Midtown Raleigh News

Raleigh looks to develop policy for incentives, tax breaks

Companies and developers considering Raleigh often don’t know whether city leaders will offer tax breaks or other incentives: the city has no formal policy on the subject.

That could change following advice from new City Manager Ruffin Hall. He told city council members at their recent planning retreat to consider crafting a policy that makes the offerings clear.

“When developers come and have these conversations, they’re all case-by-case,” Hall said, adding that city staffers need to “respond to developers in a predictable way.”

Some council members, however, aren’t sure Raleigh needs to offer incentives at all, pointing to the city’s success in attracting new employers and construction. “We have historically not been big on incentives unless there was something in return,” Councilman Thomas Crowder said. “I think the majority of citizens want growth to pay its own way.”

Raleigh has had a mixed track record on development incentives. In 2006, city leaders spent $1 million to bring upscale restaurant The Mint to a city-owned building on Fayetteville Street. The restaurant struggled through the recession and closed several years later, although the location is now home to a lower-priced eatery called Bolt.

The same year, the council rebuffed developer John Kane’s request for $75 million in public money to build parking decks for North Hills East. He said the financing would allow him to build a high-density, mixed-use project instead of a traditional strip mall. Even without the $75 million, North Hills East has become a model mixed-use development, with apartments, offices, restaurants and a grocery store.

When those requests come forward, city planning staffers generally pass the proposal directly to the Raleigh City Council. “It’s a very good recommendation to have a policy,” said Mitchell Silver, planning director and chief development officer. “It would be very helpful to explain up front what staff can do and can’t do.”

An incentive policy could help target financial assistance to meet specific needs in Raleigh. The city isn’t likely to hand out money to every new employer or development.

“Raleigh is not a city that has a declining tax base, so the city can be more strategic about how it offers incentives,” Silver said.

Charlotte offers tax breaks based in part on the number of jobs a project involves, with the biggest breaks set aside for “business investment zones” and vacant retail big box stores. Durham has a similar program with tax credits for job-creating and/or high investment projects, particularly within the city’s “community development area.”

Wake County offers grants of up to 2.25 percent of the new construction’s value – provided the company is investing more than $100 million or bringing more than 350 high-paying jobs. But that percentage can’t exceed what the town or city is offering, Wake economic development director Adrienne Cole said.

And while several of Wake’s smaller towns have detailed incentive policies, Cary and Raleigh don’t. Both approaches have advantages, Cole said.

“For a community, they have to weigh the benefit of having that certainty and being able to communicated (a policy) ... versus the flexibility to evaluate them on a case-by-case basis,” she said.