Millions in bond funds go unused in Meck, Charlotte

SLATED FOR IMPROVEMENT: Charlotte-based Red City Properties has won preliminary approval for $6.48 million in federal bond funding to purchase and rehabilitate this 88,000-square-foot building at 222 S. Church St. in Charlotte. The bond funds would be used for a new roof, electrical, heating and air conditioning improvements and exterior work. RCP plans to house its sister company, RedF Marketing, in the building along with other small businesses. Photo by Tara Ramsey.

In June 2009, Mecklenburg County and the city of Charlotte were allocated $57.8 million in federal bond money to help businesses fund capital projects and jump-start the local economy.

Despite the availability of that funding – Recovery Zone Facility Bonds, provided through the federal stimulus plan – only two businesses have applied for the county’s share of bond funds.

The reason for the lack of interest, county and city leaders say, is the economy.

Brad Richardson, the city’s business retention and expansion manager, said the timing of the bonds during tough national and local economic times has kept most businesses from taking advantage of the low-interest loans.

“They had to pull the trigger on development projects to get bonds spent or at least started by December 2010,” he said. “But the real estate community is not ready to rebound with projects. The timing is what really drove a lot of folks to not be able to use them.”

To make matters worse, banks have been more restrictive in their lending practices, making it harder for businesses to obtain a bank’s backing, which is needed to receive the bonds, Richardson said.

Marvin Bethune, county attorney for the Industrial Facilities and Pollution Control Financing Authority, which grants approval for bonds, agreed that the economy has lessened the interest in the facility bonds.

“There aren’t many people borrowing money for manufacturing projects or hardly anything,” Bethune said. “There’s less economic activity and fewer people borrowing money or using industrial revenue bonds.”

Two businesses apply

While $44.5 million in facility bonds allocated to Charlotte sit untouched, two businesses in Mecklenburg County have applied for portions of the nearly $13.3 million facility bond allocation to the county.

Charlotte-based Red City Properties has been granted preliminary approval to receive $6.48 million in bond funding to purchase and rehabilitate an 88,000-square-foot office building at 222 S. Church St. in Center City.

The building will house offices for the 108 employees of RCP’s sister company, RedF Marketing, which has outgrown its office space in south Charlotte.

Today, 65 percent of the South Church Street building is vacant. RCP hopes the remainder of the building will become an economic incubator for small startups.

The bond funds will be used for a new roof, electrical, heating and air conditioning improvements and exterior work.

A “Charlotte Studio” project has also requested as much as $33 million in bond financing, but details of that project – beyond that it will be a film and sound studio – have been confidential as developers finalize details. Bonds have not yet been awarded to that project.

The projects were presented to the financing authority Oct. 13, barely giving the projects enough time to get through the approval process before the year-end deadline for the money to be disbursed. With the deadline looming, they will likely be the only projects in the city and county to take advantage of the facility bonds.

The stimulus act included $15 billion in facility bonds for U.S. businesses to finance a broad range of depreciable capital projects.

Overall, there is $149 million in facility bonds still available for North Carolina businesses to use for capital projects, said Tim Crowley, spokesman for the North Carolina Department of Commerce. North Carolina received $626.23 million in the bonds, he said.

It’s likely that the remaining funding will not be disbursed before a Dec. 31 deadline to gain bond approval from local and state officials.

Government also takes a pass

The stimulus plan also included $10 billion in Recovery Zone Economic Development Bonds for local governments to use on infrastructure improvements, but that money hasn’t been used, either – at least locally.

North Carolina was allocated $418.15 million in economic development bonds, with $29.7 million set aside for Charlotte and $8.85 million for Mecklenburg County, according to the state’s commerce department.

The reason Mecklenburg County government decided not to use the economic development bonds is similar to why businesses didn’t snatch them up: concerns about spending too much while the economy is still recovering.

Mecklenburg County spokesman Rick Christenbury said the county’s Board of Commissioners has decided to go on a debt diet and keep expenses down.

“With the need to hold down expenses and with no source of funding to repay these loans, the county has not used any,” he said.

Charlotte, with an AAA bond rating, also opted not to use the economic development bonds because it can generate low-interest loans without using the bonds to fund infrastructure improvements, Richardson said.

But not all of the federal bond money has gone unused in North Carolina, where there has been $684.48 million approved in facility bonds and $479.75 million in economic development bonds.

Iredell, Gaston projects

While Charlotte and Mecklenburg County governments have passed on using the economic development bonds, other local governments have taken advantage of them.

The town of Mooresville in Iredell County received approval in March to use $20.9 million for infrastructure improvements, such as the construction of an on-site hypochlorite generation system at an old water-treatment plant for drinking water disinfection, according to the state commerce department. The new system will no longer use chlorine gas for disinfection.

The town also plans to make improvements to the Presbyterian Pump Station that will help avoid a washout at the Rocky River Wastewater Treatment Plant.

Gaston County received $5.8 million in facility bonds to construct a landfill methane gas collection facility and a methane power generation plant. The city of Gastonia received $8 million in economic development bonds to construct a 21,600-square-foot conference center, public parking deck and 5,000-square-foot environmental studies center.

Before the RCP and the “Charlotte Studio” projects, there had not been any bonds issued in the county since Feb. 15, 2008, when $6 million was allocated in special purpose bonds to Goodwill Industries of Southern Piedmont, Bethune said.

There have been approximately 60 Mecklenburg County projects funded by bonds since $4 million was allocated to Frito-Lay June 30, 1978, according to a report from the financing authority.

“In times of higher interest rates and higher economic growth, we would do 10 in a year and have a bond authority meeting every month,” said Bethune, who has been the authority’s attorney since 1977.

There are two main factors that affect the number of businesses and municipalities interested in receiving bonds, he said.

The first is the economy and whether people want to invest money. The second is interest rates.

“It’s a hassle to go through this and the upfront cost is pretty expensive,” Bethune said. “We’re at the bottom of the trough now and there’s not much economic activity and the interest rate is low.”

Tara Ramsey can be reached at [email protected].