Will a $2.2M tax break help Glen Lennox bring office space, jobs to Chapel Hill?

Town officials will negotiate a $2.2 million tax incentive with a Charlotte developer trying to bring new office space to the Glen Lennox neighborhood off N.C. 54.

Grubb Properties is redeveloping the 1950s-era shops and apartments east of UNC’s campus to create 3 million square feet of shops, offices, apartments and a hotel on 70 acres. The first phase — 215 apartments, a clubhouse and a parking deck — is being built now.

Office buildings have been delayed, however, by rising costs, tariffs and interest rates, Grubb Properties CEO Clay Grubb said. The biggest challenge is pre-leasing the office space, which would help secure bank financing, he said.

A five-year incentive would discount Grubb Properties future property tax payments to the town as it adds jobs and office space, said Dwight Bassett, the town’s economic development director. The town would get an annual progress report.

The council voted 6-1 Wednesday to ask Town Manager Maurice Jones and the town’s attorney to negotiate the deal and bring it back to the council for a future vote. Council member Hongbin Gu voted against taking that step.

Gu said she understands the need for a diverse tax base, but questioned the effect Glen Lennox incentives could have on the Blue Hill District, where the council now requires buildings to have some commercial space. The district lies along East Franklin Street, Fordham Boulevard, Legion Road and Ephesus Church Road.

“I feel like these two strategies are contradictory to each other,” Gu said. She suggested the town help with something that benefits everyone, such as bike and pedestrian amenities, instead of a single developer or project.

“I feel like the town, if it’s going to provide that tax incentive, I think it needs to benefit all the communities in this town,” Gu said.

No other office buildings have been built in 10 years, and there is “nothing else on the horizon,” Mayor Pam Hemminger countered. She also noted the town’s desire to balance its commercial vs. residential tax base and add more office space and jobs.

Commercial buildings “produce more and take less in taxes, so we are getting benefits to the community that helps with our housing and all the goals we set out there, including greenways and sidewalks and all kinds of things,” Hemminger said. “It also brings companies here that participate in our nonprofits and our activities, and they support things and they get involved.”

Glen Lennox Linden pic.jpg
The Linden, a 215-unit apartment building under construction now in the 1950s-era Glen Lennox community at N.C. 54 and U.S. 15-501 in Chapel Hill, is the first phase of a plan to replace aging buildings with 3 million square feet of new apartments, retail, offices and a hotel. Glen Lennox Contributed

What’s possible

The Glen Lennox deal would meet guidelines that the Town Council approved last year for large construction or commercial projects.

Town estimates have shown 488,000 square feet of office space planned for Glen Lennox could add $97.9 million to its assessed property value. At current tax rates, that could bring the town nearly $2.6 million in new property tax revenues over five years.

It also could represent up to 1,952 jobs, town staff reported. Grubb Properties would have to complete a designated amount of office space each year and start paying taxes on it to get the incentives. The first building could open in 2020, he said.

Read more about the project at bit.ly/2GsVDdV.

If Grubb Properties doesn’t build the office space, it doesn’t get the incentive, Bassett said.

Aaron Nelson, president of the Chapel Hill-Carrboro Chamber of Commerce, said the town need office space.

“I know very specific examples of companies that were it built, they would have stayed,” he said. “They were interested; they just couldn’t wait the 18 months it sometimes takes to get approved and to build.”

County partnership

The final proposal is less than the $3.5 million Grubb sought from the town and Orange County in 2016. Although the county worked with the town to offer a $4 million tax incentive to Wegmans Food Market in 2017, it is not a partner to the Glen Lennox deal.

County Commissioners Chair Penny Rich has declined to talk about the board’s discussion but said it should have been approached before construction started.

That decision concerned Gu and council member Nancy Oates. Oates noted the county’s new slogan “One Orange,” referring to the county and towns working together on issues.

“I want to make sure that they understand we see this as a partnership among the towns and the county, not just the towns paying out taxpayer money into the county,” Oates said Wednesday, “and I’d like to see it be more reciprocal.”

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Tammy Grubb has written about Orange County’s politics, people and government since 2010. She is a UNC-Chapel Hill alumna and has lived and worked in the Triangle for over 25 years.