Chapel Hill weighs tax incentives for Glen Lennox office plans
A Charlotte developer got $2.2 million in performance-based town incentives Wednesday night to help launch construction on the first of several office buildings planned for the Glen Lennox neighborhood on N.C. 54.
The partnership will give Grubb Properties the opportunity to bring more commercial taxes, jobs and community benefits to Chapel Hill more quickly, Mayor Pam Hemminger said.
“In theory, I think we would like it to work that we didn’t have to incentivize, but we have a track record,” Hemminger said. ”We haven’t had any office buildings; nothing else we tried has worked. In order to move forward, this is what the developer said it would take to be able to get them out of the ground, because it is very risky and speculative when you’re building office in our community.”
Grubb Properties CEO Clay Grubb has said the challenge is signing enough tenants to get the first building off the ground. Pre-leasing the space would help secure bank financing, he said, amid rising costs, tariffs and interest rates.
The Town Council approved the incentive by an 7-1 vote Wednesday. It will return most of the new town property taxes that Grubb Properties generates by developing 488,000 square feet of offices over five years.
The project has the potential to create 1,952 jobs and $122 million in assessed property value, said Dwight Bassett, the town’s economic development officer.
Construction could start on the first, 103,000-square-foot office building this year. Up to 10 percent ground-floor retail also is possible.
Grubb Properties will be required to make annual reports to the council, and if it doesn’t meet its goals in a given year, it doesn’t get an incentive that year. The five-year agreement is based on incentive guidelines that the Town Council approved last year.
Concern about incentives
Council member Hongbin Gu, who opposed the incentive, said she likes Grubb Properties and the Glen Lennox project but is concerned about how returning tax revenue for five years supports the public good.
She suggested instead that the town invest in the development’s bike and pedestrian improvements, or offer the company a loan or ask for a share of the project in return for a tax incentive. The town needs tax revenues to pay for services to new buildings, she said.
“Because we are the Chapel Hill Town Council, we have responsibilities (to taxpayers) to do it in the right way, because we are the stewards of the taxpayers’ money,” she said.
The incentive benefits the town by strengthening the commercial tax base and adding jobs, Town Attorney Ralph Karpinos said, but it’s up to the council to decide whether the incentive is the right choice. The cost of providing town services to new office buildings, Bassett said, is much lower than for retail or residential development.
The incentive also is aimed at regaining the office market that the town lost after the 2009 recession, Bassett said. No other office buildings have been built in 10 years, and nothing is planned, he said. Meanwhile, the Durham and Wake office markets are booming.
The hope is Glen Lennox will reignite other developers’ interest in Chapel Hill, he said.
Aaron Nelson, president of the Chapel Hill-Carrboro Chamber of Commerce, noted the town’s loss of Strata Solar, which was founded in Chapel Hill, to Durham.
“We came so close to putting their headquarters here,” Nelson said. “We just couldn’t build fast enough. There’s just no space to move into, nothing in their size, they were willing to wait 12 months but not 18 months, and so they now are very happy in Golden Belt in Durham.”
Longtime Glen Lennox resident Molly McConnell also addressed Gu’s concerns. She noted the affordable housing, bike improvements, tree preservation plan, and decades-long investment that Grubb Properties already has made in Glen Lennox. The developer also is helping less-wealthy, longtime residents like her to stay in their homes by capping rent increases, she said.
“That has cost money to do, so by not helping the company do building that will bring in profit, bring in offices and income into this company, you hurt people who are living and working in Glen Lennox,” McConnell said.
The redevelopment of the 1950s-era shops and apartments east of UNC’s campus will 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.
Read more about the project at bit.ly/2GsVDdV.
The incentive is less than the original $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.
Council member Nancy Oates noted the county’s reluctance to join the town this time.
Orange County commissioners Chair Penny Rich has declined to talk about the board’s discussion but said the county should have been approached before construction of the first phase started.
“I hope also the county sees what a success this is, and that they’ll consider being a ‘One Orange’ with us and perhaps partnering with us on other things,” Oates said, referring to the county’s newly stated goal of working with the towns on mutual issues.