North Hills 'East' Financing Proposal Divides Raleigh Mayor, Developer
Posted July 6, 2006 6:47 a.m. EDT
RALEIGH, N.C. — Raleigh Mayor Charles Meeker says quite openly that he admires what real estate developer John Kane has done with development at North Hills. But he does have reservations about a portion of what Kane wants from the city as part of his project that is being called North Hills East.
"Everyone very much likes what John has done on the west side of Six Forks Road," Meeker said. "The question is whether the project on the east side requires public assistance."
Kane is asking the City Council to provide $75 million in financing to help him build two parking garages as part of the proposed North Hills East development covering more than 40 acres at the corner of Six Forks Road and the I-440 Beltline.
The assistance would come in the form of self-financing bonds, a new economic development tool that was approved by North Carolina voters in 2004. The money would be repaid as property values in the North Hills East area increased.
The City Council will have its initial discussion of Kane's proposal next Tuesday afternoon.
In a telephone interview with WRAL.com, Kane said he is hopeful that the City Council will agree to hold a public hearing about his proposal.
"I don't see a downside for anybody involved if there is a public hearing," Kane said. "We feel that the public needs to be heard."
Kane pointed out that the self-financing bonds "only have been available in our state for under two years. It is something new and not completely understood by a lot of people."
City Manager Russell Allen, who has gone on the record as being opposed to Kane's idea, plans to issue his arguments in a formal document on Friday afternoon.
"I understand that it is not going to be affirmative," Meeker said.
Meeker said it's his belief that Kane could develop the project without any public assistance.
"Given the value of the residential units and the retail space in that area, why can't the parking be paid for privately as has been done in the past," Meeker said.
However, Kane said that North Hills East would look much different if the City declines his proposal.
"If we don't get the financing, it certainly will affect the type of development we do there," Kane said. "We hate to go in that direction."
Without the parking decks, Kane explained that the project would resemble "urban sprawl" with "fields of surface parking". Having the parking decks would enable a more "urban" development with more land being set aside for parks and a pedestrian friendly environment, he said. "We're trying to make this more urban in nature," Kane explained. "Anti-sprawl if you will."
Another bond alternative to finance the project is something called "certificates of participation". Neither option requires voter approval. Those bonds were used to build city-owned parking garages downtown, Allen said.
Even if Kane were to pursue that option, Meeker said, "You are still talking about public money."
Allen, the city manager, said under either option the City would still own the parking decks. Were Kane to pay for part of the construction costs, he would own the portion paid for with his funds, Allen added.
Wake County government approval would also be required if the parking decks were to be financed with public funds, according to Allen.
Picking the self-financing bonds meant that the project would have no effect on the City's bond rating, Kane said. "We're not opposed to that," he said in reference to the certificates of participation. "We're open to other ways to accomplish this."
The City has built parking garages as part of development downtown, Meeker acknowledged, but he noted that "We do charge" for parking and that they are "self sufficient".
Parking in North Hills East would be free under Kane's plan, Meeker said. "Free parking is a very different proposal," Meeker said. He estimated that "about $5 million a year" would be needed to support the parking decks.
According to Kane, a higher tax rate for the property would be agreed upon if the decks were built and the City would realize more money than what was spent for the financing. Kane said his company's research showed that an additional $35 million in tax revenue "over and above current tax revenues and debt service" would be generated the first 15 years. Over 50 years, the project would produce a "bonanza" of $538 million, Kane added.
"This is a risk-free proposition," he said.
Meeker and Allen were first approached by Kane about the idea late last fall and both men voiced opposition to it, Meeker said.
"He came in informally and asked us if this was a good idea to pursue, and we said it was not a very good idea," Meeker said. "He didn't follow our advice, which he is entitled to do."
However, Meeker stressed that he was not opposed to development on the east side of Six Forks.
"Everyone would like to see that developed on an urban scale," Meeker said. "(Kane) has done a great job with North Hills west."
With the exception of a J.C. Penney store, the old North Hills mall was torn down and redeveloped. Kane also redeveloped a strip mall to the north of the former mall complex, incorporating a mix of business, retail and residential properties.