Downtown plans now include bond

The latest financial models for the proposed redevelopment of parking lots 2 and 5 include a controversial new tool that already has generated debate within the project committee.

Project consultant John Stainback of Stainback Public/Private Real Estate LLC has incorporated funding from tax increment financing bonds, or self-financing bonds, in a financing plan for the downtown project.

In the Nov. 2 election, North Carolina voters narrowly approved TIF bonds through Amendment One, which allows local governments to bypass voter approval to use the bonds on infrastructure projects.

"I think it's a real creative thing the town could look into," said Aaron Nelson, executive director of the Chapel Hill-Carrboro Chamber of Commerce.

The downtown project includes the construction of mixed-use developments on lot 2, behind Spanky's restaurant, and lot 5, across from University Square; the replacement of the RBC Centura bank on Rosemary Street with a parking deck; and an expansion to the Wallace Deck on Rosemary Street.

The Chapel Hill Town Council's Committee on Lots 2 and 5 is discussing TIF in its development of request for qualifications documents, which will be used to solicit project developers.

Mark Kleinschmidt, a member of the council committee, said the purpose of retaining TIF bonds in the documents is to show the town's financial capabilities.

"What it does is put it out on the table," he said. "It demonstrates our ability to deal with the project."

Stainback is revising the RFQ documents after the council committee reviewed a draft Nov. 22.

The council will review the revised copy Dec. 6. If accepted, the final draft is tentatively set to be sent to potential developers Dec. 13.

Unforeseen rises in project costs created the need for more options to be considered in the RFQ, Kleinschmidt said.

"Some costs added on required us to use more than land-lease payments," he said, adding that the plan still largely relies on the land-lease payments and sales of development rights.

The project now is estimated to cost $82.3 million, according to Stainback's financial analysis, with the town providing $17.7 million.

Stainback said at the committee's Nov. 22 meeting that TIF bonds could cover up to half of the estimated $6.2 million budget for the proposed RBC parking deck.

Still, committee members expressed reservations about the inclusion of TIF bonds in the RFQ at the Nov. 22 meeting.

They added a stipulation that the council has yet to determine its stance on the use of TIF bonds.

Kleinschmidt said the council will not proceed with analysis of TIF bond usage until a project developer is hired.

"I don't think there's anything inherently evil (about TIF), but the council has to exercise caution with it," he said. "We want to know eyes wide open what we're doing."

But Nelson said using TIF in the project would reflect the amendment's purpose.

"This is the kind of thing it could be used for."

Contact the City Editor at citydesk@unc.edu.