Midtown Raleigh News

Raleigh offers to buy Dorothea Dix property for $38 million

2010 News & Observer file photo

In the opening round of negotiations for the 308-acre Dorothea Dix property, Raleigh leaders have offered to buy the former psychiatric hospital campus from the state for $38 million, city officials said Wednesday.

The proposal would allow the state to lease back a 40-acre section of the property to house offices for the Department of Health and Human Services. The state would get that section – around the McBryde Building at the center of the campus – for $1 a year for the next 15 years, according to the city’s offer, and the state would pay for environmental clean-up costs.

The proposed sale price is in line with the city’s recent appraisal of the land, which came in at $37.45 million. Raleigh wants the land for a “destination park” that’s been a major goal of Mayor Nancy McFarlane.

“We thought this was a good way for all of this to move forward,” McFarlane said of the offer, which is dated March 24. “Really it’s about continuing the conversation.”

Bill Peaslee, an attorney for the state Department of Administration, said no decision has been made on Raleigh’s offer.

“The city’s proposal is being given thoughtful deliberation as the state balances the desire for a city park and the state’s fiduciary duty to its citizens,” Peaslee said, adding that he doesn’t know when the city will get a response. “It should be forthcoming fairly soon, I would think.”

Gov. Pat McCrory’s administration could seek a higher price. Appraisers working for the state pegged the property value at $66 million this year, though that was considerably less than the 2011 state appraisal of $84 million that Republicans legislators cited last year as the land’s fair market value.

The legislators sought to revoke a lease signed in December 2012 by outgoing Gov. Bev Perdue, which called for Raleigh to pay $500,000 a year, plus 1.5 percent annual increases, totaling $68 million over 75 years. McCrory brokered a “standstill agreement” last summer with the city to allow time to craft a new deal.

Sen. Ralph Hise, a Mitchell County Republican who co-sponsored the bill to revoke the lease, said Wednesday that the new agreement should reflect the appraised value. He wants proceeds from the sale to go to mental health services.

“The property was given to the state with the intent that it would be used for mental health, and I don’t think we would want to shortchange mental health by taking a lower value,” he said.

In their offer, city officials argue that because the state would save money on rented office space, the deal would be worth $44.3 million to state government. The state wouldn’t, however, keep all of its current office buildings spread across the Dix campus.

McCrory administration officials have said that they’d like to permanently keep up to 60 acres for the Department of Health and Human Services. But the city’s offer says that “the state is open to relocating some or all of DHHS off the Dorothea Dix property while using the renovated offices in the McBryde Building in the near future.”

The offer also calls for the state to handle environmental cleanup, which is estimated to cost between $10.99 million and $22.68 million.

An environmental study identified petroleum contamination in groundwater near the hospital’s former garage, as well as contaminants that seeped underground from sites that once housed piles of coal. Tests also revealed high levels of mercury vapor in several parts of the McBryde Building, and multiple buildings contain asbestos.

Hise said that having the state handle cleanup could devalue the sale. “I think it puts a whole new shade on the agreement,” he said.

The letter making the offer, dated March 24 and signed by city attorney Tom McCormick, requested a response by noon Monday – two days before the city made the offer public.

“I have no idea” whether McCrory will agree to the terms, McCormick said.