A letter to the N&R says the city and county shouldn't put money (an estimated $2 million) into the Wachovia tower project.

In the comments, I say it's a good deal.

Using Justin Catanoso's numbers from the BizJournal: the current tax revenue from the vacant property is about $40k per year, the renovated building would generate about $433k in tax revenue per year. A successful project pays the city and county back over several years and then keeps pumping money to them.

One commenter asks about risk. Good question. The formal ask hasn't been made yet, so we don't know the terms, but in any deal involving cash there would likely be risk attached to the public funds.

Given Carroll's record, and the momentum downtown, and the costs of not doing this project, I say it's a worthwhile investment -- and if we don't do it, the empty building can stand as a momument to missed opportunities and poor math skills.

Comments

[David Wharton]

There are ways the city can contribute to the project that aren't just a handing over of cash to Carroll.

For example, the city could undertake to develop a parking structure (either underground, or one with a layer of businesses/residences facing the street) and lease some spaces to the Wachovia residents while retaining some public parking.

If the city council members who went to Greenville, SC were paying attention, and are serious about emulating what was successful there, we should be soon be hearning some discussion about creative public-private partnerships.

[Jim Capo]

Downtown Greenville, SC is indeed stunning and a pleasure to experience. However, it should be invoked not as a model for our city fathers but rather as a warning for local taxpayers.

What has been accomplished in Greenville is nothing more than robbing Peter to pay Paul. Tax monies have been directed downtown at the expense of other areas in the city and a ballooning tax rate. Greenville County too has helped out with similar redirections.

Magnificence is an easy mark when spending other people's money.

[Bubba]

I am a little curious about the five year payback time frame quoted. I would like to see more details on the payback, and on the budget for the project..

Also, I am interested about the relatively small amount of public investment percentage-wise of the stated overall cost of the project. Is Carroll telling us he absolutely cannot find private funding for that amount? Does he have another reason, perhaps not so obvious to casual observers, for wanting the public money?

Having said that, I agree that the project is worthwhile. I'm just not quite convinced of the soundness of the details yet.

[Outsidethebox]

If Carroll had allowed the building to be added to the National Register, as he initially requested back in the fall but halted in February, he could have participated in an established program that would return of 20% of construction costs through tax credits on his federal income tax, and an additional 20% return claimed on his state income taxes. Considering the scope of this project, this would have involved well north of $10 million of federal and state tax relief he could spread over many years, and reduced his burden on this investment. This has been done many times before in Greensboro, financing popular projects such as Natty Greene's, Foundation Place, and Elm Street Center with little local charity. http://www.hpo.dcr.state.nc.us/tchome.htm

The sticking point with this plan? Balconies. He wants balconies to market condos to upscale owners and for his own penthouse unit. If Greensboro is willing to pay such an amount for balconies, expect a long line of downtown developers to form with hands outstretched for similar perks for amenities of all shapes and sizes across the board.

[Jim Capo]

If the payback is years away, what's the rush to jump at this scheme? This is the only option we will ever see to move this building from $40K a year in tax revenue to something higher?

Also, I'm applying some math skills here: Looking at the tax bill on my house as a reference point I am wondering how the vacant Wachovia building has a tax bill of only $40K per yer. By my rough calculation, fudging residential and commercial rates, the city must have the vacant building appraised for less than $4 million dollars.

If it is really worth only $4 million why should taxpayers throw away $2 million as an outright gift to a developer?

There are two better options:

1) The tax charge on the current building should be raised to a fair market rate to encourage the building owner to make a fair market decision as to what to do with their property.

2) Those who love to spend other people's money should at least demand that the $2 million be a subordinated loan rather than a gift. (If the developer can't work the numbers out under the loan scenario then the project must not be a good project worth pursuing.)

[David Boyd]

Hmmmm. Let's see. Ed's statement at the N&R:

So: put in some money now, get it back in the form of increased tax revenue within several years, and enjoy the increased cashflow for years to come...

Where have I heard this before? Sounds suspiciously like...supply side economics! Only less fair since the government gets to play favorites.

[David Wharton]

JC, DB, if you know of any cities with a great urban environment that haven't laid out significant public money to get it, point me to them. I'd love to be proven wrong, but I don't think you can get that kind of thing without some public investment.

DB, the economics sound more Keynsian than Lafferian to me, but I don't think either really applies at the local level. This is just small government at work.

Outsidethebox, Carroll claims that the National Register wasn't going to approve a 40-year old building for historic tax credits, but I don't know the whole story. I assume Carroll knows his market, and didn't think he could sell balcony-less condos at the price points he needs in order to make the deal work.

[Ed Cone]

Justin used the five-year payback time, seemingly based simple math (the $400k bump in tax revenue x 5 years), I edged away from that because in the real world money loses value over time, projects can take time to fill up, etc. "Several years" seems a safer projection to me.

I assume the supply side comment was meant as a joke, certainly it is one.

[Outsidethebox]

The National Register would not approve the tax credits for balconies and reskinning. The reskinning of the building also adds considerably to the total project cost, and drives the price tag for the project well beyond what would be involved with sprucing up what is there. In the end, it remains a glass box from 2006 instead of a glass box from 1966.

[David Boyd]

Sort of a joke, but not really.

Put in money - lower taxes.

Get it back in form of increased tax revenue - supply of condos is increased directly due to tax breaks with the assumption that demand for condos will be created thus leading to more taxes being paid later and higher revenue overall.

Sounds like a plan to me. If it makes sense in this instance, it makes sense for the guy on High Point Road too.

It's a fairness issue to me, DW. If Carroll merits tax breaks, why not another developer? Maybe another developer can come up with a better plan for the building since they now know they'll have x dollars of public money to spend. Why be locked in with Carroll? Sure, he owns the place, but it's obvious he can't make anything work without government assistance. So, I suspect if the city wanted to go in a different direction, he'd step aside.

As for public/private partnerships, the baseball stadium seemed like a pretty good deal to me. In this case, it's pretty hard to argue about the tower without knowing the specifics, but I like your parking garage example. Local government making infrastructure changes to accomodate development is one thing, giving cash or tax breaks away to a preferred party is another.

[Ed Cone]

We are where we are.

A proposal may come soon from a developer who plans to revive downtown Greensboro's white elephant.

All previous plans have come to nought, and the building has stood empty for 16 years.

The math seems pretty favorable. The project seems very important.

Woulda shoulda coulda, sure.

But we are where we are.

Let's do it.

[David Wharton]

O-box, I read the original National Register nomination, and it didn't say anything about balconies. It proposed to restore the original building facade and window color. Again, I don't know the details, but Carroll was quoted in the paper saying the Register wasn't going for it.

DB, I hear ya, but . . . what Ed said. Also JFK: "life's not fair."

[Jim Capo]

DW,
Taxpayer money for a park, library, public auditorium or street scape is at one level of argument. Taxpayer money for a private residence(s) takes the discussion beyond the pale. (Sidebar: If we want diversity and fairness why not spend taxpayer money to convert the building to section 8 housing?)

Ed's line was just too funny to go unpunished: "...in the real world money loses value over time."

Do I need to explain that the reason for this is that governments have forever been unable to restrain themselves from spending money they don't have and thereby, possessed with the option, always resort to debasing its value?

Take your best kooky Libertarian swipe at me, but I would have been against the public funding on the Great Pyramids and Taj Mahal too.

[David Wharton]

"Taxpayer money for a private residence(s) takes the discussion beyond the pale."

That's why I suggested that the city contribute in the form of city-owned infrastructure.

For my money, the Pyramids and Taj Mahal are simply whimsies (let's throw Neuschwanstein in, too).

But the Acropolis, the Roman Forum, Notre Dame cathedral -- let's keep 'em.

[Roch101]

David, my recollection may be incorrect, but weren't you railing against the overabundance of parking garage space downtown not that long ago?

[David Wharton]

Yes and no.

There's not enough parking at that end of downtown for Carroll's project, although over all downtown has more than enough -- for now. But as Ray Gibbs points out, if the downtown succeeds, a lot of the present surface lots will become building sites, and we'll need to build decks.

[Roch101]

Flip flopper!

[diane davis]

". . . The math seems pretty favorable. The project seems very important.

“ . . Based on Carroll's record and the trends downtown, as well as the upside for the city in terms of both $$ and downtown development, and the downside of losing the project, I think a well-structured deal would be worth the risk.

“ . . I judge incentives on a case-by-case basis. But I don't see this as an incentive deal, much less corporate welfare.
It's an investment that, unlike many other worthwhile public investments, should have a direct cash payoff.

“. . .Thank goodness we have a homegrown talent like Roy Carroll who is willing to take considerable risk on a project that is so vital to Greensboro.

“. . .The guy is taking an enormous risk, and it's a great thing for this city. I hope our elected officials support this project."

Ed,
I don't understand.
If this is such a good project and a good plan, where is the enormous risk being taken by the developer?

[Ed Cone]

He's the guy leading the charge, putting in money and energy and reputation. He's asking for some backup.

And he seems to be asking for it in the form of tax breaks -- which are based on a huge bump in tax revenue that his project would create. If he doesn't do the project, there are no big tax dollars on which to give him a break.

Let's look at it this way: what if there was no developer or $37 million project, and the City could just invest $2 million in cash and magically make the Wachovia building full and useful and a generator of tax revenue that would pay for itself in a matter of years. People would rejoice.

Back in the real world, the City has a chance to do pretty much that magic trick, less the cash infusion.

The return on the City's investment seems like a win-win to me.

The costs of non-investment seem much, much higher than doing the deal.

I'd like to hear people say it clearly: They'd rather see the building stand empty and the City not get that future tax revenue than have a private businessman get a boost from the City for his project.

[Roch101]

"I'd like to hear people say it clearly: They'd rather see the building stand empty and the City not get that future tax revenue than have a private businessman get a boost from the City for his project."

And that's the typicall argument; one that people often think is a canard. "Poney up or we won't build." "Give us tax breaks or we won't expand." "Cough it up or we won't locate here."

I'm on the fence on this one, waiting for more details, but the question that deserves an honest answer is would this $37M project really not go forward absent $2M in public funds?

[Ed Cone]

A reasonable question, Roch. Remember, though, we aren't at the opening bell here. Nobody has been able to move this project forward for 16 years, and not for want of trying. JP and Cherokee couldn't get it done. Carroll has spent a couple of years on it already. So it's clear that this is not an easy job.

This discussion reminds me of the latter days of the ballpark debate, when WMS advocates were pushing their $15 million plan...but didn't have $15 million or a plan to get it.

Also, if the request is for tax breaks, and the breaks are on taxes that only flow if the project is done, it seems all the more logical to go forward.

Leave aside the "typical argument," and all the conjecture about other possible deals and developers, of which in the real world we know of none, and let's go back to my statement: I'd like to hear people say it if they mean it -- that they'd rather see the building stand empty than for a developer to get help with the project.

[Jim Caserta]

Capo - the difference in tax revenue would be 10X, say the building is only worth $4M now, + the about approximate $40M investment in it, gives the 10X in value.

I think Ed has hit the nail - do you want to renovate & put to use the building, or are you content to let it sit there empty? 16 years is a long time, filled with real estate ups and downs. If there was a better plan, it probably would have come up by now.