Council questions cost of land buy

Apr. 26, 2014 @ 05:40 PM

City Council members are balking at the idea of paying the equivalent of about $1 million an acre for some of the land and easements engineers need to realign the intersections of Riddle Road, Fayetteville Street and Buxton Street.
Their objections have delayed for now the approval of a deal that would acquire temporary or permanent rights to about 0.29 acres on the southeast corner of Fayetteville and Riddle at a cost to taxpayers of $275,000.
But Councilman Steve Schewel said the overall, $5.3 million cost of the scheduled intersection realignment raises a bigger question, namely about whether it’s worth doing at all.
“I understand the state wants it, but I don’t want it that much,” he said. “That doesn’t seem a wise expenditure of city funds.”
Schewel added that the city has other pressing infrastructure needs, not to mention some things on its wish list officials otherwise argue they don’t have the money for.
“For $5 million, we could buy the [Duke] Beltline from Norfolk Southern and make an amazing trail downtown,” he said, name-checking a greenway project that’s stalled for lack of funds.
The interest in realigning the intersection comes because Riddle Road and Buxton Street now link up with Fayetteville Street at two different points, separated north to south by a bit less than 100 feet. That makes it awkward for motorists.
The project started life as a cooperative effort between the city and the N.C. Department of Transportation, the two a decade ago pledging to contribute equally when they expected the work to cost about $600,000.
But as estimated costs grew, DOT’s initial pledge of $300,000 didn’t. Eventually, officials decided the state’s offer was too small to be worth the red tape involved in using it, city Transportation Director Mark Ahrendsen said.
Now, with the city on the line for the entire bill, officials plan on paying for it with some of the money banked from “impact fees” developers paid over the years toward future road work.
Public Works Department emails indicate that land and easement purchases are by far the most potentially costly element of the realignment, the project’s budget reserving $2.8 million for acquisitions.
The actual construction is supposed to cost $1.8 million. The work is on track to start this fall.
City purchasers have been lining up the needed property for months, available records listing options that imply deals of up to $166,228 an acre for easements or outright ownership.
They secured one small piece of property for free, getting it as a donation from the Durham Public Schools.
The deal the council reviewed Thursday is with TRG Capital, the company that owns 4003 Fayetteville St. The tract includes a commercial building TRG and its owner, Frank Ascott, lease to a convenience store, Triangle Minimart & Tobacco.
The city wouldn’t buy the building, but it does want full ownership of 4,498 square feet of TRG’s land and a permanent drainage easement on another 3,962 square feet. The proposed deal also provides temporary construction access to 4,175 square feet.
General Services Department officials acknowledge the deal involves paying a premium, as the drainage work would take away seven of the store’s 15 parking spaces and render obsolete an approved plan for expanding the building.
“The ‘opportunity cost’ is the brunt of this acquisition,” Real Estate Manager David Fleischer said, using business jargon to indicate the city would pay not just for the property, but for TRG’s potential future revenue losses.
The expansion plan dates from 2008 and should have expired in 2012. But the N.C. General Assembly, in a post-recession concession to the real-estate industry, ordered cities and counties to extend all approved permits by four years so developers could recover from the downturn.
That means TRG’s plan remains valid until the start of 2016, City/County Planning Director Steve Medlin said.
Public Works emails indicate city officials hired a local appraiser, David A. Smith, to help size up the value of the property involved in the realignment.
He thought the TRG tract was worth $403,500 and would lose $59,500 in value because of the city’s acquisitions.
General Services purchasers figured Ascott would have to spend another $25,000 to rework his expansion plan. That led them to propose making an initial offer on the property of $75,000, with $85,000 being what they really expected to pay.
That drew pushback from Mike Hughes, the Public Works engineer who’s overseeing the project.
He told General Services officials he thought the guess on the cost of a new expansion plan and the appraisal itself were both “understated” and that Ascott would want more.
But in a negotiation, “you need to start somewhere,” Hughes told them, conceding the point.
County land records show that TRG Capital bought the property in 2002, paying $325,000.
Schewel was the only councilman to voice a complaint about the overall cost of the project during Thursday’s review, but others made it clear they didn’t like the terms of the deal with TRG.
“It’s clearly a highly inflated real estate value,” Councilwoman Diane Catotti said. “I’m troubled by the opportunity cost element there.”