There's a very good article by Ray Gronberg in today's Herald-Sun on the proposed incentive financing for the redevelopment of Heritage Square and the Golden Belt Manufacturing Co. sites by Scientific Properties, Andy Rothschild's Durham-based development firm that's tackled the Venable and several other downtown projects.
Some key points at hand from Gronberg's piece:
- The inclusion of GBMC -- which is intended to provide live/work space for artists, music performing spaces, and some office and restaurant space -- into the incentives package for Heritage Square is a new happening; previously, the incentives under discussion were just for the Heritage Square shopping center.
- The current plans for Heritage Square call for about 300,000 square feet of retail and 200,000 square feet of office and possibly hotel space; up to 100 apartments/condos are possible.
- The incentives for both projects would include $2 million in streetscape improvements and $4.1 million in tax breaks to the developer over ten years. The developer still needs an additional $6.2 million in gap financing to make the deal work.
Is this a good idea? I think many folks are at an inflection point in thinking about how these incentives work, and what the need is for them today. There's a strong current of thinking that downtown's success is proven, and that it's time for developers to stand on their own in bringing these projects to life. At the same time, there's also real concern that single-developer mega-projects overwhelm the ability of local developers to play (as discussed around the DAP proposal), and that massive developments like American Tobacco and West Village will tend to favor national firms from design/construction all the way to the selection of which retailers will get to lease on the site.
Personally, I think Rothschild's plan is a sound one and worthy of city investment, for a number of reasons:
- To my mind, city incentive dollars can make sense for existing large facilities like Golden Belt that, by dint of their need for all-at-once redevelopment under single ownership, require significant up-front investment. It also seems reasonable that incentives are more appropriate for developers willing to work in underfunded and more blighted districts, versus districts like Brightleaf that have already demonstrated their viability. Heritage Square and Golden Belt meet both of these challenges.
- There is tremendous concern that ongoing development downtown will price out small businesses in general and artists in particular. Rothschild has both contributed to but also been sensitive to this issue, as this Indy Weekly piece covered. To my mind, the fact that Golden Belt would have a focus on space for the arts and music performance is a plus, and not something most developers would try to do. Of course, from there we get into questions about who could afford the space, what the impact would be on initiatives like BCHQ and other more organic projects, and so forth.
- The inclusion of GBMC in the plan is a boost for East Durham in an area where the City has spent tremendous amounts of tax dollars on projects like Hope VI and Eastway Village. Shoring up residential with some commercial and arts activity cements this corner of the district and represents investment in East Durham, which has traditionally been neglected by developers.
- Although there's been sensitivity about the impact of Rothschild coming in to the vestiges of Hayti with the Heritage Square project, a number of business-owners in the existing complex have complained about the poor maintenance of the existing facility, and have expressed their support the redevelopment, having been offered the opportunity to re-open their businesses in the new complex.
- The inclusion of such a substantial retail component in the Heritage Square plan bodes well for the presence of more local businesses and businesses that will serve the surrounding neighborhoods.
To the extent that opposition is likely, it's doubtlessly going to be spearheaded by the Hesters, owners of the Phoenix Square and Phoenix Crossing shopping centers near Heritage Square, and active participants in the unsuccessful Rolling Hills project. The Hesters have been advocating vocally for a $25 million (or more) streetscape investment on Fayetteville Street. They've acknowledged this would be a major boon to their properties' value, but they've also argued that this would be an appropriate investment in this part of Durham.
I'm not convinced that they're wrong that Fayetteville Street needs aesthetic improvements. At the same time, however, the payback from the Heritage Square investment is substantial enough to justify this financial support. First, only $2 million of the $6 million are hard dollars; since the remainder are discounts on property and sales taxes, these incentives represent foregone tax dollars that wouldn't have come in anyway without the Rothschild redevelopment. Once the ten year discount window expires, there's a stronger tax base to provide the city with revenue.
At the same time, for this initial investment of $2 million in hard dollars, the City is estimating the creation of 1,300 jobs. Durham County earlier this year approved $1 million in County incentives for Merck for 60 jobs and a $100 million plant investment -- though only after $40 million in tax incentives and other governmental dollars from outside the county. And let's not talk about the ridiculous largess to Google out in western N.C. Frankly, from a return-on-investment perspective, this one looks pretty good.
Frankly, I'm not convinced the Hesters have a leg to stand on on this fight -- particularly in light of the fact that their Phoenix Crossing shopping center cost $4.2 million, with a staggering 20% of that coming in the form of city-backed grants and subsidized loans in the late 1990s. It's hard to take seriously an argument that spending $2 million of hard dollars and foregoing some of the new tax revenue is unfair when, as a percentage of the development, Scientific would be receiving a much smaller investment.