Raleigh wants to add part of Morehead School land to Dix deal

As part of a proposal in which Raleigh would settle for buying less than the full 306-acre Dorothea Dix property from the state, city leaders have asked for 7 acres of the Morehead School.

Posted 11:25 p.m. May 7, 2014 — Updated 3:05 a.m. May 8, 2014

Mark Binker

RALEIGH, N.C. — The City of Raleigh has added a new wrinkle to its ongoing negotiations with the state over the 306-acre Dorothea Dix property: a 7-acre slice of land used for the Gov. Morehead School.

"Governor McCrory thoughtfully suggested that this property could be useful to the city in improving connectivity between Pullen Park and the Dix Property," said a letter from Raleigh City Attorney Thomas McCormick dated April 28.

The city, he wrote, would like to buy part of the school property in exchange for a major concession to the total size of the Dix property purchase.

The idea of including part of the Morehead School has also been included in legislative proposals concerning the property.

Pullen Park is an established 66-acre city attraction drawing thousands of visitors every year. The Dorothea Dix property is a sprawling tract just outside of the city's downtown area that was home to the state's now-closed main mental hospital. Although mainly open space, the property houses a variety of aging state offices but has long been coveted by city and community leaders for a "destination park."

City of Raleigh 4/28 offer for Dix property

Dorothea Dix documents

In December 2012, then-Gov. Bev Perdue, a Democrat, signed a lease agreement that would have eventually cleared the way for the 306-acre property to be converted into such a park. But Republican legislative leaders said the governor forged a sweetheart deal that didn't get enough value for the state. After tense negotiations during last year's legislative session, city and state leaders agreed to put the Perdue lease on hold while they worked out a new deal.

That "standstill agreement" expires on June 1. Although the deal doesn't technically need lawmaker approval, legislative leaders have said they will block the final deal if they don’t like it.

McCrory rejected the city's opening bid for the property earlier this year, saying it low-balled the value of the space. The state has expressed a desire to hold onto roughly 64 acres in order to house the Department of Health and Human Services in new or renovated buildings. City leaders have said the state's counteroffer was too costly for Raleigh taxpayers.

The city’s latest offer seeks to bridge the two deals. The April 28 offer would leave the state with 64 acres of the Dix property. It also stipulates the following:

• The city offers $1.5 million for 7.3 acres of the Morehead School, which is a residential school for the blind.

• The city offers to lease back a 90-acre section of the property it is buying for 10 years at a cost of $1 per year.

• In total, the city is offering $37.2 million in cash for the portion of the Dix property it is buying, although McCormick's letter estimates the value of the lease-back arrangement to the state at $12.3 million. The city characterizes the total deal as a $51.3 million offer.

• The city asks the state to back out $10 million from the purchase price that would be put in an interest-bearing escrow account for 15 years. The city would use that money to deal with any environmental problems encountered on the property. At the end of 15 years, any unused money would revert to the state.

• The city asks for right of first refusal should the state ever decide to sell the 64 acres of Dix property it is keeping.

It is unclear how state leaders view this offer. A spokesman for Gov. Pat McCrory could not immediately be reached Wednesday night.

However, the city does give the state an alternative proposal if the governor doesn't like the new offer.

"As an alternative to selling the property to the city, the city would entertain amending and ratifying the lease agreement executed by the state and the city on December 28, 2012, to increase the city's annual rent payment to $1.6 million," McCormick's letter said.

The city originally offered $500,000 annually under the Perdue deal.

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