Carolina Journal News Reports
"The NC Research Campus, based in Kannapolis, is a stunning joint venture between Dole Foods, Duke University and the University of North Carolina system. Built on the site of a former textile mill, this campus-like redevelopment forges a bold new path..."
RALEIGH — Internet surfers might expect to read the above at the Web sites of either the giant fruit and vegetable packager, or of the universities involved. But instead it is published on a special Web page created by the entity with probably the greatest stake in the venture: The City of Kannapolis.
A healthy serving of taxpayer funds will help a planned nutritional research mega-facility, part of a mixed-use development backed by developer and Dole CEO David Murdock. Thanks to the passage in November 2004 of Amendment One to the N.C. Constitution, which provides for local governments to implement so-called tax increment financing without a public vote, a majority of local officials and Murdock are looking for almost $200 million in public assistance for the project, dubbed the North Carolina Research Campus.
"With the important financial support of Cabarrus County, we as a community can fully participate in financially supporting the growth of the Campus," says the Web site of Alliance for Tomorrow, a coalition of government advocates and businesses created specifically to develop support for the NCRC. "…It is critical that we do everything possible to make the Campus as successful as we possibly can."
The Alliance for Tomorrow, led by state Rep. Jeff Barnhart, R-Concord, was created to shore up support for the Research Campus — specifically from Cabarrus County commissioners, who took longer than Kannapolis officials to join the project with public financial backing. That is because of county leaders' skepticism about the size of the project and how much resources it would drain from their coffers. The alliance ran television advertisements in the market to garner the public's support for the Research Campus.
Ultimately commissioners relented, and voted May 21 to finance the project with Kannapolis, although they hedged on using tax increment financing. Instead, they considered using an alternative form of borrowing, called certificates of participation.
Tax increment financing is used to borrow funds to finance improvements for properties, usually by local governments for areas they want redeveloped. They often pay for upgrades to infrastructure and roads, in order to attract more private investment and increase property tax values. The increase in tax revenues from the tax-increment financing district is used to pay the debt from the improvements incurred by the local government.
Critics say that tax increment financing leaves taxpayers vulnerable should the new developments not bring in the expected revenue and that the funded projects also place additional burdens upon government services that are not paid for because the extra money from the ventures is used to pay off the tax increment financing bonds.
But in early June the Cabarrus commissioners voted, 4-1, to use tax increment financing, despite the financing’s higher-interest costs than that of certificates of participation, because the TIFs would not require the county to use its assets for collateral. Republican Commissioner Coy Privette, who supports the Research Campus, was the sole opponent of the financing plan.
"The Board of Commissioners voted to finance its corporate giveaway through the equivalent of a payday lender for governments," Privette wrote in an opinion article for the Concord-Kannapolis Independent Tribune.
Kannapolis's lobbying effort
Ever since textile company Pillowtex closed in 2003, out-of-work residents and their elected leaders have hoped that another company would come to their rescue. Many manufacturing communities dependent on a single industry never recover once a company closes or moves away, but in the case of Kannapolis, the city had to wait only a few years for its savior.
With Murdock, it was the second coming. He had owned Pillowtex's predecessor — longtime textile powerhouse Fieldcrest Cannon—during the 1980s. But he didn't keep the business long, although he maintained a presence in Cabarrus County as a property owner.
For Murdock, this time, the public funding of the Research Campus could be a greater boon for another company he owns — Castle & Cooke, a developer — than it is for Dole Foods. The former textile complex will be transformed into more than just a university research center. Castle & Cooke plans a large-scale mixed-use development, to include offices, industry, retail, and residential, all within the 1.5-square-mile TIF district. As many as 35,000 people have been projected to be employed there once the project is complete.
"I like the term 'biopolis' very much," Murdock told Site Selection magazine in November 2005. "I want to make this entire town into a think tank."
But not everyone around the former industrial city 20 miles north of Charlotte thinks the project should receive such heavy public financial support. Kannapolis and Cabarrus County committed to support the Research Campus with $169 million from TIFs. Also, some question the appropriateness of public financing for upgrades the Research Campus is getting that are usually paid for by developers, such as road improvements, parking decks, landscaping, and water and sewer infrastructure. The city's entire downtown water system must be replaced to accommodate the Research Campus.
"What's happened here is that David Murdock and his companies are asking us to subsidize that expense," citizen Harold Smith told commissioners at a meeting May 21, just before they voted to finance the Research Campus. An audio clip is available at the Web site of the Independent-Tribune. "Now I don't think it's fair for the taxpayers."
Debate over TIFs, public resources
Leading up Cabarrus’ approval of TIFs in early June, officials debated whether the county's funding of the Research Campus would lead to tax increases, or diminished resources for other county needs. County Manager John Day argued that the commitment to TIFs would inevitably hamper the commissioners' ability to address other basic government services such as schools and law enforcement. Legislators representing the area, as well as Kannapolis officials, disputed that claim.
Much of the debate was expressed following the airing of television advertisements by the Alliance for Tomorrow. Day, in an e-mail message to Barnhart, said the ad was misleading because the ad said, "there will be no cost to the rest of the county's taxpayers or that the tax rate will not be affected." Day emphasized in his message that the county's schools already were struggling to keep up with growth and straining the financial resources under the current property tax rate.
"If the Board of Commissioners appropriates taxpayers' money to pay for municipal infrastructure in downtown Kannapolis," Day wrote, "then that money will not be available to meet our community's overwhelming needs related to education.
"In other words, taxes will have to be increased to make up for what is given to Kannapolis so that the county's educational needs can be met."
Barnhart disputed Day's assertion that the Research Campus would put an additional strain on county resources.
"To say that you would have to increase taxes to pay for the TIF financing, because you are planning on using the 'new revenue' to pay for the 'old problem' of school financing is not in my opinion being straightforward," Barnhart said.
"If the NC Research Campus was not built, would you still be planning on using that revenue stream to pay for the school problem? Or would you propose to the commissioners that they increase taxes to fund the schools? It is very unfair to blame that problem on the Research Campus," he said.
Kannapolis City Manager Mike Legg, a staunch supporter of TIFs for the Research Campus, said Castle & Cooke will pay an estimated $469 million in property taxes over the 25-year life of the TIF bond issue. "A portion of these taxes will be pledged to the TIF debt," he wrote in an e-mail answer to questions from CJ.
Projections from an "independent fiscal impact report" show that the city and county would receive about $123 million in other revenues from the redevelopment effort, Legg said. The "other revenues" included sales and use taxes, personal property taxes, utility franchise taxes, business licenses, and other sources, he said.
Other incentives would be "difficult" for the city to offer to any more businesses — including Dole — that move to the Research Campus, "because a portion of those revenues are pledged to the repayment of the TIF debt," Legg said.
"Currently no incentives have been offered to the dozen or so companies that have announced a move (Red Hat, LabCorp, Dole and several others)," Legg wrote in his e-mail, "nor did any of these request incentives.
"However, I cannot speak to what future elected boards may offer to businesses desiring to locate to the Campus."
State legislation and budget
The funding for Murdock's development doesn't stop with the local government TIFs. State legislators last year appropriated $6 million to the universities for their Research Campus activities, $5 million of which was in recurring funds for 25 job positions and other expenses. Community Colleges got $2.2 million recurring for their operations at the Kannapolis Campus.
This year's budget has not yet been finalized, but the Senate's version calls for an additional $16.5 million ($8.5 million recurring and $8 million nonrecurring) for the project. But the House appropriated only $1 million in onetime money. The Senate budget also gives the state community college system $1.4 million for programs related to the Kannapolis project.
Lawmakers also sought an expansion in state law for the kinds of projects TIFs might be used for. A bill that has passed the Senate would allow the special financing to also pay for parks, recreational centers, playgrounds, schools, and community-college facilities. The House has not acted on the legislation.
Murdock is no stranger to the state's beneficence. His company Bud Antle Inc., a subsidiary of Dole, received $500,000 in August 2005 from the One North Carolina Fund for building a vegetable packaging plant in Bessemer City. Gaston County received the same amount from the state through the Industrial Development Fund for the same project. That paid to extend water and sewer lines to service the plant. The plant was also eligible for as much as $6 million in tax credits through the state's William S. Lee Act.
The plant also received 118 acres, valued at $2.1 million, said Donny Hicks, executive director of the Gaston County Economic Development Commission. Also, Bud Antle will pay property taxes to the county for its first 10 years, but then will receive an 85 percent rebate on the taxes in years 11 through 15, and a 65 percent break in years 16 through 20. The company also agreed to be annexed into Bessemer City in exchange for agreeing to a 10-year tax abatement. The city draws other revenue from the plant through its water and sewer service.
Construction at the Research Campus is well under way, even though a final TIF plan has not been approved, as required, by the state's Local Government Commission. Castle & Cooke representatives say the project will be built anyway, and that TIFs and other funding will determine the final size of the project.
According to Legg, about 550,000 square feet worth of construction has begun. Work includes a $144 million Core Lab building; the $30 million Central Energy building; a $46 million UNC-Chapel Hill building, and a $40 million building for N.C. State University researchers.
Completion of the buildings is scheduled for late 2007 through mid-2008, he said. According to a report in the Concord-Kannapolis Independent-Tribune, Dole will not own or control any intellectual property developed from university research.
Street and landscape renovations for the campus have been under way for some time now. Part of Main Street near the campus has been closed since last August for water infrastructure improvements.
Paul Chesser is associate editor of Carolina Journal.