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2015-04-23 Special Meeting NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 33 SPECIAL MEETING, APRIL 23, 2015 PAGE 279 ASSEMBLY The New Hanover County Board of Commissioners met for a Joint Special Meeting with the Wilmington City Council on Thursday, April 23, 2015, at 4:00 p.m. in the Blue Room of the Wilmington Police Department, 615 Bess Street, Wilmington, North Carolina. Members present: Chairman Jonathan Barfield, Jr.; Vice-Chairman Beth Dawson; Commissioner Skip Watkins; Commissioner Woody White; and Commissioner Rob Zapple. Staff present: County Manager Chris Coudriet; County Attorney Wanda M. Copley; and Clerk to the Board Teresa P. Elmore. City of Wilmington Councilmembers present: Mayor Bill Saffo; Mayor Pro-Tem Margaret Haynes; Councilmembers Neal Anderson; Kevin O'Grady; Charlie Rivenbark; and Earl Sheridan. Councilmember Laura Padgett was absent. City of Wilmington staff present: City Manager Sterling Cheatham; City Attorney William Wolak; and City Clerk Penny Spicer-Sidbury. Chairman Barfield and Mayor Saffo called their respective Boards to order for the Special Meeting reporting that the purpose of the meeting was to hear an update on two of the priority items from the Garner Report – Pathways to Prosperity. County Manager Coudriet reported that the Boards have been working on priorities identified in the August 2014 Garner Report and Staff is prepared to provide detail information on the following: 1.) A build-out analysis for the US Highway 421 economic development project of extending water and sewer to the Pender County line; and 2.) A clearly defined incentive policy that would be integrated and mirrored between the governing boards to provide guidance to Wilmington Business Development, Inc. in recruiting new industries and businesses to the area. Progress Update on Priority Item: Rebuild New Hanover County – Bringing Water and Sewer to the US Highway 421 Corridor County Strategy and Policy Manager Beth Schrader presented the following analysis and information on bringing water and sewer to the US Highway 421 corridor: For illustrative purposes, the US Highway 421 corridor was divided into five zones of immediately developable acres as follows. These zones do not include wetlands, flood zones or conservation district overlay: Zone 1: 384 acres (close to the Pender County industrial park with large tracts of land; highway and natural gas access): food processing, precision manufacturing, cold storage Zone 2: 420 acres (highway and rail access, significant size parcels): distribution, heavy equipment, pet food, pharma, chemical, precision manufacturing, injection molding and boat building Zone 3: 67 acres (smaller parcels; rail and highway access): tool and die, metal fabrication, cold storage Zone 4: 98 acres (large parcels with river bluff views): high value office operations/headquarters Zone 5: 13 acres (small properties along highway access): service companies, small warehouse facilities, boat building Total: 982 acres available Model Assumptions:  Uses regional industrial forecasts from FOCUS project  Weights suitability of Highway 421 sites relative to other NHC, Pender and Brunswick sites  Investment value estimated based on appraised value/acre and floor-to-area ratios  Area attractive for development based on access to new residents, average job growth, access to existing jobs, proximity to transportation infrastructure and higher education opportunities Model Limitations:  Reflects existing industry mix/project size  Future investment valuations based on existing industry appraisals  Understated/excludes business personal property (furniture, fixtures, and equipment)  Employment projections at aggregate level  Quantity and quality (no job totals) and not by specific industry Average Quality of Jobs/ Job Type Illustrative Industries Earnings/Job* Lower skill/technology industrial Self-storage warehouse $29,485 Automotive parts, accessories $32,931 Higher skill/technology Professional/Scientific Instrumentation $45,313 industrial Boat and Ship Construction $66,172 Chemical and Plastics Manufacturing $111,963 Commercial Legal Services $59,893 Medical and Diagnostic Laboratories $68,406 Insurance and Employee Benefits Funds $132,687 *Garner Economics Competitive Realities Report NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 33 SPECIAL MEETING, APRIL 23, 2015 PAGE 280 Projected Development Through 2040 Investment Scenarios Do-Nothing Conservative Most Likely Optimistic Scenario Square Feet 478,750 957,505 1,816,263 2,675,022 Jobs by type: Lower skill industrial 239 100% 110 10% 209 10% 308 10% Higher skill 0 0% 771 70% 1,462 70% 2,153 70% industrial Commercial 0 0% 220 20% 418 20% 615 20% Total Jobs 239 1,101 2,089 3,076 Ms. Schrader pointed out that with the completion of I-140 and better road access in the northern part of Brunswick County in 2017, New Hanover County (NHC) would lose some new development to surrounding counties. Under the most likely investment scenario, a cohesive policy is needed to bring in industry. Under the optimistic investment scenario, the County would have to have a strategic, coordinated and cohesive policy for development where the bulk of the jobs would be for the higher skill industrial jobs. “Most Likely” Scenario Estimated Investment Horizon: Cumulative Assessed Tax Base (in millions) Year 0 $5.1 10% land value increase associated with water and sewer install Year 5 $48.0  Level of tax base investment needed for ad valorem to support Year 10 $90.8 debt service occurs after less than 15 years  High-value industries accelerate this timeline Year 15 $133.6 Year 20 $176.4 Primary Service Plan for Sewer:  Force main spine to serve customers by pressure connections  Most parcels will connect to sewer via on-site private pumps  Water spine to serve foreseeable demand  Expandable with minimal investment for build out horizon  Budgetary estimates:  Primary service plan: $12 million  Future expansion to build out horizon: $3.5 million Service Area with Estimated Project Cost: Leg A - northern river crossing near I-140 (return loop) $5.0 million Leg B - upper US 421 $4.5 million Leg C - lower US 421 $2.5 million Total (assumes 20% contingency) $12.0 million Design Capacity:  12-inch water line = 1 million GPD  Available Capacity = 815,000 GPD  Existing Demand = less than 185,000 GPD Illustrative Example of Usage:  Large chemical manufacturer =400,000 GPD  Small or precision manufacturer = Four 60,000 GPD  R&D or process design facilities = Six 20,000 GPD  Equivalent of 2,200 employees for warehouse, distribution and logistics, high value office, headquarters type operations Cape Fear Public Utility Authority (CFPUA) Director of Engineering Carel Vandermeyden was present and responded to questions concerning the design and capacity of the water lines. County Finance Director Lisa Wurtzbacher presented other funding opportunities for bringing water and sewer to the US Highway 421 corridor: Grants:  Reviewed Grant Opportunities: HUD, CDBG Economic Development, Brownfields Area-Wide Planning Grant, Brownfields Cleanup Grant (EPA), Brownfields Training, Research, and Technical Assistance Grants; Brownfields Economic Development Initiative  Grants not viable due to purpose of grant or requirement criteria:  Must own land or must provide jobs that benefit low-income  Possible opportunity for Public Works Economic Development Assistance Grant: NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 33 SPECIAL MEETING, APRIL 23, 2015 PAGE 281  Average award of $1.4 million per project  Staff to verify all required criteria  Boards would need to approve grant application by mid-June Loans:  Other State loans available but most do not meet needs of the project  Staff to continue searching for possible low rate loan opportunities such as general obligation bonds, revenue bonds and limited obligation bonds Traditional Funding Option of Limited Obligation Bonds:  Estimated Project Cost of $12 million with term of 20 years:  Estimated Interest Rate: 3.267%  Estimated Total Debt Service: $15,957,129  Annual Average Debt Service: $797,856  Required Investment for NHC Property Tax to Cover Annual Average Debt Service: $144,017,409  Impact on Debt Policy Limitations:  Average Increase in Debt Service: $797,856  No debt service expected until FY2017  Estimated Impact on debt per capita: 55  2016 Total Projected: 2,044  Impact on debt to assessed value: 0.10%  2016 Total Projected: 1.5%  Impact on debt service to Operational Expenditures: 0.3%  2016 Total Projected: 17.7% County Manager Coudriet reported that the Garner Report designated the US Highway 421 corridor water and sewer project as a main priority for economic development and the project is included in the County’s FY15-16 Recommended Budget and the Capital Improvement Plan for the $12 million investment. The debt service would not require a property tax increase as the County would have $30 million available for new investments as old debt is retired. An Interlocal Agreement among the three parties of the CFPUA, City of Wilmington and the County would be needed before proceeding or the project may be considered as a part of CFPUA’s long-range capital improvement plan. The business community should respond to the investment with building new businesses that would increase the tax base. As the economy continues to improve, the County would have a natural growth rate in the tax base of 1.1% per year, but that increase would not be sufficient to handle the $160 million school bond. Councilmember O’Grady expressed concern that the Boards would need to consider all debt service and other investment needs of the City and County such as schools, road improvements and fire stations before committing to the Highway 421 infrastructure. He questioned that the tax rate would not be affected by incurring more debt and requested to see the numbers of the projection. Commissioner Zapple commented that proceeding with the project has the potential of taking the first major step of undertaking the Garner Report and supported proceeding with the economic investment project. Commissioner White supported the project stating it would have a major economic impact to the region and said that the County should find other alternatives in paying for the project and suggested selling surplus real estate property. Although the County may decrease debt by $30 million a year, the County continues to add more debt. Chairman Barfield supported the project as it provides opportunities for growth and new business development along the corridor thereby increasing the County’s tax base. Mayor Saffo suggested that private investors from major manufacturing companies should be encouraged to participate in the project so that it could be done more quickly as with Duke Energy participating in the water infrastructure under the river. Progress Update on Priority Item: Incentive Policy Discussion Strategy and Policy Manager Beth Schrader presented the following update on developing a realistic and sustainable written incentive policy: Context for the proposed incentive policy with the maximum allocation to a project based on jobs and wages: Wage range ($/hour) Allocation per job $25.00 and above $5,000 $20.01 - $24.99 $4,000 $16.01 - $20.00 $3,000 $12.01 - $16.00 $2,000 Up to $12.00 $500 NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 33 SPECIAL MEETING, APRIL 23, 2015 PAGE 282 200% Federal Poverty Level Household Size Level Annual Salary Implied Hourly Wage 1 $23,540 $11.32 2 $31,860 $15.32 3 $40,180 $19.32 4 $48,500 $23.32 5 $56,821 $27.32 Bureau of Labor Statistics – Quarterly Census of Employment and Wages (QCEW) Third Quarter 2014 Data:  US = $949/week, $23.73/hour or NHC weekly wage = $39,000 annual  200% of the Federal Poverty level is the point at which an individual or family would no longer qualify for benefits from entitlement programs  North Carolina average weekly wage = $839 (or $20.98/hour)  NHC average weekly wage was $750 (or $18.75/hour) Past Incentives Compared to Draft Policy : nCino / Live Oak Castle Branch Company Investment $16 million real property $9 million real property 120 jobs (≥ $80,000 average) 400 jobs (≥$35,000 average) Awarded Incentive NHC: $325,000 NHC: $250,000 City: $250,000 City: $250,000 $575,000 $500,000 Estimated Incentive Under New $515,000 - $545,000 $670,000 - $737,500 Policy nCino – has 29 remaining hires to Castle Branch has 282 hires make (targeting average salary of remaining. Based on hires over the $80,000 which narrows range) past year, would predict incentives would run $673,000 Payroll 120 jobs* Payroll 400 jobs * $85,000 = 10,200,000 $35,000=14,000,000 Ms. Schrader explained that nCino would not have received any additional credit for jobs above $52,000. The proposed formula treats a $100,000 job and a $52,000 job the same way.From a policy standpoint, the Board would need to determine to what extent should the policy value the different wage levels and if the appropriate allocations are provided. Additional credits could be provided for salaries above $25/hour. When looking at Castle Branch, a higher incentive could be paid, suggesting that the policy might be overweighing the value of jobs with a salary of less than $16/hour. Document Roadmap for Draft policy: SectionKey Provisions Purpose: Creating and retaining quality value-added jobs; broadening and diversifying the tax base; increasing the region’s global competitiveness; promoting growth and welfare of the City and County; and encouraging capital investment Eligible Business /Industry Clusters : Manufacturing (by NAICS codes and permitted by right in industrial zones), Research and Development, Warehousing and Distribution, Corporate Headquarters, Transportation, Medical Services and Speculative Industrial Buildings Subsectors eligible for an additional 10% bonus allocation to the incentive formula: Life and Marine Sciences Research and Development Subsectors, High Value Office Operations Subsectors, Precision Manufacturing Subsectors, Aircraft Assembly, Modification and Maintenance Subsectors Minimum Project Qualifications: 25 net new jobs; Wages 110% of local wage for industry by occupation; 30% Return on Investment (ROI); If ROI threshold not met on expansion project, must have two out of three of the following: a) ≥$25,000,000 taxable real property investment; b) Create or retain at least 200 jobs; c) Total economic impact at least $500,000 Incentive Amount: Chart of allocation per job for eligible and bonus eligible businesses Only counts jobs for whom company pays unemployment insurance, or employee pays NC income tax Project Evaluation: Assessment of competitiveness, industry eligibility, “But for” certification and additional criteria Exclusionary Factors: If results in net decrease in ad valorem tax, if company not current on NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 33 SPECIAL MEETING, APRIL 23, 2015 PAGE 283 payments to local governments, company financial condition in doubt, or project would have a detrimental affect Use of Incentive Funds: Training, infrastructure improvements, site improvements, owner occupied land and building improvements, build-to-suit and leasehold improvements, relocation expenses. Short-term loans may be available in extraordinary circumstances, with guarantees and in participation with traditional financing Performance Agreement: Written document required addressing major key elements of agreement. Includes requirements, timing, “clawback” terms and provisions; penalties for non-performance; etc. Disclaimers: Policy does not establish an entitlement/right; decision and or amount of participation at governing board discretion and subject to availability of funding Alternate Programs: Governing boards have flexibility to do other incentives outside of the policy on a case-by-case basis. May reduce or preclude any incentive normally granted through policy Ms. Schrader handed out the draft Economic Development Jobs Investment Policy and requested everyone to read the draft and identify questions. The policy should be considered among the individual governing bodies and collectively at a later date. ADDITIONAL ITEMS OF DISCUSSION Mayor Saffo requested Council to waive the rules of order to discuss other items of business. Motion : Councilmember O’Grady MOVED, SECONDED by Councilmember Sheridan, to waive the rules to discuss items of mutual interest. Upon vote, the MOTION CARRIED UNANIMOUSLY. Chairman Barfield requested the Board to waive the rules of order to discuss other items of business. Motion : Vice-Chairman Dawson MOVED, SECONDED by Commissioner Zapple, to waive the rules to discuss items of mutual interest. Upon vote, the MOTION CARRIED 4 TO 1. Commissioner Watkins voted in opposition. Discussion of Shooting Ranges near Residential Properties Mayor Saffo requested the Boards to consider removing shooting ranges away from City limits and residential properties for safety concerns and asked that the Sheriff and the Police Chief work together to find a suitable location that would serve both City and County law enforcement officers, as well as State and Federal officers requiring certifications. He supported closing the shooting range located near the development of Riverlights and the one across the river from the Wilmington Convention Center. It was suggested that a previously considered site located on Highway 421 and property at the Sheriff’s Office on Juvenile Center Road be explored. Discussion of Re-establishing Human Relations Commissions Councilmember Sheridan requested the Boards to consider re-establishing the Human Relations Commission to deal with some of the issues of crime and other matters of the community. County Manager Coudriet reported that his office has talked with the State Human Relations Commission to see how the County should proceed in reestablishing the Human Relations Commission. An advisory panel could consider issues that would make the community better and the governing bodies could receive issue reports from the community meetings. Staff will continue its investigation and provide a proposal. ADJOURNMENT Hearing no further discussion, Chairman Barfield and Mayor Saffo thanked staff for the updates and for those attending the meeting and adjourned at 5:45 p.m. Respectfully submitted, Teresa P. Elmore Clerk to the Board Please note that the above minutes are not a verbatim record of the Special Meeting of the New Hanover County Board of Commissioners.