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NHC buys Project Grace plans for $2.5 million, vice-chair pushes to reimburse Zimmer for cost overruns

Another angle on the Project Grace plan shows some an outdoor terrace overlooking the street.
Another angle on the Project Grace plan shows some an outdoor terrace overlooking the street.

When the state declined to approve Project Grace it triggered a contractual agreement for the county to buy the plans from the private developer — who has exceeded the $2.5 million cap. The county intends to use the plans to 'go it alone' on the project without a private partnership.

In September, state officials nixed Project Grace, the county’s long-planned attempt to redevelop the downtown Wilmington library block with a private partner, Zimmer Development Company.

Related: Project Grace sputters out

The state’s Local Government Commission (LGC), headed by State Treasurer Dale Folwell, questioned the project’s lease-to-own financing structure, which would have padded Zimmer’s bottom line at taxpayer expense. Folwell had previously criticized a similar lease structure when it was put forward for the county's initial plans to redevelop its government center — the county ultimately opted to directly finance that project.

Related: State officials grill New Hanover County on Project Grace: A conversation with the GWBJ's Johanna Still

For its part, the county vociferously argued that the added cost of the lease-to-own model was justified by the economic development benefits it would generate. The LGC was unswayed by these arguments.

Failure to get LGC approval triggered a clause in the county’s Memorandum of Understanding agreement with Zimmer which would pay the developer up to $2.5 million for the plans and to reimburse it for costs, including third-party expenses.

However, Zimmer submitted an itemized bill to the county for more than $2.6 million — roughly $120,000 over the agreed limit.

County vice-chair Deb Hays pushed repeatedly to pay Zimmer the extra amount, pointing to rising costs and her desire to negotiate in good faith.

"I feel strongly that the Zimmers worked very, very hard with us," Hays said. "They're out of pocket, I just feel like we need to cover those expenses — that's good faith business partnership."

County Manager told Hays that "access to the revenue" to pay overruns was not the issue, but that county staff could not recommend going over the contractual cap.

But commissioners Jonathan Barfield, Jr. and Rob Zapple pushed back, saying the county should stick to the agreed price. Zapple noted that Zimmer was part of the negotiation and agreed to the addition of the $2.5 million buyout clause over the summer. He also noted that Zimmer could have come forward to request an increased amount in an updated MOU.

Barfield said, "a deal is a deal is a deal — if I've agreed to a price, I need to stick to that price."

Hays continued to push to pay Zimmer's full bill, but her substitute motion to do so didn't garner any traction. Barfield and Hays did agree on one thing — blaming the LGC for drawing out the process as costs were increasing.

Ultimately, commissioners approved buying the plans for $2.5 million. Using these, the county plans to directly fund the project with a new developer. According to Eric Creedle, the county's chief financial officer, Cape Fear Commercial has expressed interest — the company handled the redevelopment of the county government offices, and also handled the recent contract for the purchase of the former Bank of America building on behalf of Cape Fear Community College.

Below: Expense report from Zimmer Development Company

Ben Schachtman is a journalist and editor with a focus on local government accountability. He began reporting for Port City Daily in the Wilmington area in 2016 and took over as managing editor there in 2018. He’s a graduate of Rutgers College and later received his MA from NYU and his PhD from SUNY-Stony Brook, both in English Literature. He loves spending time with his wife and playing rock'n'roll very loudly. You can reach him at BSchachtman@whqr.org and find him on Twitter @Ben_Schachtman.