2012-09-13 Work Session NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 32
WORK SESSION,SEPTEMBER 13,2012 PAGE 478
ASSEMBLY
The New Hanover County Board of Commissioners held a Work Session on Thursday, September 13,
2012, at 1:00 p.m. in the Harrell Conference Room of the New Hanover County Government Center, 230
Govermment Center Drive, Wilmington,North Carolina.
Members present: Chairman Ted Davis, Jr.; Vice-Chairman Jonathan Barfield, Jr.; Commissioner Jason R.
Thompson;and Commissioner Richard G. Catlin. Commissioner Brian M.Berger was absent.
Staff members present: County Manager Chris Coudriet, County Attorney Wanda M. Copley; and Deputy
Clerk to the Board Teresa P.Elmore.
Chairman Davis called the meeting to order and stated the purpose of the meeting is to discuss the fixture of
county-owned property at 320 Chestnut Street,Wilmington,NC.
Finance Director Lisa Wurtzbacher provided the following information.
Background:
• 2006: County relocated to Government Center Drive vacating four floors of 320 Chestnut Street. Vacant
spaces were filled by several court fimctions.
• 2010: City relocated leaving rivo floors vacant.
• 2010: After the City relocated a water leak damaged the building forcing remaining occupants to vacate.
• Currently: Entire building is empty and the County is paying rent for certain fimctions that were housed at
320 Chestnut Street.
Function Square Footage Needed
Public Defender 5,400
Guardian Ad Litem 3,000
Communit-v Sei ices 2,500
Gang Task Force 5,000 (may be housed within the current ROD building)
ROD 10,500
Criminal Justice Sei ices 4,100
Leasable Space 15,000
Total 45,500 Renovation Area
The City of Wilmington has expressed interest in leasing space at 320 Chestnut Street.
Ovei iew of Options Considered
• NHC renovates existing building at approximately$10 million(14 months required)
• NHC demolishes and builds new building at existing site
• Transfer of 320 Chestnut Street for land (43 acres)near Smith Creek Park
• Sale of 320 Chestnut Street and build building at new site for veteran housing
• Sell building and lease back space for court fimctions
Rehabilitation Tax Credit
• Applies to costs incurred for rehabilitation and reconstnrction of certain buildings
• 20%federal tax credit for certified historic structures
• Additional 20% state tax credit is available to match the 20%federal credit for certified historic
structures
• 20% for certified historic structures normally available to a private developer if placed on the National
Register of Historic Places
• 320 Chestnut Street is not on register although it is on a study list
• Evaluation process may take 6 months to 1 year
• State Historic Preseivation Office committee approves before submitting application to National
Parks Sei ice for the designation
■ Developer application due by December 28,2012 for June 2013 Agenda
• Tax-exempt use property: Not firlly eligible for the rehabilitation tax credit
• Defined as rehabilitated property leased to a tax-exempt entity in a "disqualified lease" if more
than 50%of such property is leased to tax exempt entities
• Disqualified Lease: As defined in IRS Code 168(h), lease to a tax-exempt entity where one of the four
criteria are met:
1. Property financed by tax-exempt obligation,or
2. There is a fixed purchase price or option to buy under the lease, or
3. Lease term is in excess of 20 nears,or
4. Lease occurs after sale of the property and the lessee used the property before the sale or lease
• Sale leaseback with the County would prevent developer from receiving tax credit
• Most likely considered a "disqualified lease"which makes the renovation expenditures not eligible
for the rehabilitation tax credit.
• Developer/owner must hold building for five years after the rehabilitation or pay back the tax credit.
NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 32
WORK SESSION,SEPTEMBER 13,2012 PAGE 479
Recommendation
• Staff recommends that New Hanover County renovate 320 Chestnut Street as laid out at the June 18, 2012
meeting with a cost not to exceed $10 million.
• Cost is reasonable when compared to other options
• Quickest and most expedient option
• Eliminates legislative obstacles
• Allows for ownership of building throughout the process
Michael Larson, with Parker Poe Adams and Bernstein LLP, was present and provided additional
information concerning IRS regulations and rules on eligibility for rehabilitation tax credit. He pointed out that
leasing property to a tax-exempt entity would disqualify a developer from the tax credit. To qualify for the credit
the property must be purchased outright without leasing to a tax-exempt entity within the five-year period,which is
the time required to recapture the credit without having to pay it back.
In consensus, the Board agreed that the rehabilitation tax credit option would not be feasible if the property
is used for court functions. County Manager Coudriet recommended renovating the building for court finctions
because the currently leased office spaces were significant costs to the County and the property is located close to
the courts.
Public Defender Jennifer Harjo, Clerk of Court Jan Kennedy, Judge J. H. Corpening, and Registrar Jennifer
H. MacNeish were present and spoke on the limitations of their current locations and spoke in support of using 320
Chestnut Street for court related functions and future expansions of the courts.
The Board discussed whether to renovate adding another floor or to demolish and rebuild seven floors at
the existing site. When adding another floor, Architect John Sawyer advised that either renovating or constructing a
new building would take approximately 2 years for the bidding and construction process.
After the discussion, Staff was instructed to provide an analysis of the costs on the options and obtain the
City's zoning regulations on height restrictions in order to continue the discussion at the September 17, 2012 Board
meeting.
ADJOURNMENT
There being no further discussion, Chairman Davis adjourned the meeting at 2:00 p.m.
Respectfully submitted,
Teresa P.Elmore
Deputy Clerk to the Board