Durham council passes tower, Jack Tar incentives

Apr. 21, 2014 @ 10:28 PM

City Council members on Monday approved a $4 million business-incentive package for a downtown project they hope yields a 26-story skyscraper and the renovation of the former Jack Tar Motel.

The 6-1 vote was the first of two likely by month’s end, as county officials have been asked to match the city’s offer to Austin Lawrence Partners.

The company plans to invest “somewhere north of $85 million in the two projects” and hopes to finish both in 2016, said Greg Hills, its founder and president.

Assuming the schedule holds, work on the tower site should begin late this fall, he said.

Hills and a construction estimator, Amanda Moreau, said the initial work will focus on shoring up the facades of a burned-out building that has frontage on Main and Parrish streets.

The façade will become part of the new tower, which will have ground-floor retail space, four floors of office space and 132 apartments or condominiums.

Their comments addressed questions council members had raised during a preliminary discussion earlier this month.

They at the time indicated they wanted early action on the burned-out building, which a 2001 fire all but destroyed and that’s drawn appearance-related complaints from neighbors ever since.

Moreau said the bracing is the first order of business, and must occur before workers can remove fire debris from the interior.

“The structure is sound if unsightly right now,” she said. “Hold on for a few more months so it’s safe.”

Council members appeared satisfied on the point, the dissenting vote coming on a different issue from a surprising source, Mayor Bill Bell.

The mayor said he was “not comfortable” with the structure of the deal because it lacked assurances that the city will reap enough revenue each year to meet its payment obligations over the 15-year life of the deal.

That comment was surprising because the deal is similar in structure to most and perhaps all of the incentive packages the City Council has approved for major downtown projects while Bell’s been mayor.

They proceed on the assumption that the project in question will add to the city’s property tax base. Officials in cooperation with the county tax office guess the project’s likely assessed value, and the council in effect pledges to give back a portion of the expected “incremental” revenue to the developer.

But it assumes some risk in that, as a market crash or decision by a future council to cut tax rates, could always undermine the initial revenue projection. As long as the developer delivers the project originally promised, they don’t have to make good any shortfall the city experiences.

In Austin Lawrence’s case, officials are figuring the two buildings will yield $4.9 million in new property revenue for the city over the coming 15 years, plus another $3.4 million in hotel-occupancy and retail sales tax revenue.

But Bell said officials “ought to have absolute” certainty the revenue from the project can cover the city’s future payment obligations.

“I’m not going to be here two, three, four, five years from now, but somebody is going to be here paying this debt,” he said.

The mayor’s objection appeared to catch both his colleagues and the city staff by surprise, as he hadn’t raised the point during the council’s initial review of the package in an April 10 work session.

Senior Assistant City Attorney Fred Lamar pointed out the similarity with previous incentive agreements, and that state law bars an explicit tax rebate.

“The only issue is can we directly link our incentive to the actual tax revenue [collected] for a given year, and that’s what’s problematic,” he said. “It’s what the [city incentive] policy at least has historically avoided up to this point.”

Bell eventually called for a vote, saying he supported the project. But when City Clerk Ann Gray announced the result, it was clear the mayor had cast his electronic ballot against it.