City Council Modifies the Durham Innovation District’s Incentive Agreement, Worries About Its Cost | News
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Friday, October 21, 2016

City Council Modifies the Durham Innovation District’s Incentive Agreement, Worries About Its Cost

Posted by on Fri, Oct 21, 2016 at 3:10 PM

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Incentives for the first phase of the Durham Innovation District were, again, discussed by the city council on Monday night, and several council members said they were concerned about how the city uses public dollars for private development.

By Thursday, however, those concerns had been assuaged—at least enough for the project to pass. 

Last September, the council voted to approve a $5.25 million incentive agreement for Durham ID Phase I Developers LLC, which is set to redevelop properties at 224, 301, and 302 Morris Street in downtown. But now, as the developers ramp up and construction begins, they want to renegotiate the terms.

The original agreement would see an $87 million investment made in Durham, including $8.3 million for infrastructure improvements, 271,00 square feet of lab and office space and an 820-space parking garage. 

The changes include reducing the minimum capital investment requirement from $87 million to as low as $78.3 million and would also change requirements for the development, including commitments regarding how much of the square footage was to be continuously occupied and how many parking spaces would be made available to the public after hours. 


The modifications also extend the construction commencement date to March 31, 2017 (a three-month extension) and the completion date to September 30, 2019 (another three-month change). The developers asked for the modifications so they could finalize their financing, which is contingent upon an agreement with the city. 


Council member Steve Schewel described the changes as “substantive,” and added that he was reluctant to vote on the agreement Monday (spoiler alert: they didn’t vote) until a pro forma explaining the financials of was presented. In short, he wanted to make sure the city wasn't overpaying. 


City manager Tom Bonfield said the agreement was structured so that if “the investment goes down, then our investment goes down by the same percentage.” Essentially, it’s a sliding scale.


By Thursday, when the council approved the agreement modifications, there still were concerns—particularly from members of the board who were elected after the original agreement was signed last September.


Council members Jillian Johnson and Charlie Reece both said the incentive amount was too high given the fact that it makes up about 70 percent of the future incremental property tax revenue created by the development. But they weren't the first council members to oppose the percentage. In fact, when the proposal was on the docket in September 2015, then-councilwoman Diane Cattoti voted against it, saying: "I do think it's a good project. But as I said in June [2015], I still believe that an incentive equivalent to 70 percent of future tax revenues is just too high." 

Reece said he, too, thinks 70 percent of the future tax dollars generated is too high for a project like the Durham ID—which is essentially new construction—but that percentage is better served for projects like 21c or The Chesterfield, which helps bring back buildings that already exist in downtown. 

But in the end the modifications were approved unanimously.


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