Memo-03-14-2017-Item-9

March 14, 2017

MEMO TO:           Mayor Barber and Board of Commissioners

FROM:                  Frank A. Rush, Jr., Town Manager

SUBJECT:           Real Property Acquisition – 203 Islander Drive (Abandoned Go-Kart Track) (Summary & Suggested Motions)

The Board of Commissioners is scheduled to conduct a public hearing and consider three items associated with the acquisition of 203 Islander Drive.  The property consists of 1.8 acres, and the purchase cost is $656,250.  The Board will consider a resolution formally authorizing the real property acquisition, a resolution authorizing a funding request to Carteret County for $450,000 to assist with the acquisition of the property, and an associated capital project ordinance amendment.

The Property

The 1.8 acre tract includes an abandoned go-kart track, and is located directly adjacent (to the north) to the Western Ocean Regional Access, a 4.5 acre public beach access facility off Islander Drive.  The property is L-shaped, and has approximately 137 feet of frontage on Islander Drive, and 150 feet contiguous to the Western Ocean Regional Access. 

The property is an eyesore, and has not been maintained in a manner consistent with Emerald Isle’s overall aesthetic quality.  The property is located in the Village West planning area, which is identified in the Town’s Comprehensive Land Use Plan as an area where quality redevelopment is desired and encouraged.  Additionally, the Town’s Comprehensive Land Use Plan identifies the desire for a “meeting and events center” to draw additional visitors to Emerald Isle and generate additional economic activity in the offseason.  The “meeting and events” center would also accommodate larger public events, as Emerald Isle currently lacks a large, quality meeting space. 

“Meeting and Events Center” Concept

If the Town acquires the 1.8 acre tract, it would likely be combined with the Town’s existing Western Ocean Regional Access facility, and the Town would seek a private partner for the development of a new “meeting and events center” on the combined site.  The exact form and substance of any partnership would be determined by the Board of Commissioners over the coming months, and the Town would then solicit proposals from potential private partners.  The Town would then select the private partner proposal that best matches the Town’s goals. 

Although the Board of Commissioners and the private partner will develop a specific plan to achieve the Town’s goals, I envision a concept whereby the Town would make the land on the combined site available to a private partner - in exchange for the partner constructing and operating the new “meeting and events center” (in a manner consistent with the Town’s goals) and preserving, replacing, and/or enhancing the public beach access facilities currently on the site (165 parking spaces, restroom facilities, and other amenities).  The private partner would be afforded the opportunity to construct hotel accommodations and other commercial enterprises on the site.  The private enterprises and public facilities would be integrated together on the entire site, resulting in an open and public center of activity in an oceanfront setting.  The overall integrated facility would be required to adhere to the Town’s current building height limits (50 ft. mean roof height), and the overall facility would be constructed in a style consistent with Emerald Isle’s traditional architectural style.    

This land acquisition is the first step in a likely lengthy process to achieve the goals noted above.  This project will likely be very challenging, but with hard work and creativity I believe it can be achieved and benefit the people of Emerald Isle over the long-term.  It will be essential to craft a public-private project that  a) maintains and enhances public beach access,  b) includes sufficient wastewater treatment capacity,  c) includes sufficient parking to accommodate public access needs, the new “meeting and events center”, and associated private investment,  d) adheres to the Town’s building height requirements, and  e) that is attractive to a private partner.  Much hard work will be required, and it may ultimately also be necessary for the Town and/or the private partner to acquire additional land in this area, construct a low-profile (and disguised) parking deck, and/or seek off-site wastewater treatment capabilities.  However, all significant achievements must begin somewhere, and the acquisition of 203 Islander Drive represents the first step.      

Public Hearing, Pursuant to NCGS 158-7.1

In most cases, the Town is not required to conduct a public hearing prior to a land acquisition.  In this instance, depending on the exact form and substance of an eventual public-private partnership, it is advantageous to conduct a public hearing prior to the Board’s authorization of the land acquisition.  Because the purpose of the land acquisition is for economic development purposes that may involve the Town conveying an interest in the property to a private partner, NCGS 158-7.1 applies, and requires a public hearing. 

Town staff have advertised the required public hearing in the Carteret County New Times on March 3 and March 10, consistent with the requirements of NCGS 158-7.1.  The public hearing will provide the public an opportunity to offer their input into the proposed land acquisition and plan for redevelopment.

Resolution Authorizing Real Property Acquisition

As Town Manager, I have executed a purchase contract with Watson Family Assets, LLC for the 1.8 acre tract.  The contract is contingent upon formal approval by the Board of Commissioners prior to March 15, 2017, and the attached resolution would satisfy this contingency.  The total purchase price is $656,250.

Watson Family Assets, LLC does not currently own the property, but has executed an assignable purchase contract for this property and the adjacent abandoned batting cage property (0.6 acres).  The total purchase price of the combined 2.4 acres is $875,000, and the Town’s contract with Watson Family Assets LLC simply assigns this cost to each party on a pro rata basis. This purchase price is slightly less than the amount indicated in a January 2016 appraisal of the overall property, and is less than a composite of recent and currently pending commercial property sales in Emerald Isle.  Watson Family Assets LLC’s assignable contract includes a May 17 due diligence deadline and a June 1 closing date.  The Town’s contract with Watson Family Assets LLC includes an identical May 17 due diligence deadline and June 1 closing date.

It is anticipated that the Town will only proceed with the acquisition of 203 Islander Drive if significant outside funding can be secured for this purchase.  As noted, the Town is seeking funding assistance from Carteret County in the amount of $450,000, and will have until the May 17 due diligence deadline to secure this funding.  If the County does not provide the requested funding, I expect that the Town will terminate the contract and not proceed with the land acquisition.

Resolution Authorizing Funding Request to Carteret County

The attached resolution formally authorizes a request to Carteret County for economic development funding in the amount of $450,000 for this land acquisition.  If the Board approves, I will forward the appropriate request to County officials in the coming days, and will attempt to secure a decision in April, well in advance of the May 17 due diligence deadline.

I am optimistic that Carteret County will partner with the Town on this significant economic development project for Emerald Isle and western Carteret County.  The development of a new “meeting and events center” in Emerald Isle is intended to draw State and regional professional and trade associations to Emerald Isle for their 3 – 4 day conference “at the beach” during the offseason.  I do not envision hosting such groups during the summer months, and instead hope to host these groups in Emerald Isle between September and May annually.  The additional visitors during these offseason months will hopefully provide additional economic opportunity for our restaurants, shops, and short-term accommodations. Additionally, and perhaps more importantly, I am hopeful that by hosting these groups in Emerald Isle that it will introduce a whole new group of people to Emerald Isle in the future.  Ideally, some of these people will return with their family and friends for their annual vacation, purchase a second home in Emerald Isle, or even relocate permanently once they realize what a special place we have in Emerald Isle.

Carteret County currently has in excess of $1 million of designated economic development funds in reserve, and these funds could be made available to assist the Town with the purchase of 203 Islander Drive. 

Capital Project Ordinance

The attached capital project ordinance appropriates a total of $715,000 for the acquisition of 203 Islander Drive and the associated cleanup cost.  A total of $656,250 is allocated for the acquisition, $55,000 for the associated cleanup, and $3,750 for other miscellaneous costs.  If the Town proceeds with the acquisition on June 1, I intend to have a contractor on site on June 2 to begin the cleanup of the site and restore it to a grassy field.   

The attached capital project ordinance anticipates a total of $450,000 from Carteret County, and $265,000 from the Town of Emerald Isle.  The Town’s share would be financed with a new installment financing agreement, likely over a 5-year term or shorter.  At an annual rate of 2.5% over a 5-year term, this results in an annual debt service payment of approximately $57,000.  The Town could choose to finance this cost through a private institution or via an internal loan from the Future Beach Nourishment Fund.  The Town may also ultimately enter into an agreement with a private partner that results in the repayment of the Town’s initial contribution as part of the public-private partnership. 

“Backup Plans”

Recognizing the challenges associated with this plan, I have identified two “backup plans” for the acquisition of 203 Islander Drive if the “meeting and events center” goal is not achieved.  First, the Town could ultimately decide to retain the property and simply expand the existing Western Ocean Regional Access.  Preliminary estimates indicate that a total of 80 – 100 surface parking spaces could be added, and that annual parking fee revenue in the range of $30,000 - $40,000 is a reasonable assumption.  If this “backup plan” is not desirable, the Town would also have the option of simply offering the (cleaned up) property for sale in the future, and recover its initial investment (and perhaps some appreciation).  Considering these two “backup plans”, the overall risk to the Town in proceeding with acquisition of 203 Islander Drive is considered minimal. 

If the Town relies on the first “backup plan”, I would envision reimbursing Carteret County its $450,000 contribution toward the land purchase due to the fact that specific economic development funding is targeted.  I would, however, recommend requesting separate County funding for the purpose of expanding the Western Ocean Regional Access at that time.  If the Town relies on the second “backup plan”, I would envision remitting a pro rata share of the land sale proceeds to the County, with the Town retaining a pro rata share.

I am excited about the potential benefits associated with the “meeting and events center” concept for the Town, and also excited about the challenge associated with this project.  I look forward to discussing the proposed acquisition of 203 Islander Drive at the March 14 meeting.