If “corporate welfare” results in community investments, does that mitigate the “welfare” component? Are there different degrees of “corporate welfare”? If a corporation, in a time of economic recession, can bolster a community’s tax base – if it can add jobs to the local economy – what would it be worth to that community? What kind of a price tag would we put on that?
The current credit squeeze has hurt developers’ ability to move forward on their projects. Banks are not providing large commercial construction loans. But commercial developers want to continue building even during the recession – and it’s important that they’re allowed to do so. Why? Because in a time of recession, commercial development can add much-needed revenue and jobs to the local economy.
But without the ability to secure construction loans, how can developers move forward?
As of Aug. 3, they can ask that their land is designated a “special assessment district” (SAD), which essentially means that the municipality in which the development is situated will back the issuance of bonds to pay for the development’s infrastructure costs.
There’s still a lot of confusion about the state legislation, and rightfully so. The law is only a few months old, and the N.C. General Assembly did not include “protocols” in the legislation. Essentially, that means that those protocols have to be invented the first time the legislation is taken for a spin.
And that’s what is happening right now in Iredell County. Developers of Langtree at the Lake – the $800 million upscale mixed-use development in Mt. Mourne – have asked county commissioners to issue up to $46 million in bonds to install infrastructure at the southern Iredell development.
The request sent up red flags to folks who are fundamentally against government involving itself in private business. Others may have found the proposal questionable due simply to unfamiliarity with the new law.
So what’s it all about? Who’s at risk? What’s the risk specifically to the county? Who’s responsible for repayment if Langtree developers, or the “benefitted properties” within the development, miss a payment or fold altogether?
Let’s start with the problem: If developers are in the beginning stages of their projects – i.e. the “horizontal development,” or the grading/infrastructure stage – they could technically go to banks to request loans. But people want to buy buildings, not sewer lines, and banks cannot generate money from properties until the development “goes vertical” (i.e. buildings are built and ready to close), said David Parker, attorney and partner of Langtree at the Lake. The banks, therefore, may agree to lend the money – but only a certain percentage of every dollar, and a much lower percentage right now (about 50 cents per dollar), due to the recession, than in stable economic times (at least 80 cents per dollar).
The SADs allow developers to ask municipal governments to issue bonds for infrastructure costs. The bonds, in turn, are sold, and the developers’ properties are put up as collateral; the requirement in most states with SADs is that the developers have a 3:1 ratio of land value to bond. The developers – and eventually the benefitted-property owners and merchants – repay the debt through property assessments.
“The county is not lending us a dime,” said Parker. “The benefitting business owners are borrowing the money from (bond buyers).” Langtree, he said, is simply “asking for the county’s blessing.”
The onus, then, is on the developer having in place accredited bond buyers, which Parker said are limited to either “qualified institutional buyers” and/or accredited investors across the country with a net worth in excess of a million dollars, excluding their primary residence.
Recognizing that municipalities would not want to secure bonds by using their taxing authority since only certain parts of the municipalities would benefit, the N.C. General Assembly agreed to make the bond buyers first in priority, even before the property’s mortgage holders and “vertical construction” lenders. The bond buyers are second only to the county’s property taxes and state/federal tax liens.
Why did the state create such a law? “Because it’s a good public purpose,” said Parker. “It creates sales-tax revenue, a heftier tax base and jobs.”
Will the developers benefit from the bond proceeds? Absolutely. But so will the state and the local economies. One key difference, however, is that the state and municipalities are not legally liable for the bonds. They have relatively little, if any, risk because the bonds are secured by the developers’ land – not the county.
As of 2002, the U.S. had 3,600 SADs. Florida is one state that has them, and Parker said it’s the one with the most safeguards in place. He said that’s why Langtree developers “modeled all of (their) findings – and all the information that will be submitted to the (N.C.) Local Government Commission” after the State of Florida.
When a SAD assessment payment has been missed in Florida, said Parker, the primary lender (typically a bank) covers the missed payment to avoid default. “The bank doesn’t want to have to come in on foreclosure and buy the whole bond,” said Parker, “because in that case, it only makes 80 cents per dollar.”
“For that reason,” he said, “it is impossible to sell the bonds without ‘vertical’ financing in place.”
Fortunately for Langtree, the developers have “loan commitment letters for further financing from lenders that understand that they may be in behind the Special Assessments and are comfortable with that,” Parker said.
In essence, the county, by approving the issuance of the bonds, would essentially help “legitimize” the bonds to bond buyers and bond underwriters, who determine whether the feasibility studies related to the bonds are legitimate.
The underwriters, said Parker, “are very sophisticated.” He said “there are only 5 to 10 underwriters in the country that underwrite these kinds of bonds, and they follow legislation like hawks on sparrows.”
Langtree’s underwriters, from Florida and Arkansas, have assured Langtree that “they already have buyers wanting to buy the first $20 million in bonds,” said Parker. The buyers, he said, “want the favorable tax treatment and like the security of the project.”
Langtree may adjust their request to the county from $46 million to $20 million, which would cover the entire first phase of development, said Parker. “We asked for the full project amount ($46 million) because several commissioners told us to ask for it all on the first hearing instead of coming back for each phase,” he said. “I, personally, would rather just ask for issuance for Phase 1 and then, if the credit market remains in its current funk, ask again if necessary for issuance for future phases.”
“All economic models of the depth and breadth of this recession show recovery within two years past our anticipated construction completion,” Parker said. If that’s the case, and if the county approves issuing $20 million in bonds now, then the developers could secure a private loan for the remaining $26 million a couple years from now. By then, the development would be “vertical” – or buildings would be built and ready to close – which means the banks could approve a better private loan.
An additional advantage of the bonds: With Iredell County’s consent, Langtree can capitalize interest payments for a two-year period after construction starts. Basically, that means that payments for the first two years past construction are included in the loan amount.
Langtree’s infrastructure installation could be complete within three months after the bonds are issued because construction companies, due to the economy and lack of work, are able to complete jobs quicker and under-budget. And theoretically, Langtree’s first condominium tower will reach build-out 14 months after construction on it begins, while the development’s office tower will take 12 months. So, construction on Langtree’s first phase could be complete at the end of the two-year period of capitalized interest payments – which is the same time that the economy is projected to pull out of its current slump.
Langtree’s condo tower, Parker said, is already 70 percent pre-sold, and the retail tower is 50 percent pre-leased. “So when the two years is up,” Parker said, “we’ll be well underway with the ability to make those payments (on the bonds).”
Parker said Langtree had to have the pre-sale and pre-lease commitments before it was able to secure commitments from its “vertical construction lenders,” or people who intend to lend money for the development’s buildings.
And in order to have bond underwriters sell bonds, Parker added, “vertical lenders have to be in place.”
The vertical lenders, who will eventually buy the bonds from the folks who originally purchase them, are actually at the highest risk in a bond financing arrangement, said Parker, because they have accepted 50 cents per dollar from the bonds, putting them in second place to the bond buyer, who will receive 80 cents per dollar.
“Langtree’s lenders on vertical construction know all of this and are still willing to fund us because they believe in us,” said Parker. “They are willing to pay the bond even if they don’t make anything back on the loan.”
If it all falls apart, said Parker, the bond buyers “come after our development. The risk is only to us. We hold all the risk.”
So, why does Langtree need the county? Iredell, by issuing the bonds, would help legitimize the bonds to buyers and underwriters. But even more than that, the developers need a stamp of approval from the LGC, which has credibility with bond buyers and underwriters throughout the country. The LGC’s job is to protect the issuing municipalities by determining whether the bonds will perform as they should.
Langtree and Iredell County must approach the LGC with fine details of the financing proposal. The LGC will pour over the information and ultimately render an opinion on whether the county should issue the bonds. The county can then base its decision on the LGC’s recommendation.
“Iredell County is not being asked to lend a private developer anything and is not at risk in authorizing the bonds,” said Parker. “South Carolina, Mississippi, Alabama and most of the other southern states have these bond facilities in place, and they have worked without any peril to the counties.”
If Iredell County does not issue the bonds, Parker said that Langtree will continue building its development, but it will likely wait for at least a year. Why? Because the developers would rather wait until the recession is over than move forward with a 50-cents-on-the-dollar loan.
Some folks have expressed concerns that the bonds would simply be cheaper for the developers, thereby allowing them to make more money. Parker said that isn’t so. In fact, he said the interest rate that Langtree would pay on the bonds would be in the range of what private equity lenders are charging (8-9 percent). Since the bonds would not be backed by the county, the developers would not receive the cheaper “general obligation” rates, which are currently in the 4-5 percent range.
The difference between the bonds and a private loan is that the bond moneys are available now, the pay-back term is up to 30 years, and the bonds feature some favorable tax advantages and better security for the bond buyers. “There are no cost savings to the developer, and specifically none to Langtree,” Parker said.
“The problems in the economy right now are related to the lack of credit, not interest rates,” he added. “Banks simply will not make any large commercial loans until the defaults in home mortgages and credit-card-backed obligations have run through the system, which may take another year.
“We would like to build during this recession if at all possible,” he said. “In short, bond money is available today – bank loans are not. Employment during a recession requires credit. The bonds can provide that.”
Another concern is that the state legislation opens the door for every developer in the state to request bonds. But Parker said the legal fees alone for the SAD financing will top $20,000; in Langtree’s case, the developers also plan to pay the county’s associated legal fees. The underwriter fees are also very expensive, he said. The underwriter and legal fees alone would eat into all the potential profit of smaller projects. Additionally, the bonds likely wouldn’t sell on smaller projects because they wouldn’t perform in the current economy, and smaller projects aren’t as likely to be able to secure both infrastructure and vertical loans.
“Only 4- and 5-star developments will even look at this (funding option),” Parker said.
So, what’s the bottom line? The bond proceeds would no doubt help Langtree at the Lake by enabling the developers to continue building through the recession, when prices are cheaper and workers are more readily available. And the sooner that Langtree can “go vertical,” the sooner it can start making money.
And make no mistake about it, Parker said: “I share your suspicion and leeriness of developers.” After all he said, “They’re always in it for themselves.”
But there’s a good side even to developers, and as long as “the better angles of the developer’s nature are consistently heard by the developer and the public,” then a development can benefit both, Parker said.
Look no further than Lowe’s corporate headquarters in Mooresville: The town offered it tax incentives to locate here. But the corporation has also generously donated millions of dollars to the community, including sinking millions to build the YMCA and to expand the Mooresville Public Library.
Langtree’s more immediate contribution would be providing jobs to labor workers in desperate need of work right now. The development would also provide useful tax revenue to the county and to the Town of Mooresville. Think about this: Two years ago, Iredell County received approximately $20,000 a year in taxes for the properties now owned by Langtree. Now, the county makes about $170,000. With the addition of infrastructure alone, those annual property taxes would jump to $500,000 a year.
At the end of the day, it isn’t the developer’s job to base its decisions on the economic benefits that its project would have on a community. That’s the job of our public officials; in this particular case, the Iredell County Board of Commissioners.
It’s no secret that Langtree won’t pull the plug on its development if the county decides not to issue the bonds. But the developers have said that they will wait to move forward until the economy pulls out of its current slump.
To the county, is it worth the wait?
Langtree expects to appear before county commissioners today with a development agreement. Commissioners have voted to conduct their “due diligence” on the project before reconsidering a request from Langtree to approve a “final assessment resolution.”
Tuesday, November 18, 2008
Wednesday, November 12, 2008
Tice says she voted with group
There's been some confusion about Commissioner Sara Haire Tice's vote on the first motion made at Monday's county board meeting regarding the Langtree proposal.
Here's the passage that was reported here yesterday:
When County Commission Chairman Marvin Norman called for the vote on Monday, each commissioner except Tice verbally voted "yea." As Norman was calling for the "nay" votes, Tice cast her vote.
Shortly after the meeting, I called County Clerk Jean Moore, who confirmed that Tice had voted against the first motion.
However, Moore sent me the following e-mail today:
Here's the passage that was reported here yesterday:
But Tice says she actually voted the same as the other commissioners both times.(Commissioner Steve) Johnson made a motion that the board instruct county staff to “consult with whoever” to “develop a comprehensive definition of what due diligence is” and “what is expected of due diligence.” He also asked that all expenses incurred by the county “be born by the developer.”
The motion passed 3-1, with Tice dissenting. Commissioner Ken Robertson is out of the country on business and was absent from the vote.Johnson then amended his motion to include language about the county’s intent to enter into a development agreement with the Langtree developers with all expenses paid by the
developers.
That motion passed unanimously.
When County Commission Chairman Marvin Norman called for the vote on Monday, each commissioner except Tice verbally voted "yea." As Norman was calling for the "nay" votes, Tice cast her vote.
Shortly after the meeting, I called County Clerk Jean Moore, who confirmed that Tice had voted against the first motion.
However, Moore sent me the following e-mail today:
Jaime,
I wanted to let you know that today I talked to Sara Haire Tice, and I asked her about the first motion at the Nov 10 commissioners’ meeting. Tice advises that she voted with the group, or the voting was 4 – 0.
I wanted to let you know, and to apologize for my
previous answer to you.
Thanks,
Jean
Tuesday, November 11, 2008
County to Langtree: Too many questions, not enough answers
County commissioners are moving forward on Langtree at the Lake’s request for $46 million in bonds – but they’ve decided to do some homework first.
Developers of Langtree at the Lake wanted commissioners to pass a final assessment resolution yesterday. Langtree has asked the county to issue $46 million in bonds to install public infrastructure at its $800 million Mt. Mourne development. The county, in turn, would designate Langtree properties a special tax district, which means the development would repay the bond through property assessments. (For more information, visit http://thegattonreport.blogspot.com/2008/11/bonds-for-billionaires.html)
The final assessment resolution, County Manager Joel Mashburn told commissioners yesterday, “is not a final document – it’s not a final act. It’s not the thing that issues the bonds.” Instead, he said, the resolution simply “establishes parameters and criteria” that detail “where we go from here.”
But most of the commissioners agreed that too many questions remain unanswered – including whether the county would face any ramifications if it adopted the resolution then decided down the road that it didn’t want to issue the bonds.
County Attorney Bill Pope reminded commissioners that the county would not be legally liable if Langtree defaults on repayment, but he also restated his concern that it could result in “reputational taint.” Pope and Mashburn said they felt the county wouldn’t be committed to issuing the bonds even if it adopted the resolution.
“So what I’m hearing from Mr. Pope and Mr. Mashburn,” said Commissioner Sara Haire Tice, “is if we approve this document today, the county can always back out if they change their mind or if they don’t get the documents they need?”
Answered Mashburn: “That’s my opinion.” However, he said that since this particular type of financial arrangement has never before been tackled in North Carolina, he couldn’t say unequivocally “what action may come out in moving forward at this time.”
“If you’re not comfortable with that,” Mashburn said, “I certainly think it’s within your authority to say, ‘We will wait until we’re more comfortable with this, and here’s what it’ll take to make me more comfortable.’”
He told commissioners that the question facing them was essentially one of policy. The county must pass a final assessment resolution and perform due diligence before approaching the Local Government Commission, he said, adding that the commissioners basically needed to decide which to do first.
Iredell Commissioner Steve Johnson cut to the chase: “I’m getting a little frustrated, and I’m trying to control myself,” he said. “Is it the policy of the LGC that we are to perform our due diligence” before presenting a proposal to the LGC?
“That is correct,” answered Mashburn. He said the LGC will expect that all the county’s questions are answered and all the necessary impact studies are complete before a proposal is submitted.
“They don’t put all this stuff together,” Mashburn said of the LGC. “The county will be the applicant on this.” The LGC will simply review the information compiled by the county, he added.
“Why not do (the due diligence) now?” asked Johnson. “Do it on the front end of the project – not after we’ve already approved the resolution.”
“I have friends on both sides of this issue,” said Johnson, “but I’m here as a representative of this county. They hired me to do a job, and I’m going to do it.”
“We’d all be better served if (due diligence) is done on the front-end of this project.”
Throughout the discussion, commissioners expressed concerns about passing the resolution without having seen any of Langtree’s financial information.
Statesville attorney and Langtree partner David Parker, who spoke on behalf of the development group at yesterday’s county meeting, held up a three-ring binder and told commissioners: “I have our business plan right here; I'm ready to provide it to you.” He said the plan includes “spreadsheets for the next three years, month-by-month.”
Langtree has said it is confident that the business plan would answer any and all of the county's questions.
Parker said Langtree fully understands that “when you ask the government for help, you have to open your books to the government.” However, he said, the developers are obviously hesitant about opening the business plan “to full disclosure,” because all of Langtree’s financial information would become public record … and could wind up in the hands of competitors.
County Commission Chairman Marvin Norman said in yesterday’s meeting that he doesn’t feel the county has enough information to vote. He said he won’t be satisfied until the county manager, attorney and finance director are satisfied. “And right now, I’m not hearing that,” he said.
In a follow-up telephone conversation with the Report today, Norman said: “I don’t have a problem with (Langtree) wanting to invest in the community.” However, he said, “I do have a problem with them not being able to answer my questions.”
He said that Langtree “initially did not give (the county) the information we asked for.”
“If they’re not getting me this information, they’re not getting my vote,” he said. “When I got voted in, people put me in there to make good decisions. Taxpayers are expecting us to do our jobs. If somebody gets mad about that, guess what – it doesn’t bother me.
“I don’t have a dog in the fight,” Norman continued. “My dog is trying to make sure the taxpayers don’t get caught in a bad situation on my watch.”
He said that’s why he “wasn’t in a hurry” to pass the resolution yesterday.
“I want to be the best person I can to everybody, but I’ve got to be objective,” Norman said. “I have to look after the county, the people who put me in that office. I can’t look after special interest people just because they want to do a special project. When you look at today’s economy, the risk is very high.
“Whatever you do, somebody’s gotta pay for it,” Norman added. Private developers, he said, “are in it to make money.”
“There are no free rides,” he said, directing his comments to private businesses. “I want you to make your money, but don’t ask me to subsidize it."
Bottom line, said Norman: “I’m not happy using the county government for something it was not intended to be used for. We’re not there to provide their needs, other than what we can do to help them get by. We’re not there to be a financial institution for anybody other than the taxpayers.”
Norman said that Langtree may eventually be a shot in the arm for Iredell’s economy. But before the county involves itself in a financial agreement with private developers, he said, commissioners need to be certain that the true beneficiaries of the project would be the county and its taxpayers and that the county would in no way be at risk.
Right now, he said, commissioners don’t have enough information to feel completely confident about that. He said the answers to too many questions have started with “as far as I know.” And Norman said that makes him nervous.
Mashburn told commissioners in yesterday’s meeting that “nobody can give you definite answers to all your questions because we’ve never done this before. The state has never done this before.”
The developers believe that all the questions can’t be answered until the LGC is approached with a proposal.
Norman said he represented the county in a meeting with the LGC in Raleigh on Oct. 29. He said it became clear at that meeting that there were far more questions than answers about the proposed financial arrangement, which was made possible through state legislation that was passed into law just three months ago.
“I was really nervous because they couldn’t answer my questions, and if they can’t answer mine, they can’t answer yours,” Norman said, adding that even the county’s bond counsel from New York “kept saying he’s got to research this.”
Norman agreed that sometimes government has to gather as much information as it possibly can, then take a leap of faith. But at this time, he said, more information is needed before the county can take that leap with Langtree.
Norman said that Langtree "initially did not give us the information we asked for." He said the developers brought some of that information to yesterday’s county commission meeting in the form of a business plan, but even then, they didn’t open their books. “Eventually I think it’ll have to go public,” Norman said of the business plan. “They entered into a public arena as far as I’m concerned.”
Could county commissioners look at the financial books without them automatically turning into public record?
Norman said the commissioners will need to pour over Langtree’s financial information to make sure the developers “meet all the criteria and have the equity” to pay back the bonds. “Just showing us ain’t gonna cut it,” he said.
Commissioner Godfrey Williams at yesterday’s meeting said he wishes the county “had a precedent to look to.” He said he needs assurances that the county would not be impacted if Langtree defaults or forecloses.
“I certainly have some additional concerns,” Williams said, adding that he has different concerns each time he reads the final assessment resolution.
Responded Parker: “Any question you have, I would be delighted to answer in this forum or any other.”
“I guess I’m confused,” said Tice, explaining that it was her understanding that Parker had spoken with the county’s bond counsel, the county attorney and the finance director … and that everyone had agreed that “this final assessment resolution paperwork was ready to move forward.”
“Is that not correct?” she asked.
Citing the resolution, Parker said that everything would be “subject to the approval of the Local Government Commission (and) the receipt of studies and reports acceptable to the county commissioners.” Basically, anything and everything would have to be presented to the county board for approval before it is presented to the LGC.
“We have an obligation to turn that over to you,” said Parker. “If we don’t, we won’t get the bond, and we won’t get approval from the LGC.
“Everybody gets to ask questions,” Parker said. “Until we satisfy everybody, you’re not going to pass a bond resolution.
“This whole thing is about job creation,” he continued. “This is an economic stimulus package.”
Commissioners mentioned that another company already plans to approach the county with this same type of financing request. Tice said that she has not put the county at risk in all her years as commissioner … and she doesn’t intend to do it now. But the new law that allows county government to work with private business for infrastructure needs, she said, “is probably going to be the way to go in the future.”
Williams said county commissioners need to “make sure we know what we’re doing the first time.”
Langtree’s managing partner, Rick Howard, asked commissioners to keep in mind that “this is an opportunity.”
“This is not about Langtree,” he said. “This is about infrastructure.”
“We’re running water and sewer to Alcove Road; we’re widening roads two miles from our project,” Howard said, adding that such infrastructure projects are typically funded by towns or counties. But the towns and counties don’t have any money right now … and banks aren’t lending.
The state passed into law the “special assessment district” funding option on Aug. 3 “specifically to be a rapidly deployable economic stimulus tool available to counties and municipalities interested in improving the economic environment in their jurisdiction,” Langtree developers maintain.
Howard asked county commissioners yesterday: “How do we develop the southern end of the county to become the economic engine that we want it to become?”
“This,” he said, “will help accelerate it with no risk to the county.”
“We need the opportunity to move forward together,” Howard added. “I ask for your support on behalf of Iredell County, not Langtree.”
Statesville attorney Bedford Cannon, who appeared before the board as a concerned citizen yesterday, wished success to Langtree. However, he said to commissioners, “these folks are private-sector developers. There’s no reason for the county to be involved.”
Commissioner Johnson said the county needs more answers. He said he “cannot buy the argument” that the project would be delayed if the resolution isn’t passed until after due diligence is performed.
Williams asked Johnson: “Not knowing even the questions to ask, how are we going to come up with questions for due diligence?”
Replied Johnson: “You’re going to have to ask someone smarter than me, and there’s a lot of them out there, but I’ll let you know when I’m done asking questions … and I’ll ask them ‘til I’m darn good and done.”
Mashburn said “somebody will have to pay” for the county’s due diligence, including impact studies and consultations with outside sources. “And I don’t think it should be the county,” he said.
He recommended that before the county begins incurring costs associated with due diligence, it should enter into “some kind of agreement up front with the developers.”
Parker said that Langtree would at some point in the process have to enter into a “development agreement that is acceptable to the (county) board that will cover a lot of details” before the LGC is approached.
“That contract will come to you,” he said. “You can turn the project down then.”
In fact, said Parker, commissioners will have several opportunities to shoot down the project. “There will be many, many bites at this apple, and at any time you don’t like the taste,” Parker said, “you can spit us out … at no risk to this board.”
Johnson made a motion that the board instruct county staff to “consult with whoever” to “develop a comprehensive definition of what due diligence is” and “what is expected of due diligence.” He also asked that all expenses incurred by the county “be born by the developer.”
The motion passed 3-1, with Tice dissenting. Commissioner Ken Robertson is out of the country on business and was absent from the vote.
Johnson then amended his motion to include language about the county’s intent to enter into a development agreement with the Langtree developers with all expenses paid by the developers.
That motion passed unanimously.
An agreement could be ready for the board’s consideration as soon as its Nov. 18 meeting.
Developers of Langtree at the Lake wanted commissioners to pass a final assessment resolution yesterday. Langtree has asked the county to issue $46 million in bonds to install public infrastructure at its $800 million Mt. Mourne development. The county, in turn, would designate Langtree properties a special tax district, which means the development would repay the bond through property assessments. (For more information, visit http://thegattonreport.blogspot.com/2008/11/bonds-for-billionaires.html)
The final assessment resolution, County Manager Joel Mashburn told commissioners yesterday, “is not a final document – it’s not a final act. It’s not the thing that issues the bonds.” Instead, he said, the resolution simply “establishes parameters and criteria” that detail “where we go from here.”
But most of the commissioners agreed that too many questions remain unanswered – including whether the county would face any ramifications if it adopted the resolution then decided down the road that it didn’t want to issue the bonds.
County Attorney Bill Pope reminded commissioners that the county would not be legally liable if Langtree defaults on repayment, but he also restated his concern that it could result in “reputational taint.” Pope and Mashburn said they felt the county wouldn’t be committed to issuing the bonds even if it adopted the resolution.
“So what I’m hearing from Mr. Pope and Mr. Mashburn,” said Commissioner Sara Haire Tice, “is if we approve this document today, the county can always back out if they change their mind or if they don’t get the documents they need?”
Answered Mashburn: “That’s my opinion.” However, he said that since this particular type of financial arrangement has never before been tackled in North Carolina, he couldn’t say unequivocally “what action may come out in moving forward at this time.”
“If you’re not comfortable with that,” Mashburn said, “I certainly think it’s within your authority to say, ‘We will wait until we’re more comfortable with this, and here’s what it’ll take to make me more comfortable.’”
He told commissioners that the question facing them was essentially one of policy. The county must pass a final assessment resolution and perform due diligence before approaching the Local Government Commission, he said, adding that the commissioners basically needed to decide which to do first.
Iredell Commissioner Steve Johnson cut to the chase: “I’m getting a little frustrated, and I’m trying to control myself,” he said. “Is it the policy of the LGC that we are to perform our due diligence” before presenting a proposal to the LGC?
“That is correct,” answered Mashburn. He said the LGC will expect that all the county’s questions are answered and all the necessary impact studies are complete before a proposal is submitted.
“They don’t put all this stuff together,” Mashburn said of the LGC. “The county will be the applicant on this.” The LGC will simply review the information compiled by the county, he added.
“Why not do (the due diligence) now?” asked Johnson. “Do it on the front end of the project – not after we’ve already approved the resolution.”
“I have friends on both sides of this issue,” said Johnson, “but I’m here as a representative of this county. They hired me to do a job, and I’m going to do it.”
“We’d all be better served if (due diligence) is done on the front-end of this project.”
Throughout the discussion, commissioners expressed concerns about passing the resolution without having seen any of Langtree’s financial information.
Statesville attorney and Langtree partner David Parker, who spoke on behalf of the development group at yesterday’s county meeting, held up a three-ring binder and told commissioners: “I have our business plan right here; I'm ready to provide it to you.” He said the plan includes “spreadsheets for the next three years, month-by-month.”
Langtree has said it is confident that the business plan would answer any and all of the county's questions.
Parker said Langtree fully understands that “when you ask the government for help, you have to open your books to the government.” However, he said, the developers are obviously hesitant about opening the business plan “to full disclosure,” because all of Langtree’s financial information would become public record … and could wind up in the hands of competitors.
County Commission Chairman Marvin Norman said in yesterday’s meeting that he doesn’t feel the county has enough information to vote. He said he won’t be satisfied until the county manager, attorney and finance director are satisfied. “And right now, I’m not hearing that,” he said.
In a follow-up telephone conversation with the Report today, Norman said: “I don’t have a problem with (Langtree) wanting to invest in the community.” However, he said, “I do have a problem with them not being able to answer my questions.”
He said that Langtree “initially did not give (the county) the information we asked for.”
“If they’re not getting me this information, they’re not getting my vote,” he said. “When I got voted in, people put me in there to make good decisions. Taxpayers are expecting us to do our jobs. If somebody gets mad about that, guess what – it doesn’t bother me.
“I don’t have a dog in the fight,” Norman continued. “My dog is trying to make sure the taxpayers don’t get caught in a bad situation on my watch.”
He said that’s why he “wasn’t in a hurry” to pass the resolution yesterday.
“I want to be the best person I can to everybody, but I’ve got to be objective,” Norman said. “I have to look after the county, the people who put me in that office. I can’t look after special interest people just because they want to do a special project. When you look at today’s economy, the risk is very high.
“Whatever you do, somebody’s gotta pay for it,” Norman added. Private developers, he said, “are in it to make money.”
“There are no free rides,” he said, directing his comments to private businesses. “I want you to make your money, but don’t ask me to subsidize it."
Bottom line, said Norman: “I’m not happy using the county government for something it was not intended to be used for. We’re not there to provide their needs, other than what we can do to help them get by. We’re not there to be a financial institution for anybody other than the taxpayers.”
Norman said that Langtree may eventually be a shot in the arm for Iredell’s economy. But before the county involves itself in a financial agreement with private developers, he said, commissioners need to be certain that the true beneficiaries of the project would be the county and its taxpayers and that the county would in no way be at risk.
Right now, he said, commissioners don’t have enough information to feel completely confident about that. He said the answers to too many questions have started with “as far as I know.” And Norman said that makes him nervous.
Mashburn told commissioners in yesterday’s meeting that “nobody can give you definite answers to all your questions because we’ve never done this before. The state has never done this before.”
The developers believe that all the questions can’t be answered until the LGC is approached with a proposal.
Norman said he represented the county in a meeting with the LGC in Raleigh on Oct. 29. He said it became clear at that meeting that there were far more questions than answers about the proposed financial arrangement, which was made possible through state legislation that was passed into law just three months ago.
“I was really nervous because they couldn’t answer my questions, and if they can’t answer mine, they can’t answer yours,” Norman said, adding that even the county’s bond counsel from New York “kept saying he’s got to research this.”
Norman agreed that sometimes government has to gather as much information as it possibly can, then take a leap of faith. But at this time, he said, more information is needed before the county can take that leap with Langtree.
Norman said that Langtree "initially did not give us the information we asked for." He said the developers brought some of that information to yesterday’s county commission meeting in the form of a business plan, but even then, they didn’t open their books. “Eventually I think it’ll have to go public,” Norman said of the business plan. “They entered into a public arena as far as I’m concerned.”
Could county commissioners look at the financial books without them automatically turning into public record?
Norman said the commissioners will need to pour over Langtree’s financial information to make sure the developers “meet all the criteria and have the equity” to pay back the bonds. “Just showing us ain’t gonna cut it,” he said.
Commissioner Godfrey Williams at yesterday’s meeting said he wishes the county “had a precedent to look to.” He said he needs assurances that the county would not be impacted if Langtree defaults or forecloses.
“I certainly have some additional concerns,” Williams said, adding that he has different concerns each time he reads the final assessment resolution.
Responded Parker: “Any question you have, I would be delighted to answer in this forum or any other.”
“I guess I’m confused,” said Tice, explaining that it was her understanding that Parker had spoken with the county’s bond counsel, the county attorney and the finance director … and that everyone had agreed that “this final assessment resolution paperwork was ready to move forward.”
“Is that not correct?” she asked.
Citing the resolution, Parker said that everything would be “subject to the approval of the Local Government Commission (and) the receipt of studies and reports acceptable to the county commissioners.” Basically, anything and everything would have to be presented to the county board for approval before it is presented to the LGC.
“We have an obligation to turn that over to you,” said Parker. “If we don’t, we won’t get the bond, and we won’t get approval from the LGC.
“Everybody gets to ask questions,” Parker said. “Until we satisfy everybody, you’re not going to pass a bond resolution.
“This whole thing is about job creation,” he continued. “This is an economic stimulus package.”
Commissioners mentioned that another company already plans to approach the county with this same type of financing request. Tice said that she has not put the county at risk in all her years as commissioner … and she doesn’t intend to do it now. But the new law that allows county government to work with private business for infrastructure needs, she said, “is probably going to be the way to go in the future.”
Williams said county commissioners need to “make sure we know what we’re doing the first time.”
Langtree’s managing partner, Rick Howard, asked commissioners to keep in mind that “this is an opportunity.”
“This is not about Langtree,” he said. “This is about infrastructure.”
“We’re running water and sewer to Alcove Road; we’re widening roads two miles from our project,” Howard said, adding that such infrastructure projects are typically funded by towns or counties. But the towns and counties don’t have any money right now … and banks aren’t lending.
The state passed into law the “special assessment district” funding option on Aug. 3 “specifically to be a rapidly deployable economic stimulus tool available to counties and municipalities interested in improving the economic environment in their jurisdiction,” Langtree developers maintain.
Howard asked county commissioners yesterday: “How do we develop the southern end of the county to become the economic engine that we want it to become?”
“This,” he said, “will help accelerate it with no risk to the county.”
“We need the opportunity to move forward together,” Howard added. “I ask for your support on behalf of Iredell County, not Langtree.”
Statesville attorney Bedford Cannon, who appeared before the board as a concerned citizen yesterday, wished success to Langtree. However, he said to commissioners, “these folks are private-sector developers. There’s no reason for the county to be involved.”
Commissioner Johnson said the county needs more answers. He said he “cannot buy the argument” that the project would be delayed if the resolution isn’t passed until after due diligence is performed.
Williams asked Johnson: “Not knowing even the questions to ask, how are we going to come up with questions for due diligence?”
Replied Johnson: “You’re going to have to ask someone smarter than me, and there’s a lot of them out there, but I’ll let you know when I’m done asking questions … and I’ll ask them ‘til I’m darn good and done.”
Mashburn said “somebody will have to pay” for the county’s due diligence, including impact studies and consultations with outside sources. “And I don’t think it should be the county,” he said.
He recommended that before the county begins incurring costs associated with due diligence, it should enter into “some kind of agreement up front with the developers.”
Parker said that Langtree would at some point in the process have to enter into a “development agreement that is acceptable to the (county) board that will cover a lot of details” before the LGC is approached.
“That contract will come to you,” he said. “You can turn the project down then.”
In fact, said Parker, commissioners will have several opportunities to shoot down the project. “There will be many, many bites at this apple, and at any time you don’t like the taste,” Parker said, “you can spit us out … at no risk to this board.”
Johnson made a motion that the board instruct county staff to “consult with whoever” to “develop a comprehensive definition of what due diligence is” and “what is expected of due diligence.” He also asked that all expenses incurred by the county “be born by the developer.”
The motion passed 3-1, with Tice dissenting. Commissioner Ken Robertson is out of the country on business and was absent from the vote.
Johnson then amended his motion to include language about the county’s intent to enter into a development agreement with the Langtree developers with all expenses paid by the developers.
That motion passed unanimously.
An agreement could be ready for the board’s consideration as soon as its Nov. 18 meeting.
Sunday, November 9, 2008
Bonds for Billionaires?
Should Iredell County help float $46 million in bonds to benefit private developers, including billionaire hotelier John Q. Hammons?
That’s the fundamental policy question that county commissioners could answer as early as noon tomorrow (Monday), when they’ll be asked to give a preliminary nod of approval to issuing $46 million in bonds to enable developers of Langtree at the Lake – the $800 million mixed-use development in Mt. Mourne – to install public infrastructure in their development.
Langtree is asking the county to issue the bonds. The county, in turn, would designate the development a special tax district. Langtree would repay the county through property assessments, which would be over and beyond what the development pays in property tax.
Taxpayers will not be legally liable for the bonds if Langtree defaults on repayment, according to County Attorney William Pope. County Manager Joel Mashburn added that “no tax money can be pledged to pay for the bonds.”
In a meeting Monday at noon in Statesville's Iredell County Government Center, county commissioners will consider approving a “final assessment resolution,” which is a necessary step before Langtree can take its proposal to the Local Government Commission (LGC). The LGC would then determine “the feasibility of the sale of the bonds … and whether or not the project itself is feasible and will be able to generate the monies needed to pay the bond,” said David Parker, a Statesville attorney and partner of Langtree at the Lake, during the county commission’s Oct. 21 public hearing on the developers’ request.
“The decision to refer this to the Local Government Commission via the ‘Final Assessment Resolution’ is not a ‘major’ decision,” said Parker in an e-mail to the Report on Sunday. “The county has zero risk, is making no promises, and will incur no expense in asking the LGC’s opinion on these bonds.
“The role of the commissioners at this point is fairly simple – if they ‘lower the drawbridge,’ we will go to the LGC castle,” Parker said. It will be up to the LGC, he said, “to recommend to Iredell County whether or not they should actually issue the bonds.”
County commissioners don’t have to take the LGC’s advice, Parker said. But they “generally do since that is the LGC’s function,” he added.
State legislation that enables county governments to enter into such financial arrangements with private businesses was signed into law just three months ago – on Aug. 3. (http://www.ncga.state.nc.us/gascripts/BillLookUp/BillLookUp.pl?Session=2007&BillID=H1770&submitButton=Go). Langtree is the first private business in the state to take advantage of the new statute, which means that how the county proceeds will set precedent.
“The whole question that we are dealing with is new to North Carolina,” said County Commissioner Godfrey Williams. “The legislation was approved by the state in August. Other states have similar legislation and have been working with developers for years.
“Since Langtree is the first project in NC to make this request," added Williams, "the board of commissioners (and) Iredell County’s financial and legal staff will make sure that its questions are all addressed."
Pope, the county attorney, said in the Oct. 21 public hearing that he had unanswered questions and concerns, mainly because the concept is so new. But he said he felt the LGC would be able to satisfy his concerns in an Oct. 29 meeting with county staff.
It is unclear if Pope’s questions were answered in that meeting. County Commissioner Ken Robertson, responding to Report questions on Saturday, said: “It is my understanding that they (the LGC) believe that us passing a resolution at this time is premature and that it is the responsibility of the county commission to kind of vet this project out and determine whether or not this is an appropriate course of action prior to it going to the Local Government Commission.”
Commissioner Williams said on Saturday that “generally speaking, the LGC’s response was favorable.” However, he added, “we may still need more information from them in order to finalize our decision.”
Robertson, who will not be at Monday’s meeting due to a business trip to Canada, said he is concerned about issuing bonds for Langtree when the county hasn’t received any of the development’s detailed financial information. “As with any institution that loans money to businesses or individuals,” said Robertson, “the only responsible course of action must include a list of assets, liabilities, current and future expenses, and current and projected revenues in order to ensure or have a high degree of confidence that the borrower can pay back the loan.
“A failure on the part of the lending institution – whether it’s a bank, individual or a governmental body – to have that information would be totally irresponsible,” he said.
Williams agreed that the county “should be allowed a full disclosure of (Langtree’s) business plan.”
And though the LGC will scrutinize those records before it issues an opinion to the county on the bond request, Parker said that Langtree would “of course” be willing to submit its financial records to the county. However, he said, “the figures will not be final due to (a) not knowing what the interest rates will be when the bonds are actually issued, and (b) not knowing the costs of labor and materials at the time the bonds are issued and moneys made available through the Trustee appointed by the county to regulate the draws."
Parker continued: “One of the reasons that Langtree wants to go forward is because building in a recession generally means that the project comes in on time and under-budget.”
Also, he said, “The ability to create jobs in Iredell County in a time of layoffs is in the public interest, as is the creation of tax base income stream to the county (and to Mooresville upon annexation) via Langtree’s property taxes.”
Parker emphasized that “the taxpayers of Iredell County will bear no risk, responsibility or expense in the issuance of these bonds.”
Still, is it the proper role of government to facilitate what is essentially a $46 million loan for private developers?
“Facilitation is not the right word for what Langtree has asked the county to do,” said Parker. “Iredell County will have no liability whatsoever for these bonds – their role as issuer permits bond buyers to have favorable tax treatment which in this economic environment can mean the difference between an investor investing or staying on the sidelines.”
He said that “the Special Assessment Improvement bonds are secured solely by the assessed/‘benefitted’ properties only i.e. the developer’s land and improvements thereon.
“Iredell County’s tax base is not at risk," Parker said. "No other property owner other than Langtree and John Q. Hammons will have to pay a dime for these bonds.
"Our county government has previously engaged in stimulating the local economy in the best of times by utilizing tax forgiveness, free office space, training through the Community College, etc.," Parker said, adding that Langtree "has asked for no such perks, benefits, or stimuli."
The development is "merely requesting that the county authorize the issuance of bonds as a funding method in this tight credit economy," he said.
“The county is not guaranteeing these bonds, and there is no expenditure from the county,” Parker continued. “Langtree is even going to pay the county’s attorney’s fees for its outside bond counsel from the bond proceeds or out of its own pocket regardless of whether or not the bonds are issued.”
Hammons, a partner in the Langtree project, is a billionaire hotelier. Why doesn’t Langtree borrow the $46 million from him instead of the county? Some of the comments made during the Oct. 21 public hearing suggested that it makes good business sense to invest in Langtree. But if it’s such a good investment, why didn’t Hammons lend the money?
Responded Parker: “Mr. Hammons may well be one of the buyers for the bonds but, like all investors, would be interested in obtaining the favorable tax treatments available through these bonds.
“Billionaires do not build their wealth and success by simply giving away their assets,” he said. “In addition, Hammons' business plan does not include investing in infrastructure for properties surrounding his hotels. His planned expenditure in Iredell County will probably top $80 million.
“Also bear in mind,” said Parker, “that many, if not most, communities that have Hammons Hotels in them have given the land or infrastructure to Hammons in return for getting Hammons to build a 250-room full service hotel with 35,000 square feet of meeting space such as he proposes to build at Langtree.
"Neither Langtree nor Hammons has asked for any such assistance or benevolence for the Langtree project, notwithstanding that it will generate hundreds of jobs in the Mooresville area during construction and operation,” Parker said.
Robertson said he believes that “economic incentives for industry are not the proper role of government.” However, he said, “because it is the law of the land and its constitutionality has been held up in court, we have been forced to give economic incentives to industry to locate in Iredell County.
“It appears that legislation has been broadened from attracting manufacturing industries to now there’s a venue for us to assist or subsidize commercial ventures as well,” Robertson said. “While I believe that it is not the proper role of government to do either, I feel that Iredell County will have to do both.”
A 175-acre development, Langtree expects to add up to $1 billion to the county’s tax base and up to $4.5 million in county revenues every year once it has reached full build out, which is expected to be within the next decade.
Said Robertson: “The Langtree at the Lake project could be a real asset to the community – that point is not in contention.
“The issue at hand,” he said, “is whether Iredell County should lend its name to a $46 million bond without the borrower providing any information whatsoever as to their ability to repay the loan.
“If the Langtree developers were to provide the information that shows they have the ability to repay the bond,” Robertson said, “then I see no reason the keep this proposal from moving forward.”
In addition to Robertson not being at Monday's meeting, the county board is a month away from swearing in its newest member, Scott Keadle, who will replace Sara Haire Tice, who didn’t seek re-election this year.
Tice is a longtime friend of the family of Langtree’s managing partner, Rick Howard, and Tice's son works for Langtree.
Parker said Langtree’s attempts to quickly obtain the county’s approval to approach the LGC “is not an attempt to avoid the ‘new’ board.”
“The new board will have to decide on the ultimate question of issuance if, but only if, (the) LGC approves or recommends the issuance,” Parker said. “Langtree is confident that Iredell’s commissioners, regardless of their composition, will carefully weigh the advantages of a risk-free, cost-free stimulus to the economy and approve the final assessment resolution and the bonding resolutions after LGC approval.”
Commissioner Williams – who accepted a $250 campaign contribution from Rick Howard about three weeks before the Nov. 4 election – said he feels that the county will make a decision “when the commissioners have the necessary information that they are seeking.”
When asked what impact, if any, the campaign contribution would have on his vote on Monday, Williams responded: “I resent the assertion that any contribution received could impact my vote on any issue. I have served my county for 16 years in elected office – and you are the first person who has every questioned my integrity.
“Do you actually believe a person could buy my vote for a measly $250? I will vote on this issue on its merits alone.”
“I question your motives in bringing this up at this time,” Williams continued. “It appears to me that this is an attempt to try to influence my vote in the negative.”
In a second e-mail to the Report on Sunday morning, Williams wrote: “I will be sending Mr. Howard a personal check in the amount of $250 from my personal account tomorrow. I hope this will clear up this issue for good.
“By the way,” he added, “where is all the widespread concern about Mr. Keadle accepting an out of county contribution of $8,000 from the Richardson family? Are you aware that they have filed a lawsuit against the very board that (Keadle) now sits on?”
(The Report plans to have Keadle’s response to those concerns within the next few days. Meanwhile, follow this link to read what was reported on the issue by the Statesville Record & Landmark: http://www2.statesville.com/content/2008/nov/01/commission-candidates-raise-thousands/)
When asked if the county should wait until Robertson is back in town and Keadle is seated before making a decision on Langtree's request, Williams said: “The current board has had the advantage of hearing all the questions and answers.”
“The decision will be decided only when the commissioners are satisfied the county is free of any financial liability,” Williams said. “The question concerning this project was first placed in the agenda at the mid-September (Iredell County) commissioners meeting. Since that time we have discussed the issue one other time.”
Williams said he is “prepared to take as long as necessary to resolve in my mind if this will benefit our citizens.”
Robertson said it “wasn’t my decision” to schedule a potential vote on a day when he wouldn’t be in town. In fact, he said, “I would like to participate in this process.”
He said he alerted the county clerk that he would be out of the country on business this coming week. “It is possible that (County Commission Chairman) Marvin (Norman) did not know that,” Robertson said. “He said he did not know that when he set the meeting up, and I believe Marvin.”
Responding to Report questions today about whether he would prefer the county to wait until he is seated before voting on the Langtree request, Keadle said: “Notwithstanding my eagerness to serve on the board, the current board is still the current board, and my only preference, as a citizen, is that the board proceed in a timely fashion that is respectful of the needs of the county business calendar and not of any election-related calendar.
“I can only assume that this is what the board is doing, and be ready to make decisions next month about whatever issues are pending at the time,” Keadle added.
He said that he received his “first briefing about the Langtree deal on Friday, and as I was out of town, I didn’t get a look at it until (Sunday afternoon).
“My information is therefore very limited and confined to a copy of the ‘Final Assessment Resolution’ that was sent to me by County Attorney Bill Pope on Friday,” Keadle said. “After reading the proposed resolution, I was left with several questions, which would have to be answered before I could comment in favor of the resolution. I will not be attending the meeting, so it is unlikely that my questions will be answered.”
But generally speaking, said Keadle, “I believe that the government should reduce regulatory burden as much as is possible and cooperate with business entities in their free-market pursuit of commerce. I also believe that government should not invest taxpayers' money in private enterprise, or otherwise deviate from the Constitutional intent of government.”
Commissioner Tice did not respond to Report questions this weekend, nor did Commissioner Johnson, though he signed a “read receipt” indicating that he opened the e-mail of questions on Saturday. Commissioner Norman attempted to respond through a voicemail on Saturday, but he was unable to be reached on Sunday.
What would be the ramifications to Langtree if a vote was delayed for a month until Robertson is back in town and Keadle is sworn in? What’s the hurry to obtain a decision tomorrow?
“Langtree has encountered numerous bureaucratic delays stemming from similar questions,” said Parker. “Two years after receiving zoning approval seems to be enough time to wait.”
“There are over 3,600 of these districts nationwide, and they have worked well,” he added. “Although Langtree is ready, willing and able to continue to pay to carry the expenses of such a large venture pending vertical and horizontal (infrastructure) development, time is always money.”
He said the state legislation was signed into law in August “specifically to be a rapidly deployable economic stimulus tool available to counties and municipalities interested in improving the economic environment in their jurisdiction.”
Some counties, said Parker, “will decline or place the idea into bureaucratic limbo,” while other counties “will take advantage of this zero-cost stimulus opportunity.” The latter group, he said, “will do well by its citizens.”
“Langtree has patiently waited for state and local officials to learn about this bonding process even though it has been utilized in other states since as far back as the 1700’s,” Parker said. “Such similar states as South Carolina, Florida, Mississippi, Arkansas, and Alabama have been able to turn these bonds around in 60-90 days because they work.
“Langtree realizes that as the first project in NC, it will take a little longer,” he added. “There is also the question of economic stimulus to the economy. For the folks that are out of work but would be able to be employed by Langtree and its contractors during the infrastructure phases, a month’s delay can mean the difference between keeping and losing their homes.
“Inertia is always a challenge for any business dealing with governmental agencies,” Parker said. “Some agencies understand that ‘he who hesitates is lost’ – others do not.
“Langtree believes that the sheer common sense of this bonding opportunity, particularly given the potential for such a large employment center, will not be lost on this commission.”
That’s the fundamental policy question that county commissioners could answer as early as noon tomorrow (Monday), when they’ll be asked to give a preliminary nod of approval to issuing $46 million in bonds to enable developers of Langtree at the Lake – the $800 million mixed-use development in Mt. Mourne – to install public infrastructure in their development.
Langtree is asking the county to issue the bonds. The county, in turn, would designate the development a special tax district. Langtree would repay the county through property assessments, which would be over and beyond what the development pays in property tax.
Taxpayers will not be legally liable for the bonds if Langtree defaults on repayment, according to County Attorney William Pope. County Manager Joel Mashburn added that “no tax money can be pledged to pay for the bonds.”
In a meeting Monday at noon in Statesville's Iredell County Government Center, county commissioners will consider approving a “final assessment resolution,” which is a necessary step before Langtree can take its proposal to the Local Government Commission (LGC). The LGC would then determine “the feasibility of the sale of the bonds … and whether or not the project itself is feasible and will be able to generate the monies needed to pay the bond,” said David Parker, a Statesville attorney and partner of Langtree at the Lake, during the county commission’s Oct. 21 public hearing on the developers’ request.
“The decision to refer this to the Local Government Commission via the ‘Final Assessment Resolution’ is not a ‘major’ decision,” said Parker in an e-mail to the Report on Sunday. “The county has zero risk, is making no promises, and will incur no expense in asking the LGC’s opinion on these bonds.
“The role of the commissioners at this point is fairly simple – if they ‘lower the drawbridge,’ we will go to the LGC castle,” Parker said. It will be up to the LGC, he said, “to recommend to Iredell County whether or not they should actually issue the bonds.”
County commissioners don’t have to take the LGC’s advice, Parker said. But they “generally do since that is the LGC’s function,” he added.
State legislation that enables county governments to enter into such financial arrangements with private businesses was signed into law just three months ago – on Aug. 3. (http://www.ncga.state.nc.us/gascripts/BillLookUp/BillLookUp.pl?Session=2007&BillID=H1770&submitButton=Go). Langtree is the first private business in the state to take advantage of the new statute, which means that how the county proceeds will set precedent.
“The whole question that we are dealing with is new to North Carolina,” said County Commissioner Godfrey Williams. “The legislation was approved by the state in August. Other states have similar legislation and have been working with developers for years.
“Since Langtree is the first project in NC to make this request," added Williams, "the board of commissioners (and) Iredell County’s financial and legal staff will make sure that its questions are all addressed."
Pope, the county attorney, said in the Oct. 21 public hearing that he had unanswered questions and concerns, mainly because the concept is so new. But he said he felt the LGC would be able to satisfy his concerns in an Oct. 29 meeting with county staff.
It is unclear if Pope’s questions were answered in that meeting. County Commissioner Ken Robertson, responding to Report questions on Saturday, said: “It is my understanding that they (the LGC) believe that us passing a resolution at this time is premature and that it is the responsibility of the county commission to kind of vet this project out and determine whether or not this is an appropriate course of action prior to it going to the Local Government Commission.”
Commissioner Williams said on Saturday that “generally speaking, the LGC’s response was favorable.” However, he added, “we may still need more information from them in order to finalize our decision.”
Robertson, who will not be at Monday’s meeting due to a business trip to Canada, said he is concerned about issuing bonds for Langtree when the county hasn’t received any of the development’s detailed financial information. “As with any institution that loans money to businesses or individuals,” said Robertson, “the only responsible course of action must include a list of assets, liabilities, current and future expenses, and current and projected revenues in order to ensure or have a high degree of confidence that the borrower can pay back the loan.
“A failure on the part of the lending institution – whether it’s a bank, individual or a governmental body – to have that information would be totally irresponsible,” he said.
Williams agreed that the county “should be allowed a full disclosure of (Langtree’s) business plan.”
And though the LGC will scrutinize those records before it issues an opinion to the county on the bond request, Parker said that Langtree would “of course” be willing to submit its financial records to the county. However, he said, “the figures will not be final due to (a) not knowing what the interest rates will be when the bonds are actually issued, and (b) not knowing the costs of labor and materials at the time the bonds are issued and moneys made available through the Trustee appointed by the county to regulate the draws."
Parker continued: “One of the reasons that Langtree wants to go forward is because building in a recession generally means that the project comes in on time and under-budget.”
Also, he said, “The ability to create jobs in Iredell County in a time of layoffs is in the public interest, as is the creation of tax base income stream to the county (and to Mooresville upon annexation) via Langtree’s property taxes.”
Parker emphasized that “the taxpayers of Iredell County will bear no risk, responsibility or expense in the issuance of these bonds.”
Still, is it the proper role of government to facilitate what is essentially a $46 million loan for private developers?
“Facilitation is not the right word for what Langtree has asked the county to do,” said Parker. “Iredell County will have no liability whatsoever for these bonds – their role as issuer permits bond buyers to have favorable tax treatment which in this economic environment can mean the difference between an investor investing or staying on the sidelines.”
He said that “the Special Assessment Improvement bonds are secured solely by the assessed/‘benefitted’ properties only i.e. the developer’s land and improvements thereon.
“Iredell County’s tax base is not at risk," Parker said. "No other property owner other than Langtree and John Q. Hammons will have to pay a dime for these bonds.
"Our county government has previously engaged in stimulating the local economy in the best of times by utilizing tax forgiveness, free office space, training through the Community College, etc.," Parker said, adding that Langtree "has asked for no such perks, benefits, or stimuli."
The development is "merely requesting that the county authorize the issuance of bonds as a funding method in this tight credit economy," he said.
“The county is not guaranteeing these bonds, and there is no expenditure from the county,” Parker continued. “Langtree is even going to pay the county’s attorney’s fees for its outside bond counsel from the bond proceeds or out of its own pocket regardless of whether or not the bonds are issued.”
Hammons, a partner in the Langtree project, is a billionaire hotelier. Why doesn’t Langtree borrow the $46 million from him instead of the county? Some of the comments made during the Oct. 21 public hearing suggested that it makes good business sense to invest in Langtree. But if it’s such a good investment, why didn’t Hammons lend the money?
Responded Parker: “Mr. Hammons may well be one of the buyers for the bonds but, like all investors, would be interested in obtaining the favorable tax treatments available through these bonds.
“Billionaires do not build their wealth and success by simply giving away their assets,” he said. “In addition, Hammons' business plan does not include investing in infrastructure for properties surrounding his hotels. His planned expenditure in Iredell County will probably top $80 million.
“Also bear in mind,” said Parker, “that many, if not most, communities that have Hammons Hotels in them have given the land or infrastructure to Hammons in return for getting Hammons to build a 250-room full service hotel with 35,000 square feet of meeting space such as he proposes to build at Langtree.
"Neither Langtree nor Hammons has asked for any such assistance or benevolence for the Langtree project, notwithstanding that it will generate hundreds of jobs in the Mooresville area during construction and operation,” Parker said.
Robertson said he believes that “economic incentives for industry are not the proper role of government.” However, he said, “because it is the law of the land and its constitutionality has been held up in court, we have been forced to give economic incentives to industry to locate in Iredell County.
“It appears that legislation has been broadened from attracting manufacturing industries to now there’s a venue for us to assist or subsidize commercial ventures as well,” Robertson said. “While I believe that it is not the proper role of government to do either, I feel that Iredell County will have to do both.”
A 175-acre development, Langtree expects to add up to $1 billion to the county’s tax base and up to $4.5 million in county revenues every year once it has reached full build out, which is expected to be within the next decade.
Said Robertson: “The Langtree at the Lake project could be a real asset to the community – that point is not in contention.
“The issue at hand,” he said, “is whether Iredell County should lend its name to a $46 million bond without the borrower providing any information whatsoever as to their ability to repay the loan.
“If the Langtree developers were to provide the information that shows they have the ability to repay the bond,” Robertson said, “then I see no reason the keep this proposal from moving forward.”
In addition to Robertson not being at Monday's meeting, the county board is a month away from swearing in its newest member, Scott Keadle, who will replace Sara Haire Tice, who didn’t seek re-election this year.
Tice is a longtime friend of the family of Langtree’s managing partner, Rick Howard, and Tice's son works for Langtree.
Parker said Langtree’s attempts to quickly obtain the county’s approval to approach the LGC “is not an attempt to avoid the ‘new’ board.”
“The new board will have to decide on the ultimate question of issuance if, but only if, (the) LGC approves or recommends the issuance,” Parker said. “Langtree is confident that Iredell’s commissioners, regardless of their composition, will carefully weigh the advantages of a risk-free, cost-free stimulus to the economy and approve the final assessment resolution and the bonding resolutions after LGC approval.”
Commissioner Williams – who accepted a $250 campaign contribution from Rick Howard about three weeks before the Nov. 4 election – said he feels that the county will make a decision “when the commissioners have the necessary information that they are seeking.”
When asked what impact, if any, the campaign contribution would have on his vote on Monday, Williams responded: “I resent the assertion that any contribution received could impact my vote on any issue. I have served my county for 16 years in elected office – and you are the first person who has every questioned my integrity.
“Do you actually believe a person could buy my vote for a measly $250? I will vote on this issue on its merits alone.”
“I question your motives in bringing this up at this time,” Williams continued. “It appears to me that this is an attempt to try to influence my vote in the negative.”
In a second e-mail to the Report on Sunday morning, Williams wrote: “I will be sending Mr. Howard a personal check in the amount of $250 from my personal account tomorrow. I hope this will clear up this issue for good.
“By the way,” he added, “where is all the widespread concern about Mr. Keadle accepting an out of county contribution of $8,000 from the Richardson family? Are you aware that they have filed a lawsuit against the very board that (Keadle) now sits on?”
(The Report plans to have Keadle’s response to those concerns within the next few days. Meanwhile, follow this link to read what was reported on the issue by the Statesville Record & Landmark: http://www2.statesville.com/content/2008/nov/01/commission-candidates-raise-thousands/)
When asked if the county should wait until Robertson is back in town and Keadle is seated before making a decision on Langtree's request, Williams said: “The current board has had the advantage of hearing all the questions and answers.”
“The decision will be decided only when the commissioners are satisfied the county is free of any financial liability,” Williams said. “The question concerning this project was first placed in the agenda at the mid-September (Iredell County) commissioners meeting. Since that time we have discussed the issue one other time.”
Williams said he is “prepared to take as long as necessary to resolve in my mind if this will benefit our citizens.”
Robertson said it “wasn’t my decision” to schedule a potential vote on a day when he wouldn’t be in town. In fact, he said, “I would like to participate in this process.”
He said he alerted the county clerk that he would be out of the country on business this coming week. “It is possible that (County Commission Chairman) Marvin (Norman) did not know that,” Robertson said. “He said he did not know that when he set the meeting up, and I believe Marvin.”
Responding to Report questions today about whether he would prefer the county to wait until he is seated before voting on the Langtree request, Keadle said: “Notwithstanding my eagerness to serve on the board, the current board is still the current board, and my only preference, as a citizen, is that the board proceed in a timely fashion that is respectful of the needs of the county business calendar and not of any election-related calendar.
“I can only assume that this is what the board is doing, and be ready to make decisions next month about whatever issues are pending at the time,” Keadle added.
He said that he received his “first briefing about the Langtree deal on Friday, and as I was out of town, I didn’t get a look at it until (Sunday afternoon).
“My information is therefore very limited and confined to a copy of the ‘Final Assessment Resolution’ that was sent to me by County Attorney Bill Pope on Friday,” Keadle said. “After reading the proposed resolution, I was left with several questions, which would have to be answered before I could comment in favor of the resolution. I will not be attending the meeting, so it is unlikely that my questions will be answered.”
But generally speaking, said Keadle, “I believe that the government should reduce regulatory burden as much as is possible and cooperate with business entities in their free-market pursuit of commerce. I also believe that government should not invest taxpayers' money in private enterprise, or otherwise deviate from the Constitutional intent of government.”
Commissioner Tice did not respond to Report questions this weekend, nor did Commissioner Johnson, though he signed a “read receipt” indicating that he opened the e-mail of questions on Saturday. Commissioner Norman attempted to respond through a voicemail on Saturday, but he was unable to be reached on Sunday.
What would be the ramifications to Langtree if a vote was delayed for a month until Robertson is back in town and Keadle is sworn in? What’s the hurry to obtain a decision tomorrow?
“Langtree has encountered numerous bureaucratic delays stemming from similar questions,” said Parker. “Two years after receiving zoning approval seems to be enough time to wait.”
“There are over 3,600 of these districts nationwide, and they have worked well,” he added. “Although Langtree is ready, willing and able to continue to pay to carry the expenses of such a large venture pending vertical and horizontal (infrastructure) development, time is always money.”
He said the state legislation was signed into law in August “specifically to be a rapidly deployable economic stimulus tool available to counties and municipalities interested in improving the economic environment in their jurisdiction.”
Some counties, said Parker, “will decline or place the idea into bureaucratic limbo,” while other counties “will take advantage of this zero-cost stimulus opportunity.” The latter group, he said, “will do well by its citizens.”
“Langtree has patiently waited for state and local officials to learn about this bonding process even though it has been utilized in other states since as far back as the 1700’s,” Parker said. “Such similar states as South Carolina, Florida, Mississippi, Arkansas, and Alabama have been able to turn these bonds around in 60-90 days because they work.
“Langtree realizes that as the first project in NC, it will take a little longer,” he added. “There is also the question of economic stimulus to the economy. For the folks that are out of work but would be able to be employed by Langtree and its contractors during the infrastructure phases, a month’s delay can mean the difference between keeping and losing their homes.
“Inertia is always a challenge for any business dealing with governmental agencies,” Parker said. “Some agencies understand that ‘he who hesitates is lost’ – others do not.
“Langtree believes that the sheer common sense of this bonding opportunity, particularly given the potential for such a large employment center, will not be lost on this commission.”
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