House panel, Raleigh agree on Dix compromise bill

ccampbell@newsobserver.comMay 22, 2013 

— A state House committee approved a new version of a bill Wednesday that would revoke Raleigh’s disputed lease on the Dorothea Dix property near downtown. But the compromise bill comes with a sweetener that has the support of city leaders and the governor’s office.

The version from the House judiciary committee bill would allow a year to renegotiate the agreement, signed by outgoing Gov. Bev Perdue and Raleigh Mayor Nancy McFarlane in December, to lease the state land to the Capital City for use as a destination park. A new agreement could be a lease or sale of the land, and Raleigh would also get a chance to buy a second parcel from the state – the 40-acre Governor Morehead School property directly across Western Boulevard from Dix.

Such a move would create a connection between a Dix park and Pullen Park.

“That opens a lot of opportunities we hadn’t thought of before,” McFarlane said after the committee’s vote. “We support them giving us another year.”

The new terms still revoke the previous lease agreement, but they give the city and state until April 2014 to seek appraisals, conduct environmental assessments and hold new negotiations. The state would keep 30 acres of the 325-acre Dix property for Department of Health and Human Services offices.

“This is saying we want to hit the reset button and make sure that at the end of the day, both parties are happy,” said Rep. Justin Burr, the Albemarle Republican who sponsored the new version of the legislation.

The city could still sue for the value of the lease if negotiations don’t succeed.

All proceeds from a sale would go to mental health services, something that Republicans have argued is required by the original property deeds. Several legislators said they want the money used for building new facilities, and some worried that future legislatures might raid the fund for other purposes.

Sponsors of the original Senate Bill called the December contract – worth $68 million over 75 years – a bad deal for the state. House Republicans repeated that argument Wednesday.

“We believe that the process should be thoughtful and not rushed, fair to the city and state, and should honor all protocols,” Burr said.

But the three Senate Republicans who sponsored the original bill say they’re committed to their version, likely forcing the two sides into private conference negotiations after the House passes its legislation.

“I think we’re going down the wrong road to wait until April to resolve it all,” said Sen. Louis Pate of Mount Olive. “It seems to me it rewards an unlawful transaction and delays us paying the proceeds to mental health. ... I look forward to talking with the members of the House to see if we can reach a position on it.”

A bigger park?

In introducing the legislation, Burr said he and fellow Republicans support Raleigh’s plan for a destination park. Though the city would lose 30 acres of Dix for state offices, it could gain the 40 acres of Morehead property.

“There’s a great opportunity for the City of Raleigh to end up with an even greater park than what they’re currently looking at,” Burr said.

But while Dix is full of open space, much of the Morehead property is built up. The Governor Morehead School for the Blind remains on the site where it’s been since 1923. And another chunk is leased to the Wake County school system for the Wake Young Women’s Leadership Academy, which is expected to soon sign a 20-year lease extension, according to the state property office.

Legislators offered no details on where those schools might go if Raleigh buys the property. But state budget director Art Pope, supporting the bill on behalf of Gov. Pat McCrory, said selling Morehead would be “a key component to possibly form a junction – a nexus – between the Dorothea Dix property and the Pullen Park property.”

That idea resonated with private groups advocating for the park.

“They’re talking more land – this could mean good things,” said Bill Padgett, president of the Dix306 group. He added that he still has lot of questions about the bill.

While Morehead could be sold, Pope said it’s in the state’s best interest to keep 30 acres for DHHS offices, likely around the historic core of the Dix campus where state employees already work. Some of the older buildings could be renovated as new office space is constructed to meet growing needs. The exact boundaries haven’t been worked out.

McCrory and McFarlane are scheduled to have a news conference about the Dix property at 9:30 a.m. Thursday at the State Capitol.

Lease or sale?

If the new bill passes the full House and Senate, it would leave the nature of the property transaction open-ended. Burr offered several possibilities: Raleigh could buy the land at its appraised value or pay on an installment sale place. Or the city could swap land it already owns elsewhere for the Dix property.

Burr says Raleigh’s current long-term lease arrangement could actually harm park plans. “Serious questions have been raised about the city’s ability to raise money to improve the property when it has only leasehold interest,” he said.

Mayor McFarlane said she’s unsure at this point what option would be the best deal for Raleigh. As for the cost to the city in a new agreement, “it could be more (than the lease), but it could also be less,” she said. “We have two appraisals that are very far apart.”

A 2011 state appraisal pegged the value of Dix at $84 million, while a 2012 city appraisal came up with $36.45 million – both estimating the land’s value for development. The revised legislation will order a third appraisal that would form the basis for a new price.

The delay also allows time to survey the property boundaries, which are unknown in some locations, and to conduct environmental tests to see if pollutants lurk below the ground. The city, Burr argued, “should have some idea of what the land they’re getting is worth.”

The full House is expected to pass the bill in the coming weeks, then senators will weigh in. And though the Senate bill sponsors will push for the original version, other Republican senators like what the House has suggested.

“It sounds reasonable to me,” said Sen. Neal Hunt, a Raleigh Republican.

Staff writer John Frank contributed to this report.

Campbell: 919-829-4802 or

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