This has been a long time coming…..on December 30th, the City of Kannapolis closed on the series of bonds that will finance the first set of public investments related to the NC Research Campus!! This is a major accomplishment for Kannapolis and was the result of five years of hard work by a lot of people, including the Mayor and members of our City Council. Some of you know the history, but for those of you who don’t, the abbreviated version is this:
In 2006, the City put together a set of needed investments that would support the growth of the NC Research Campus, which was announced in 2005 and has the potential to be a significant economic driver for not just Kannapolis but the Charlotte region. The investments included new and improved roads, traffic enhancements, streetscaping, water/sewer infrastructure, pedestrian improvements, parks, and other projects. There were $168 million worth of public projects to be financed using tax increment financing (TIF), a form of bond financing new to NC but used frequently for other economic development projects around the country.
Due to many reasons, including the downturn in the economy, the TIF bonds were never issued. In 2009, the City began looking at other options for financing, including a smaller package of projects, private placement directly with banks (rather than the open bond market), and pursuing an investment grade bond rating for the TIF. None of these options were going to result in reasonable interest rates or minimum bond proceed amounts needed to finance the first phase of projects.
After negotiating for a good portion of last year, in November 2010 the Kannapolis City Council and the Cabarrus County Board of Commissioners approved the pursuit of a different type of bond financing plan; the use of Limited Obligation Bonds (LOBs) and Build America Bonds (BABs). Unlike the TIF bonds, the LOBs and BABs together would be backed by the City in the event of a default. However, it was concluded that the risk of any sort of default would be minimal due to the fact that there is already a revenue stream to pay for a smaller set of bonds from the property tax already being generated by the existing buildings on the Research Campus.
This is a complicated transaction, but after five years of working through multiple options, the City has done its due diligence to maximize benefits to taxpayers and minimize risk. The debt service for the bonds will be paid for by the incremental (increased) tax revenue generated almost exclusively by the Research Campus development, with half of these payments coming from Cabarrus County. All of the revenues necessary to pay for the bonds are already being generated. Further reducing the risk, about half of the tax revenues are secured through building leases paid by the State of North Carolina for the current state university presence on the Research Campus.
With approximately $30 million of the $35 million bond proceeds available to fund projects, the money will go towards these activities:
Cabarrus Health Alliance building – $13.5MStormwater line and pedestrian tunnel to Village Park – $1.35MReimbursement to Castle & Cooke for fronting funds for NCRC Phase 1 infrastructure – $6.3MReimbursement to City of Kannapolis for fronting funds (via temporary loans) for NCRC Phase 1 infrastructure including numerous waterline replacement projects throughout downtown Kannapolis – $2.98MImprovements to Veterans Park – $397,000NCRC interstate signage – $90,000Final pavement of N. Main St – $130,0008th St storm water line – $834,000Completion of NCRC Phase I streets – $360,000Economic development investment (NCRC Phase IIA) – $4.2 millionThe main project that the average citizen will see is the Cabarrus Health Alliance building at the corner of Mooresville Rd and Dale Earnhardt Blvd. The groundbreaking for CHA project was today at 11:00am. Because of the requirements of the bond, the City will own the building, but CHA will be fully responsible for operating and maintaining it.
The other project that citizens will notice is the stormwater line and pedestrian tunnel at Village Park, a project managed by NCDOT which may cause some interruptions to traffic flow near Village Park over the next year. Over the long-term, the pedestrian tunnel will provide safe and convenient connections from Village Park and the City’s greenway system to the Research Campus and Downtown Kannapolis.
The details of the economic development investment are to be worked out, but will almost certainly be tied to job creation and will be designed to encourage private sector investment. The City’s role will likely be to provide additional public infrastructure associated with additional Research Campus growth. There are a number of options already being considered. Ultimately, City Council will make the decision on how to best use those funds.
This bond issuance highlights the City’s commitment to quality economic development, most notably in transforming our local economy – which was formerly based on textiles and is now being rebuilt on biotechnology and other emerging industries. Without public participation, the Research Campus would not have happened on its own. While there is still a long way to go to realize the full potential of the Campus, the City – in partnership with Cabarrus County and David Murdock (Castle and Cooke) – is establishing the solid foundation upon which this growth will occur.
2011 is certainly going to be an exciting year in Kannapolis and this new funding source will play a critical role in our continuing evolution. Filed under: Uncategorized
