Huge Milestone in Research Campus Financing

This has been a long time coming…..on December 30th, the City of Kannapolis closed on the series of bonds that will finance the first set of public investments related to the NC Research Campus!!  This is a major accomplishment for Kannapolis and was the result of five years of hard work by a lot of people, including the Mayor and members of our City Council. Some of you know the history, but for those of you who don’t, the abbreviated version is this:

In 2006, the City put together a set of needed investments that would support the growth of the NC Research Campus, which was announced in 2005 and has the potential to be a significant economic driver for not just Kannapolis but the Charlotte region. The investments included new and improved roads, traffic enhancements, streetscaping, water/sewer infrastructure, pedestrian improvements, parks, and other projects. There were $168 million worth of public projects to be financed using tax increment financing (TIF), a form of bond financing new to NC but used frequently for other economic development projects around the country.

Due to many reasons, including the downturn in the economy, the TIF bonds were never issued. In 2009, the City began looking at other options for financing, including a smaller package of projects, private placement directly with banks (rather than the open bond market), and pursuing an investment grade bond rating for the TIF. None of these options were going to result in reasonable interest rates or minimum bond proceed amounts needed to finance the first phase of projects.

After negotiating for a good portion of last year, in November 2010 the Kannapolis City Council and the Cabarrus County Board of Commissioners approved the pursuit of a different type of bond financing plan; the use of Limited Obligation Bonds (LOBs) and Build America Bonds (BABs). Unlike the TIF bonds, the LOBs and BABs together would be backed by the City in the event of a default. However, it was concluded that the risk of any sort of default would be minimal due to the fact that there is already a revenue stream to pay for a smaller set of bonds from the property tax already being generated by the existing buildings on the Research Campus.  

This is a complicated transaction, but after five years of working through multiple options, the City has done its due diligence to maximize benefits to taxpayers and minimize risk. The debt service for the bonds will be paid for by the incremental (increased) tax revenue generated almost exclusively by the Research Campus development, with half of these payments coming from Cabarrus County. All of the revenues necessary to pay for the bonds are already being generated.  Further reducing the risk, about half of the tax revenues are secured through building leases paid by the State of North Carolina for the current state university presence on the Research Campus.

With approximately $30 million of the $35 million bond proceeds available to fund projects, the money will go towards these activities:

• Cabarrus Health Alliance building – $13.5M
• Stormwater line and pedestrian tunnel to Village Park – $1.35M
• Reimbursement to Castle & Cooke for fronting funds for NCRC Phase 1 infrastructure – $6.3M
• Reimbursement to City of Kannapolis for fronting funds (via temporary loans) for NCRC Phase 1 infrastructure including numerous waterline replacement projects throughout downtown Kannapolis – $2.98M
• Improvements to Veterans Park – $397,000
• NCRC interstate signage – $90,000
• Final pavement of N. Main St – $130,000
• 8th St storm water line – $834,000
• Completion of NCRC Phase I streets – $360,000
• Economic development investment (NCRC Phase IIA) – $4.2 million

The main project that the average citizen will see is the Cabarrus Health Alliance building at the corner of Mooresville Rd and Dale Earnhardt Blvd. The groundbreaking for CHA project was today at 11:00am. Because of the requirements of the bond, the City will own the building, but CHA will be fully responsible for operating and maintaining it.

The other project that citizens will notice is the stormwater line and pedestrian tunnel at Village Park, a project managed by NCDOT which may cause some interruptions to traffic flow near Village Park over the next year.  Over the long-term, the pedestrian tunnel will provide safe and convenient connections from Village Park and the City’s greenway system to the Research Campus and Downtown Kannapolis.

The details of the economic development investment are to be worked out, but will almost certainly be tied to job creation and will be designed to encourage private sector investment. The City’s role will likely be to provide additional public infrastructure associated with additional Research Campus growth.  There are a number of options already being considered.  Ultimately, City Council will make the decision on how to best use those funds.

This bond issuance highlights the City’s commitment to quality economic development, most notably in transforming our local economy – which was formerly based on textiles and is now being rebuilt on biotechnology and other emerging industries. Without public participation, the Research Campus would not have happened on its own. While there is still a long way to go to realize the full potential of the Campus, the City – in partnership with Cabarrus County and David Murdock (Castle and Cooke) – is establishing the solid foundation upon which this growth will occur.

2011 is certainly going to be an exciting year in Kannapolis and this new funding source will play a critical role in our continuing evolution.

Biotechnology is Alive and Well

As the lingering effects of the great recession continue to lead to slow job growth (not only in Kannapolis but across the globe) there are some bright spots on the horizon.

UNCC economist John Connaughton recently predicted a net growth of 36,000 jobs in North Carolina this year. While that is much less than what was lost during the last two years, it does provide a positive sign.

What is really interesting, however, is the resilience of the biotechnology and life science sector in North Carolina during the last year. NC Biotech Center CEO Norris Tolson points out in a recent column in the Raleigh News & Observer that, while the state unemployment rate hit 11% last year, biotech jobs actually grew by 1%.

He goes on to predict that, with serious focus, the biotech industry in North Carolina could grow by more than 65,000 jobs over the next decade. I like to think that the hard work occurring in Kannapolis is a critical component of that focus. In fact, I know it is.

There appears to be lots of venture capital still finding its way to biotechnology projects as evidenced by a recent report by online venture capital database VentureDeal. The report showed a steady amount of biotech venture capital and almost no change from the third to fourth quarter of 2009.

One of the keys to remember when thinking about biotechnology as an industry is that it goes well beyond drug development. It crosses into agriculture, medical devices and biofuels. There is a great guide to learn more about the different areas on the NC Biotechnology Center website.

Not only does biotech cross multiple industry sectors, but it also creates other jobs. When you look at this list of top jobs in 2010 from the Wall Street Journal, the following stand out: statistician, biologist, mathematician, accountant and computer systems engineer. All of these jobs have a direct link to the environment being built at the NCRC.

Not only are the types of the jobs we’re working to create on the campus the best jobs of today, but they also hold the greatest potential for the future. One analysis by the US Department of Labor recently ranked biomedical engineer as the number one job based on growth potential over the next decade. Medical scientists, biochemists and biophysics made the top 10.

So, while the recession has been very difficult for so many in our community, I choose to take the long view. We have a budding economic engine in Cabarrus County the likes of which we haven’t seen since the Philip Morris announcement three decades ago. When this economy turns around, we’re going to be perfectly positioned to take advantage.

The Vision of the NCRC and a Call for Patience

I have been a native of the Charlotte region for most of my 40-something years.  During this time I have watched with interest the development (and oftentimes redevelopment) of uptown Charlotte. Or downtown. Or Center City.

This weekend, while reading an article about the residential development in downtown Charlotte, I was struck that while only 8 of the 20 announced developments since the mid-2000s have been built, that downtown economic developers and promoters would have likely been thrilled by the knowledge in 1999 that, by 2010, there would be 8 new significant downtown residential developments.  It’s easy to look back now and focus on the 12 projects that didn’t happen (yet) and lose sight of the 8 that did happen and how they helped transform Charlotte’s urban core.

The parallels to the development landscape in downtown Charlotte and some of the recent talk about the slowdown of development on the North Carolina Research Campus are amazingly close. Can you imagine how excited in July 2003 we in Kannapolis and Cabarrus County would have been to know that by 2009 we would be witness to the removal of more than 6 million square feet of rapidly decaying and obsolete textile manufacturing space (with no public funds expended to do it); the construction of three huge buildings including a one of a kind, state-of-the-art laboratory facility and space to support eight public and private universities doing groundbreaking life science research; nearly $300 million in private investment; and more than 200 people in the biotech industry working in downtown Kannapolis?

The Great Recession has changed our real estate market and it has impacted development projects across the country, from downtown Charlotte to New York City’s World Trade Center site to yes, Kannapolis and the North Carolina Research Campus.

What hasn’t changed in Kannapolis is the vision. Over the past several years we have spent a lot of time talking about buildings, and rightfully so. But we’re moving into a phase of the maturity of the Campus where the science is starting to take flight. Scientific papers are being published. Scientists are being recruited on a daily basis.  Real scientific discoveries are starting to develop and emerge.  This growth in the business of the Campus (more so than the development of the Campus) is what will sustain the project over time.  It is the science and the discoveries that will lead to more buildings, more private investment and more jobs.  The transformation of our local economy is indeed occurring – just not in the five years we had originally hoped.

Even if we never witnessed another brick being laid on the North Carolina Research Campus, we as a community and a region are incredibly fortunate to have seen what has occurred to date.  We are already incredibly far ahead of the game.

The satisfying part of all this is that the North Carolina Research Campus is still in its infancy and there are no plans to stop (or even slow) its continued development once our national and global economy recovers.  There will certainly be plenty more bricks to be laid on the Campus and lots more jobs to be created; but more importantly, there will be real scientific breakthroughs in the areas of nutrition, food productivity and disease research.  We must remain patient and do our part to continue to support this great vision.

All Aboard!

Late last week federal and state officials were in Durham, NC to announce the award of $520 million to the state of North Carolina for improvements to the rail corridor between Charlotte and Raleigh to support the implementation of high-speed rail. North Carolina also received another $25 million from the rail line improvements from Raleigh north to Virginia. The Commonwealth of Virginia received $75 million for improvements between Richmond and Washington DC.  These improvements are all part of the Southeast High-Speed Rail Corridor Project.

This new federal investment represents a major leap forward in making high-speed rail a reality in North Carolina. According to state and federal officials, the project is expected to create or maintain 4,800 jobs in the state’s private sector.  For more information, see Governor Perdue’s press release and the high-speed rail fact sheet included with the release.

This new funding is part of $8 billion set aside in the American Recovery and Reinvestment Act (ARRA) reserved for high-speed rail projects across the nation.  Some of the other recipients include Illinois/Missouri, Florida and California.   This investment will fund nearly 30 rail line projects intended to improve rail speed and service between the largest cities in North Carolina – including the existing stop in Kannapolis.

What does this mean for our City?  Several things.

1. Kannapolis = Rail. Kannapolis has always been a “rail city.”  Since the onset of Cannon Mills at the beginning of the 20^th century, the railroad and the mill were critically dependent upon the other.  Kannapolis (as we know it) would not exist if it were not for the existence of the railroad.  Generations of Kannapolis residents have grown up with the railroad being the transportation and economic backbone of the community.  The further investment in rail improvements as announced last week continues to be important to Kannapolis and the surrounding communities.
2. Long Standing Local Support. This appreciation and support for rail travel, rail commerce and rail safety has never wavered locally.  About a decade ago, the Kannapolis City Council reached an agreement with the N.C. Department of Transportation Rail Division to support its “sealed corridor” program.  This effort aimed at significantly improving rail safety throughout the state.  This program involved closing a number of crossings in the community (Ebenezer Road, Plymouth Street, C Street, etc.) in an effort to reduce train/vehicle conflicts and to reduce travel time between Raleigh and Charlotte (and beyond).  The changes were painful and politically unpopular locally but the correct decisions were made.  The enticement to the local community was that several rail improvements would occur over time.  Some of the smaller, safety improvements have occurred, some have not.  However I strongly believe that the success in securing ARRA funding is a result of hard decisions made be entities like the Kannapolis City Council over the past decade or longer.
3. Rogers Lake Road Overpass? The Rogers Lake Road Overpass (formerly Universal Street) is priority number 1 on the rail project list for Kannapolis. With the City’s recent construction of the Rogers Lake Road extension to Kannapolis Parkway, this corridor has the potential to be a true east-west thoroughfare which is sorely lacking in our City.  The bridge is critical to this becoming a reality.  With help from our congressional delegation in Washington, we were successful in securing a $950,000 federal earmark for this proposed overpass (this occurred well before the high-speed rail funds were announced).  This funding will pay for engineering/design and environmental planning work on an overpass structure at this location. While it initially appears that no funding for this overpass is included in the $520 million ARRA plan for North Carolina, this is not finalized.  Regardless, it appears that both the State of North Carolina and the Federal Government are committed to a rebirth of passenger rail travel.  This likely means other funding opportunities will likely arise to help pay for this much needed bridge.  This intersection is among the most congested peak hour rail road crossings along the corridor. (NOTE: planned short-term improvements to this intersection are slated to begin this summer)
4. A New Train Station = State Commitment. The NCDOT Rail Division, the City of Kannapolis and Cabarrus County participated in the construction of the new Kannapolis Train Station which ensures that Kannapolis will remain a vital participant in passenger rail transportation for North Carolina and the eastern U.S. for many years to come.  Confirming this commitment, a new platform canopy for the Kannapolis station appears to have been included in the $520 million High-Speed Rail ARRA application.
5. NCRC and Increased Ridership. Perhaps most importantly, the high-speed rail initiative will ultimately create far more ridership options for Kannapolis residents and its workforce than currently exist.  Most notably, employees and visitors to the North Carolina Research Campus (NCRC) will be the big beneficiaries of high-speed rail due to the strong education and research link between the Raleigh-Durham-Chapel Hill and Kannapolis.  Currently one of the daily trains from Raleigh (the Piedmont) arrives in Kannapolis around 9:30 AM and the return train to Raleigh leaves Kannapolis at around 6:00 PM.  The other daily train (the Carolinian) departs Kannapolis at about 8:00 AM and arrives in Raleigh about three hours later.  The return trip from Raleigh on the Carolinian departs around 4:50 PM and arrives in Kannapolis at about 7:45 PM.  Unfortunately the Carolinian originates in New York City and is sometimes late so it is a bit less reliable for those in Raleigh wanting to get back to Kannapolis/Charlotte.  However, the rail improvement plans include adding a mid-day train between Raleigh and Charlotte.   This mid-day train will allow for more flexibility for the visitor or worker at the NCRC.  For example an NCRC researcher can leave Kannapolis at 8 AM for a lunch meeting at a campus of one of the NCRC parent universities and then catch the new mid-day train back to the NCRC.  Presently, that researcher would have to wait until at least 4:50 PM to depart Raleigh – perhaps later if the train is delayed from the stops in NYC, Philadelphia, Washington DC, etc.

Ridership has been steady in Kannapolis since the Train Station opened in 2004, but it has not seen any dramatic spikes in growth.  That all could change in the next several years. There are several factors I believe will contribute to increased ridership in Kannapolis over the next several years (some are unique to Kannapolis): (a) The Charlotte station moving from N. Tryon Street to downtown Charlotte (scheduled for 2012), which will make Kannapolis the “northeast Charlotte” station; (b) reducing the rail travel time from Raleigh to Charlotte closer to 2 hours (the ARRA funding will help get us there); (c) congestion on the interstates continuing to increase and outpace needed highway improvements (which is probably a given); and (d) the  mid-day train becoming operational which will offer lots of convenience and flexibility to the business traveler – most notably for the NCRC visitor and/or employee.

Assume for a moment that we do achieve two hour (or less) rail trips from Raleigh to Kannapolis.  It currently costs $46 round trip.  It now takes two and a half hours (assuming no traffic delays) by car.   Now assume gas is $4.00/gallon which is quite possible again.  Also factor in two hours of quiet time with your coffee and newspaper, or better yet, productive time; laptop with an air card and blackberry in hand….and the hidden benefit of you helping to improve our air quality through the use of mass transit.  You be the judge.

All in all, the ARRA funding for high-speed rail is very good for North Carolina, very good for the environment and very good for Kannapolis, the NCRC and the Charlotte region.  If there was ever a project where environmental stewardship and economic development meet – this might be it.

City Council Retreat Observations

The 2009 Kannapolis City Council Retreat was held in early December.   I will follow up in January with a more detailed report from the retreat including a summary of next steps.  In the meantime, as we roll into the holiday break, here are a few broad, “30,000 foot view” observations about the on-going retreat topic discussions.

1. Elected bodies have a tough job.  Over the two-day retreat, City staff presented the Kannapolis City Council with nearly 25 new initiatives aimed at taking Kannapolis to new heights.  Also presented were dozens of needed capital improvement projects totaling more than $80 million.  The reality is that every program and every project is important and they would ALL be good for the community in some way.  Deciding what programs and projects come first is ultimately the job of the City Council to decide.  This occurs with the assistance and recommendations from the City Manager but, in the end, the buck stops with the elected board.  We are fortunate in Kannapolis to have strong, stable elected leadership.  This dilemma of prioritizing efforts is not new to these members of our City Council.  However, it is getting harder and harder as the needs grow and the resources stay the same or even shrink….
2. Kannapolis is a young City.  Having only been incorporated for 25 years, Kannapolis has not had the full opportunities that time alone has offered other communities.  Even so, Kannapolis is a dynamic, growing City with more opportunity than most cities our size.  Due to this fortunate reality, youth should be viewed as a minor challenge to our success, not a roadblock.   There have been hard decisions made along the way in Kannapolis (minor league baseball, securing future water resources – twice, aggressive economic development partnerships like the Kannapolis Gateway Business Park and the NCRC TIF).  We should look to those decisions for strength when we tackle new challenges.
3. Kannapolis is a growing city with an incredibly bright future…..but we cannot watch it grow and evolve from the sidelines.  The temptation may present itself to let “others” run with the ball while we watch from the bench.  Unfortunately, the past couple of years have taught us all that we cannot sit back and accept things at face value.  The world economy has changed dramatically.   The City’s leadership will perhaps need to be more involved in shaping our future than we ever have before.
4. Initial feedback on the retreat from City Council has been very positive. City Council sent a clear signal at the retreat that it wants the best for Kannapolis and wants the City government to spend the most time doing the things that have the greatest return on the investment.  City Staff has not received a green light from City Council on every new program or project proposed.  City Council is searching for the same delicate balance of needs, wants and resources that I discuss below as this relates to City employees.  Even if we all wanted to do everything, we would need to internally prioritize the work load to match the resources. Nevertheless, City Council wants to move rapidly on a number of new initiatives to make Kannapolis a better place for its citizens and newcomers.  This is very encouraging.
5. The Kannapolis City Council is made up of a good mix of backgrounds and temperaments. That ultimately makes for good decisions (and sometimes spirited, but respectful, debates).  This City Council does not agree on everything, but in the end, the final decision they reach on an issue is what goes – and everybody gets behind it.  That is a sign that individual members of an elected body are pulling in the same direction.  It is the most cohesive group of elected officials I have been involved in during my 20 years of working with numerous local governments.
6. Kannapolis City employees have lots of energy and the capacity to do things that continually amaze me. Our City employees (at all levels) are engaged in what’s going on around them.  They can move into action faster than any group I have ever worked with.  They stand ready to tackle any new initiative, project or program that comes their way.  In some ways, it is this very enthusiasm that can be problematic for us.  Even though we may want to, we can’t do it all with the resources we have.  The good part is that our City Council understands this.  The Kannapolis City Council wants to provide all the resources they reasonably can to help achieve its vision.  Our employees believe passionately in what they do and they all want Kannapolis to succeed as a City.  Finding this balance – between applying limited resources and carrying out the vision – is often a challenge.  Even so, I maintain that it would be far worse to have unlimited resources but no vision.

I hope each of you have a safe and restful holiday season.  Let’s roll up our sleeves together in January and get to the job of making Kannapolis the best City it can possibly be.

Добро пожаловать (Welcome) to Kannapolis

Last Friday, Irene Sacks and I had the good fortune to spend several hours hosting a group of local government officials from Russia visiting the Charlotte region through a cultural exchange program managed by the Charlotte-based International House.  The International House serves as a center for diversity, advocating for people of diverse national backgrounds. The time that Irene and I spent with this group was as educational for us as I think it was for them. We found the group to be very engaged and inquisitive about our municipal operations, economic development activities and revenue sources (They asked me several times if we had enough funds to adequately carry out our duties – I took that to mean that they do not). Upon reflection after our meeting, I came to the realization that we have a lot more in common with other local government teams from around the world than maybe we realize – some of the same successes; some of the same challenges. I think Kannapolis and our counterparts in Russia have even more in common than most. Kannapolis is a young city with only 25 years of self-governance. These local governments in Russia have even less considering the Soviet Union dissolved in the early 1990s. They are still figuring out how to govern themselves in an entirely new economic and political system. Our challenges of the past two decades pale in contrast.

Spasiba (thank you) to Dr. Rachel Zaionz the staff at Shady Brook Elementary and to Ed Dehlin, Asst. Director of Public Works for the City. Both provided rather impromptu tours of their facilities at the last minute request of the Russian delegation. The group was most impressed with both facilities and appreciated the accommodation.

I must say that the Russian delegation thought it was pretty humorous for us all to be in panic mode due to a little sleet and the threat of some snow. I googled one of their locations (a small town in southern Siberia). The average HIGH temperature in the winter is 5° F…..So much alike, yet oh so different…..