North Hills East

[avery]

I may be wrong but I think that the difference is that the Progress Energy deck charges for parking and the Kane deck wouldn't.

I think this is one of their arguing points, but I don't even think Kane sees this as a logical comparison. I think Kane is asking for Raleigh to invest in the project, via the parking, with the additional property taxes generated paying off the investment rather than parking fees. I understand what he is saying, but I don't know whether a parking garage or traditional parking lots would affect the property values all too negatively to be honest. Granted, I would rather see more open-space, but I think Kane could front the money himself and still reap a huge benefit off of the development.

There was a good column in the N&O today about this. The columnist suggested raising the lease rates slightly to cover the added expense of the deck. $75M out of a $1B project is only a 7.5% increase in cost. Personally, I think that government and free enterprise should be seperate except in seriously blighted and low-demand areas throughout the city. The property accross from North Hills is not too blighted outside of some shoddy looking apartments and the demand definitely is not lacking in the area.

If the city extends the loan, it opens Pandora's Box for additional developments. At what point does the city approve or disapprove a loan request? How much can be left outstanding before the city becomes stretched too thin? I just don't think the city should start operating a loan department. I say that the added revenues produced through redevlopment should be steered towards other city and county needs such as education, transportation, public services, etc. Kane should seek the financing elsewhere or finance it internally with this project.

As much as I love to see this type of development and Kane, I don't agree with him on this one and I hope the city denies a loan request. Parking fees should not even be considered on this one. Progress Energy was a different scenario. At the time, dowwntown Raleigh was seriously hurting for a major corporate investment in the city's core and I think the investment was justified.

[ChiefJoJo]

Progress Energy parking deck is a different animal. The deck charges for parking (generates revenue to pay back financing), is owned by the city and can be used for public events downtown. I believe that PE leases many of the spaces in the bldg for it's use.

North Hills would be a private development and parking there would only benefit Kane. Sure the city would reap benefits too in higher property taxes over time, but I'm not too sure this is the right place to do it. The other argument is why he needs public financing when he did NHills West without any help. Plus there are many other examples of this, like Soleil Center, where decks will be privately financed and built.

Plus if he cannot develop the North Hills East plan as is, then why would he propose it in the first place? If he cannot do it than what is plan B? and what will it look like?

Yeah, I think this is a good question. He said he can't build the parking deck required to support the high density development because of the high price he paid for the land. Well, the fact that he over paid is not the public's responsibility. Even so, why did he pay those prices knowing that the public financing for parking might not go through? What are the alternatives if it doesn't?

From the city's perspective, we need to get more info from Kane on what his plans would be if this is not approved. Also, the city should decide on some criteria on how to use the financing model for development projects. If the city looks at Kane's proposal in detail, gets answers from Kane and firm commitments, does it's due diligence, and finds it makes financial sense somehow based on some very clear, objective criteria, then I say go for it if we are guaranteed to get the type of project he plans to do. Otherwise I think it's a mistake.

[dmccall]

I watched on Tuesday and while I really want Kane's plan to get done, I have to ask this simple question:

If it (paying back the loan) is SUCH a sure thing for the city in the long run, why aren't banks chomping at the bit to finance this themselves?

I assume that Kane is a Republican and I have to ask any Republican: Do you think the government is there to be a bank when the private sector feels there is too much risk? I think it is very strange to watch the more liberal City Council members saying this isn't a correct use of the financing tool and the Republicans saying we shouldn't rock the boat holding this great proposed plan.

[avery]

I watched on Tuesday and while I really want Kane's plan to get done, I have to ask this simple question:

If it (paying back the loan) is SUCH a sure thing for the city in the long run, why aren't banks chomping at the bit to finance this themselves?

I assume that Kane is a Republican and I have to ask any Republican: Do you think the government is there to be a bank when the private sector feels there is too much risk? I think it is very strange to watch the more liberal City Council members saying this isn't a correct use of the financing tool and the Republicans saying we shouldn't rock the boat holding this great proposed plan.

Kane is suggesting that increased property values and tax revenues would pay back the investment. Banks and Kane don't get access to tax revenues to pay off the loan.

[avery]

I watched on Tuesday and while I really want Kane's plan to get done, I have to ask this simple question:

If it (paying back the loan) is SUCH a sure thing for the city in the long run, why aren't banks chomping at the bit to finance this themselves?

I assume that Kane is a Republican and I have to ask any Republican: Do you think the government is there to be a bank when the private sector feels there is too much risk? I think it is very strange to watch the more liberal City Council members saying this isn't a correct use of the financing tool and the Republicans saying we shouldn't rock the boat holding this great proposed plan.

Also, democrats tend to support more government sponsored programs, organizations and such. I have a feeling that they would have a hard time approving funding for a private project like this when there are limited dollars at play to further social development. Republicans on the other hand love private investment and free enterprise. Unfortunately, it shouldn't be this way when tax dollars are needed to support the private investment of this size.

I know, very rash generalizations, but just a first glance answer to your question.

[ChiefJoJo]

Also conservatives typically favor economic development, developers, corporations, etc, whereas liberals typically favor controlled development, and eco-friendly/progressive public policies. Of course this is a huge geralization, but the idea that conservatives always favor limited government is actually a myth IMO (esp when it comes to social issues, etc).

[bullcity76]

Also, democrats tend to support more government sponsored programs, organizations and such. I have a feeling that they would have a hard time approving funding for a private project like this when there are limited dollars at play to further social development. Republicans on the other hand love private investment and free enterprise. Unfortunately, it shouldn't be this way when tax dollars are needed to support the private investment of this size.

I know, very rash generalizations, but just a first glance answer to your question.

Another public benefit would be to set aside x units for people who make y% of the median income. Some of the retail slots should be affordable for local entrepeneurs. If Raleigh decides to go through with this, they should attempt to achieve as many social concessions as possible. This would save the city from producing these units with bond, general fund or federal CDBG funds.

I think TIF's can be solid tool for redevelopment, but it can be abused also. Normally, I would not support TIF's at this site but it presents an opportunity provide affordable housing options in a semi-walkable, semi-urban environment. This is not a greenfield development out near Wake Forest. Like I said before, Raleigh needs to detail specifically when they will or when they won't utilize this tool. These guidelines should have already been in place but most governments are reactive vs. proactive.

[pack-man]

Progress Energy generates a lot of revenue and this is projected before the city built it. But the driving force behind building this deck was the fact that Progress requested it. They do lease about 40% of it, the rest is other monthly accounts and transient vehicles daily. Progress wouldn't have built Progress II w/o the city building this deck.

The Kane situation is different if in fact this deck he is requesting the city to build would be free. This would be new territory for the city and they wouldn't be able to afford it. The maintenance is where the city loses all the money. They don't have a fund in place to pay for that sort of stuff like street maintenance does. Until this policy is changed, I don't see the city building free parking decks.

[Transplant]

How many parking decks does the City of Raleigh own?

[ChiefJoJo]

Indy article by Bob Geary on North Hills East.

As City Attorney Tom McCormick points out, the real debate here isn't TIFs or COPs, it's whether the public should build parking decks for developers in the first place, and if so, where? And in return for what public benefits?...

It is, rather, as Meeker expressed it: What could a "reasonable developer" put on the site, sans subsidy, and what would that be worth, versus Kane's plan with a subsidy?

Which begs the question, is it really a good idea to ring the Beltline--not to mention lining Six Forks Road--with 20- and 25-story buildings and up? Maybe, but I'd think the answer is no, unless the city starts today to execute a transit plan to support them. And how much will that cost?

He has a good point here. Can this development even be built to max capacity with all the traffic it will generate? North Hills (after full buildout) would a be a perfect transit destination.

[hoobo]

Progress Energy generates a lot of revenue and this is projected before the city built it. But the driving force behind building this deck was the fact that Progress requested it. They do lease about 40% of it, the rest is other monthly accounts and transient vehicles daily. Progress wouldn't have built Progress II w/o the city building this deck.

The Kane situation is different if in fact this deck he is requesting the city to build would be free. This would be new territory for the city and they wouldn't be able to afford it. The maintenance is where the city loses all the money. They don't have a fund in place to pay for that sort of stuff like street maintenance does. Until this policy is changed, I don't see the city building free parking decks.

That's why Kane is requesting a TIF. The TIF is a tax on top of the city-wide property tax rate that is applied to a specific area. The additional revenues generated would go towards the proposed city-financed parking garage. It won't kill Raleigh's finances whatsoever. Virginia Beach, which has 50,000 more people, has already used a TIF to build 3 free parking garages totalling 2500 spaces with another garage under construction and a fifth in the planning stages. All this is for one developer. Granted, this TIF covers a larger area (read: more tax revenue) but it's building more free garages.

From what I've read, I don't really like that Kane threatened the city. He really should have done a better job selling them on finances of the endeavor. However, if it takes a free garage to get this project done, then I say go for it. I'm really interested in all this because I'm seriously considering moving to Raleigh in the next year or two. I do miss the south mid-atlantic.

[avery]

That's why Kane is requesting a TIF. The TIF is a tax on top of the city-wide property tax rate that is applied to a specific area. The additional revenues generated would go towards the proposed city-financed parking garage. It won't kill Raleigh's finances whatsoever. Virginia Beach, which has 50,000 more people, has already used a TIF to build 3 free parking garages totalling 2500 spaces with another garage under construction and a fifth in the planning stages. All this is for one developer. Granted, this TIF covers a larger area (read: more tax revenue) but it's building more free garages.

From what I've read, I don't really like that Kane threatened the city. He really should have done a better job selling them on finances of the endeavor. However, if it takes a free garage to get this project done, then I say go for it. I'm really interested in all this because I'm seriously considering moving to Raleigh in the next year or two. I do miss the south mid-atlantic.

I hear what you are saying and you bring up a good point about the TIFS. I think a big problem is the timing and nature of the whole issue. It feels as if Kane is pushing the city in the corner and holding the upper hand by threatening to create a more mediocre development. Maybe this is too harsh of a metaphor, but the tact was somewhat lacking. I'm sure that this does not please all of the council. Also, this decision would set a precedent for future development that the city may just not be ready for yet. The political timing of the entire thing is not the best in my opinion. There are far greater concerns here in the Triangle amongst taxpayers than the parking deck for North Hills and I don't think it would be well received by the public, irregardless of its plausability.

I'm not too familiar with the nature of TIFs, but is this an additional tax over an above the established property taxes for the landowner? If it is, wouldn't this cost be passed on to the leasee anyhow? It seems that if Kane fronts the money on his own, he could essentially cover the financing by passing it onto the leasee as well. Again, I am not familiar with the whole concept and maybe the TIF draws in more revenue than what added rent would do or is more long term in nature? If it isn't it just seems like a way of passing the buck on the operating expense side of things to make the project look more favorable to Kane's investors?

[ChiefJoJo]

As I understand it, the idea is that the bond issued by the city would pay for the cost of the deck and the difference in the value of the property with the deck versus what it would be without it would be used to recoup the costs to the city.

Essentially he's saying< "I'll build a $700M urban development if you build my deck, but if you don't, I'll only build a $200M sprawling development." So he's saying the city would enjoy a huge property tax windfall (say on an additional $500M) as a result of it's expense... sort of an investment for the future.

I still don't buy that he can't find a way to develop the 45 acres in a dense, urban form while still financing his own deck--with no public subsidy.

[ncwebguy]

What if the original North Hills Mall's parking deck was paid for with a TIF? Would there have been enough tax revenue to cover the debt in the final years? If the property only generates enough tax revenue to pay for the deck, then does the rest of the project not have to pay any taxes at all? Other city services -- police, fire, road maintenance, etc. -- would still be needed, but paid for by other taxpayers. Does the city have any claim to property? If there is a "loan default" through low tax revenue, the city's bond rating is hurt (which mkaes financing other projects more difficult) and gets nothing to show for it.

Unlike the city owned downtown decks (behind City Hall, PE 2 and the deck next to it, and the deck near the new CC and Raleigh Memorial auditorium, a North Hills East deck would serve *only* Kane owned property.

If NHE is "economically distressed" property, then Kidds Hill Plaza, Soleil, and undeveloped land near Brier Creek are too. Who cares if Norht Hills/Crabtree/Brier Creek is right across the street -- those particular parcels are economic underacheivers in rough shape! The city will get a better project if the city builds a parking deck.

[bikwillie]

Raleigh needs to develop criteria to apply for this, bc every developer in town is going to line up to get it.

I'm not opposed to NHE getting it. IF, and I mean a big IF, it gets built as planned, it will certainly pay for itself. I would also like to tie it to some affordable housing. He has single handedly cleaned out the entire stock of affordable rental in the area.

If the city can say "these are the rules for all developers to get this financing" and Kane appears to meet them, then I'd say you'll get it if you add x amount of units that are affordable to someone making 60% of the median income.

[Transplant]

The N&O has an article of other cities use of the TIF.

I like Portlands used of the TIF as a means for mass transit.

[bikwillie]

I also loved Ruth Sheehan's article about North Hills. I was shocked that she loves North Hills. That hypocrite was probably ready to handcuff herself to the bulldozers before construction began. esp. given her opposition to the dreaded and evil "COKER TOWERS."

[hoobo]

There have been a couple questions and confusion on TIFs and how they work.

There is a city-wide property tax rate. (In Raleigh, if I remember correctly, it is a combination of the Wake County tax and the City tax which comes out to about 1.1%.) Let's call this the base tax. The base tax is earmarked by the city charter/code to the general fund. This money has to go to pay for schools, PD, FD, etc. A TIF is tax in addition to this base tax. Think of it as an overlay. An area such as a downtown/CBD or special services district is designated for this TIF. Once the additional tax rate and time frame are decided upon, the TIF is implemented.

For example, the base tax is 1.1% in FY 2006. By FY 2016 an additional 0.5% tax will be in place resulting in a combined 1.6% tax rate for the overlay area. The base tax (1.1%) still goes to the general fund but the TIF (0.5%) has to be used in the overlay area. The TIF is not tacked onto the tax bill at the full 0.5% rate in FY 2007. Instead, it is increased incrementally over the specified time period (in this example 10 years). For a 0.5% tax over a 10 year period, each year the overall tax would increase 0.05% so that in FY 2007 the total tax is 1.15%, in 2008 it is 1.2%, and so on. After the specified year is reached, the new tax rate is set at that level, which in the example will be 1.6%.

For North Hills, the TIF overlay would presumably go around Kane's developments. The base tax would still go back to the GF, but the TIF revenue would go to pay debt service on the free parking garages. That's the key work: free. If it was pay-parking then the user fees would pay for the garage's debt service and banks would be willing to lend money for its construction. Another solution would be to build a couple smaller garages instead of one large one. Although the combined cost will be higher, it may be easier to finance a smaller less expensive garage for each phase of the project.

One last word on TIFs. They're not all used for developers. A neighborhood could conceivably use it to build a community pool or add a neighborhood center to the local school. A beachfront district could use it to pay for beach replenishment projects. Downtown could require special services like high-rise fire trucks or non-intrusive utility construction methods (tunneling) for which the city doesn't want to burden the rest of the city residents and businesses with since they don't need that for their low-rise neighborhoods.

OK, I just noticed the N&O article and it is pretty good in explaining TIFs. But why did Raleigh officials have to travel to St. Paul and other distant locales when all they had to do is travel up to Virginia? Doesn't sound like a good use of city funds. Anyway, I'm familiar with my hometown's (Virginia Beach) use of TIFs. There are 3 areas plus a special tax district that predated TIFs. The oldest TIF is for the Sandbridge Beach area to pay for that neighborhood's sand replenishment. The second TIF is around the CBD to pay for redevelopment projects such as new infrastructure and several free parking garages in the Town Center project. The third TIF that few know about is around the super-regional Lynnhaven Mall and it pays for its free parking deck. The special tax district is for the resort area but those taxes are not on property but on hotel rooms. Hope all this helps.

[Transplant]

This is not the way i understand the TIF mechanism.

I was under the impression that the tax rate was the same. TIF says that the additional taxes from growth/development in a certain area go to pay the loan.

So, if an area has a tax rate of 1%, and a property value of $100 Million, the city collects $1 Million. The TIF would be used to spur $800 Million in development. So the Tax value would be $900 Million, or $9 Million a year. With the difference $8 Million, used to pay the bond.

[hoobo]

This is not the way i understand the TIF mechanism.

I was under the impression that the tax rate was the same. TIF says that the additional taxes from growth/development in a certain area go to pay the loan.

So, if an area has a tax rate of 1%, and a property value of $100 Million, the city collects $1 Million. The TIF would be used to spur $800 Million in development. So the Tax value would be $900 Million, or $9 Million a year. With the difference $8 Million, used to pay the bond.

You're right. I just reread the presentation given by Virginia Beach. I misunderstood the whole concept mainly because I breezed through it. But as you said, the baseline is set at the present-day tax revenue. Anything above the baseline goes to pay off the bond. The TIF remains in place until the bond is paid off. After that, all the revenue reverts to the general fund. That would also mean that any area with an additional tax is simply a special tax district.

Sorry about the confusion everyone.

It appears that a cost/benefit analysis needs to be made between the full project which "requires" the TIF and the threatened slack-off project. Which would ultimately provide the most tax revenue and spur the most development? That should be the basis of the decision. In Virginia Beach's case, it was either a Wal-mart or an urban high-rise development with TIF-funded parking garages. The latter was chosen and since the project was begun 6 years ago, there have been several completely privately financed projects begun and announced. So the TIF turned out to be a winner. TIFs shouldn't be handed out, but should be subjected to strict planning criteria. Will North Hills East turn that area into a booming uptown? City officials need to figure that out before voting yes or no.

[ChiefJoJo]

Public Hearing is scheduled for next week, July 25. Take a look at the staff report for the project--basically Kane's plan is WAY BEYOND what is allowed in the current zoning and comp plan. Maybe TIF funded parking decks aren't the only issue he has...

[Subway Scoundrel]

I also loved Ruth Sheehan's article about North Hills. I was shocked that she loves North Hills. That hypocrite was probably ready to handcuff herself to the bulldozers before construction began. esp. given her opposition to the dreaded and evil "COKER TOWERS."

Yea and then she wrote a apology about "The Oberlin" in the N&O after seeing North Hills but her apology including one statement of 'we could have been wrong" and then the rest of the article was basically "what a dirtbag Coker is" and how it was all his fault for his communications. I did not see her mention anything about the deaththreats his family got ? Did not like her before and especially dont like her now after the so-called "apology"

[plus2]

Kane's threats are frustrating. I have a feeling he could finance the whole thing if he wanted to. Remember TIF's were only allowed in North Carolina since last year. So the real trade off for the city is the loss of property tax revenue from the NH East project that would now be going to pay the TIF.

[Transplant]

The more I think about it, the TIF request is probably more levarage for the rest of the project.

That meeting will be busy, the Blount Street will be discussed too. Wish i could go.

[bullcity76]

I initially was thinking that if the NHE deal is approved there would be developers lining up for similar support, but how many are going to be putting $700M into the ground. That would preclude any other developer from even asking for assistance without a significant investment to back it up.

I am not really familiar with Raleigh politics, but the few cases that I have seen showed the Council to have a very conservative, myopic view on most issues. We'll see at the end of the month...