Council fields $500K aid request for shopping centers

May. 28, 2014 @ 06:56 PM

Once burned, twice shy? Or forgive and forget? They aren’t philosophical questions for the City Council, thanks to a proposal from Durham’s Office of Economic and Workforce Development.
Its director, Kevin Dick, wants council members to consider providing $500,000 in aid to help pay for the renovation of Phoenix Square and Phoenix Crossing shopping centers on Fayetteville Street.
Trouble is, the centers are the property of Denise and Larry Hester, who have a long and contentious history with the council that revolves around the Rolling Hills project.
The two headed a nonprofit that led a failed redevelopment of the Rolling Hills site in the late 1990s and 2000s that ended after the nonprofit defaulted on an $860,000 loan from the council. Officials claimed control of the unfinished portions of the project via foreclosure, and orchestrated a new project whose first phase only now is nearing completion.
Dick acknowledged Thursday that that history might be enough, by itself, to put the council off on the idea of subsidizing a replacement of the façades of Phoenix Square and Phoenix Crossing.
But he pointed out the council has said it wants to revitalize the still-rundown Fayetteville Street corridor. And like it or not, he said, that means dealing with the Hesters.
“We know of no imminent plan they have to sell the property,” Dick told council members. “And therefore if we’re interested in enhancing the gateway on this end of Fayetteville Street and we’re interested in partnering to upgrade private property, this is the entity we would be working with.”
The ensuing discussion showed just how much controversy the idea could stir up, by immediately causing a split in the council’s firmest and longest-running political alliance.
Councilwoman Cora Cole-McFadden offered the aid proposal an immediate endorsement, saying she favors it “wholeheartedly with no reservations.”
“We have given beaucoup of money to people who don’t even live here to develop projects,” she continued. “If we have reservations based on stuff that happened in the past, let it go, this is a new day. We are a second-chance council, a second-chance city. We do it for other folks, so we deserve it on Fayetteville Street.”
But Cole-McFadden’s primary ally on the council, Mayor Bill Bell, disagreed.
“Unlike my mayor pro tem, I do have some reservations, and my reservations are born in the history of what we’ve been doing in this area, and they’re born in the history of what we had to go through to get Rolling Hills as it is now,” Bell said. “And I remember, very distinctly, who fought very hard to prevent that from happening, in spite of the fact we tried to say this would only enhance your property.”
As Bell indicated, the Hesters did in fact oppose the city’s efforts to put together the new Rolling Hills project, which this year will deliver 132 finished apartments plus a number of owner-occupied homes in the adjoining Southside neighborhood.
They fought one early financing attempt that involved formally labeling the area as blighted. They also argued publicly that officials, to gain control of the remainder of the site, would resort to using eminent domain to force residents out of their homes.
The council in point of fact acquired the needed properties through voluntary purchases, on its own or in cooperation with the Self-Help credit union.
Despite his comments, Bell didn’t rule out the possibility of offering the aid, which would cover half the cost of the prospective renovations to the shopping centers.
He indicated Dick and the rest of the city staff would have to draft significant performance guarantees to overcome his qualms, and that the Hesters would have to offer assurances about the treatment of existing tenants in the shopping centers.
Several other council members likewise signaled a willingness to consider some sort of aid.
Councilman Steve Schewel emailed Dick and City Manager Tom Bonfield on Friday to suggest that they consider structuring any package as a “forgivable loan” that would allow the city to recover its money if the project fails or the Hesters sell the properties.
He also asked for a “synopsis” of the Hesters’ involvement in the earlier, failed Rolling Hills project.
“If the company has failed to appropriately and successfully use city funds in the past, that should definitely be part of our deliberations, as it would for any lender,” Schewel said.
The only outright opposition to the idea came, not unexpectedly, from Councilman Eugene Brown, who termed the earlier Rolling Hills project “an absolute and complete fiasco.”
Moreover, “there’s disinvestment” at Phoenix Square and Phoenix Crossing, Brown said. “The owners have not invested in their own property. They have not enhanced it. They have not embellished it.”