for the two governments, officials said.

If Austin Lawrence delivers, they’d generate nearly $1.4 million a year.

The incentive deal asks the two governments to give back about $530,000 a year of that, again splitting the bill 50-50.

City officials have pressed the county for an even cost split in incentive deals of late, largely in response to prodding from City Councilman Steve Schewel. He’s noted the county inherently stands to gain more revenue than the city from projects because of the structure of the local tax base.

But on Monday, Commissioner Ellen Reckhow said the case for an even split isn’t nearly as clear-cut as city officials argue.

She noted that the county has to shoulder “a number of commitments the city doesn’t,” including incentive deals for projects in rural Durham, the costs of a new courthouse and human-services building and subsidies for the Durham Public Schools.

Because of school costs, residential development generally doesn’t pay for the county, “so we need to make money on non-residential” construction, she said.

Mayor Bill Bell and Councilman Eugene Brown attended Monday’s presentation. Bell spoke up to say that a move to shift more of the deal’s cost to the city would erode the project’s tax benefits to his government, for the structural reasons Schewel has noted.

Even under a 50-50 split, “you’re netting money,” Bell said, adding that past projects like the Durham Convention Center are precedents for an even-money deal.

City and county officials normally don’t openly discuss incentive deals until a package is ready for a public hearing and approval vote. The Jack Tar discussion surfaced early because of its historic-preservation aspect.

County officials don’t believe preservation projects qualify for a closed-door meeting the way other economic-development projects do under the state’s Open Meeting Law.

At least one other developer, Roger Perry, has looked at the Jack Tar property and made it clear he had little interest in retaining the existing, 1960s-vintage building.