Town of Cary
North Carolina

Staff Report

Fenton District Development Agreement

Information

Department:Town Attorney's OfficeSponsors:
Category:Contract

Speaker:  Russ Overton, Deputy Town Manager

 

Executive Summary:  The developers of the Fenton Mixed Use District have requested to enter into a development agreement with the Town, as required by the zoning for the property and in order to expedite the overall development of Fenton.   The proposed development agreement provides for careful integration between public capital facilities construction and the phasing of Fenton to ensure that public facilities are available and enjoyed by Town citizens before Fenton generates substantial increased demand on existing public facilities.  The Master Developer will bear all upfront costs to construct significant public facilities (roads, utility infrastructure, and greenway) and will be reimbursed by the Town after significant development milestones are reached.  In addition, all eligible office space will be designed to achieve an ENERGY STAR score of 75 or greater.  In recognition of this and other significant contributions to the reduction of energy consumption, the Town will pay certain development-related fees for the initial phases of development.  The Master Developer will financially participate in future traffic studies and funding of future transportation improvements as more office space is developed at Fenton.    

 

Recommendation: That Council (1) hold a public hearing on the proposed Development Agreement; and (2) adopt the attached resolution that adopts an Ordinance approving the “Development Agreement for the Fenton Mixed-Use Development” (“Agreement”); authorizing the Town Manager to execute an agreement substantially like the Agreement; and authorizing the Town Manager to provide such notices and take such action as Agreement contemplates. 

Body

Background:  The Eastern Cary Gateway (“ECG”) serves as one of the main regional entrances into Cary and was identified in the Imagine Cary Community Plan as both a Special Planning Area and a Destination Center.  This approximately 800-acre area is home to WakeMed Soccer Park, the Triangle Aquatic Center Campus, Cary Towne Center, Adams Elementary School, multi-family complexes, townhomes, mobile home parks, light industrial facilities, heavy commercial uses, the historic WPTF Transmitter, and state-owned buildings, and telecommunications and natural gas utility infrastructure.

 

However, nearly one-third, or 254 acres, of the ECG is currently undeveloped, including one of the last remaining large undeveloped sites near Interstate 40.  This acreage presents a significant opportunity for the Town to set a vision for the area that takes advantage of its location between Downtown Cary and Raleigh’s western border, existing and future regional transportation facilities, and land development potential.  As such, the Imagine Cary Community Plan envisions this area as being a destination and a gateway; a high-density center that will foster business development and provide employment, shopping, dining, recreation, and living choices in a mixed-use, urban setting.

 

On January 25, 2018, the Town Council began to set the vision for the ECG in motion by approving the Fenton District:  a mixed-used development of approximately 92 acres located on the north side of Cary Towne Boulevard between I-40 and Adams Elementary School (the “Property”). The new Mixed Use District (MXD) zoning includes a Preliminary Development Plan (“PDP”) with vertically mixed uses designed around an L-shaped main street where residential and/or office uses are located on top of ground-floor retail uses. The PDP layout generally consists of a grid-like pattern of streets and provides a variety of pedestrian corridors. The plan includes eight parking decks, with many of the buildings wrapping around and screening the decks. Several office buildings and one or more hotels are also included as part of the project.

 

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The Fenton District also includes many special elements and attributes intended to make it an attractive and desirable destination:

§         Architecture and landscaping exceeding the Town’s current minimum standards, establishing a unique sense of quality and place as illustrated in a proposed Community Design Guidebook;

§         Flexibility for signage to add character and variety; 

§         Public art integrated throughout the development, ranging from an “Art Walk” along Trinity Road to individual exhibits scattered in various locations throughout the site;

§         Six community gathering areas integrated into the development to provide both passive and active opportunities for residents and visitors; and

§         The utilization of “Jewel Box” tenant spaces, incorporated into the medians along the development’s “main street.”

 

 

 

At full build out, Fenton could be home to as much as 1.2 million square feet of office use; 575,000 square feet of retail space; 920 residential dwelling units; and 450 hotel rooms.  Based on an economic impact study commissioned by Columbia Development Group, LLC (“Columbia”), development and use of the Fenton District may generate $795,000,000 in total investment in the Town, directly create 6,295 jobs, and generate economic output in excess of $2,000,000,000. 

 

During the review process for the proposed rezoning, Columbia, the rezoning applicant, indicated to staff its interest in entering into a development agreement with the Town.  The Fenton PDP contains a zoning condition which states that no development plans may be submitted unless: a) the development is subject to a development agreement approved by the Town; b) the developer is in compliance with the development agreement; and c) the proposed development plan complies with the development agreement. 

 

Municipalities are authorized to enter into development agreements by statute (N.C.G.S. § 160A-400.20). The General Assembly specifically recognized that:

 

(1)   Large-scale development projects often occur in multiple phases extending over a period of years, requiring a long-term commitment of both public and private resources.

(2)   Such large-scale developments often create potential community impacts and potential opportunities that are difficult or impossible to accommodate within traditional zoning processes.

(3)   Because of their scale and duration, such large-scale projects often require careful integration between public capital facilities planning, financing, and construction schedules and the phasing of the private development.

(4)   Because of their scale and duration, such large-scale projects involve substantial commitments of private capital by developers, which developers are usually unwilling to risk without sufficient assurances that development standards will remain stable through the extended period of the development.

(5)   Because of their size and duration, such large-scale projects often permit communities and developers to experiment with different or nontraditional types of development concepts and standards, while still managing impacts on the surrounding areas.

(6)   To better structure and manage development approvals for such large-scale developments and ensure their proper integration into local capital facilities programs, local governments need the flexibility in negotiating such developments.

 

Municipalities are authorized to form contracts with private parties to carry out public purposes that the government is itself authorized to engage in, and possess other and additional statutory and charter authorizations to pay for public facilities.  In addition, municipalities are authorized to provide incentives to a developer by ordinance if the developer agrees to construct new development in a manner that the municipality determines, based on generally recognized standards for such purposes, makes a significant contribution to the reduction of energy consumption.  N.C.G.S. § 160A-383.4.

 

CDG Fenton, LLC (“CDG Fenton”) has requested to enter into a development agreement with the Town (see attached letter) in order to expedite the overall development of Fenton and complete the Fenton “Main Street” early in the development of Fenton.  CDG Fenton has been created and is owned by Columbia or its owners, managers, or principals who will participate and will continue to participate in CDG Fenton operations and who will exercise significant involvement, responsibility, and supervisory authority in the development of Fenton.  CDG Fenton possesses one or more legal or equitable interests in the Property by way of Columbia’s assignment of its purchase agreement with the State of North Carolina entitling CDG Fenton to purchase the Property in its name from the State of North Carolina.

 

Development agreements must be approved by Town Council through an ordinance adopted after holding a public hearing. 

 

Discussion:  Fenton is the type of large-scale development that the legislature found to be appropriate for a development agreement:  it will occupy approximately 92 acres; will occur in multiple phases over many years; involves substantial commitment of capital by private developers; and will require proper integration into the Town’s capital facilities programs. 

 

The Imagine Cary Community Plan identifies the need for new, major, publicly available transportation facilities to be located in Fenton, noting that “planning for the extension of streets within Eastern Cary Gateway is critical to unlocking the area’s potential.”  The Future Growth Framework for the ECG identifies Fenton as part of an area in which the following are recommended:

§         Additional road connectivity to the north (Trinity Road) and west (Quinard Drive) and connectivity to adjacent neighborhoods and surrounding uses;

§         Multiple connections to other parts of the Eastern Cary Gateway, especially to the Soccer Campus and future additional sports-oriented uses to the north; and

§         Parking facilities easily accessible between Fenton and WakeMed Soccer Park.

 

Therefore, the proposed development agreement provides for careful integration between the public capital facilities planning, financing, and construction schedules and the phasing of Fenton to ensure that certain transportation and other public facilities are available and enjoyed by Town citizens early during development of Fenton and before Fenton generates substantial increased demand on existing public facilities. 

 

CDG Fenton is designated as the “Master Developer” of Fenton – the entity principally responsible for development of Fenton.  Pursuant to the proposed development agreement, the Master Developer will bear all costs of constructing the following improvements (collectively, the “Public Facilities”):

§         Widen Cary Towne Boulevard;

§         Construct Trinity Road from Cary Towne Boulevard to the new Quinard Drive as a four-lane cross-section;

§         Construct a new collector avenue, Quinard Drive, from Trinity Road through the Property and continuing off-site to intersect with S.E. Maynard Road;

§         Construct a variety of transportation improvements, including widening of Cary Towne Boulevard and installation or modification of turn lanes and traffic signals at several intersections;

§         Install a new waterline along Cary Towne Boulevard and water lines along Trinity Road and Quinard Drive; and

§         Construct the Iron Gate greenway through the Property. 

 

The Town has agreed to reimburse the Master Developer up to a maximum of $22,533,394.93 for construction of the Public Facilities.  This amount is based on cost estimates prepared by both the Town and CDG Fenton after extensive research and analysis.  The Master Developer will be entitled to full reimbursement only after:

§         construction of each Public Facility is complete and each Public Facility is open for use; 

§         all buildings in Phases A and B of the development have been constructed;

§         certificates of occupancy have been obtained for at least 120,000 square feet of development in Phase A, and at least 50% of all buildings in Phase B; and

§         Phases A and B consist of at least 425,000 square feet of non-retail use. 

 

 

The Town will not reimburse the Master Developer all at one time; instead the Master Developer will be eligible for payments as certain benchmarks are reached, as further explained in the development agreement.  If the Master Developer does not construct the Public Facilities as required, or does not construct at least 425,000 square feet of non-retail use, the amount of reimbursement will be reduced.  In short, reimbursement is tied to completion of specific Public Facilities and the successful performance by the Master Developer in implementing different phases of the development.   

 

General Town laws and policies cannot require construction of private (taxable) development such as Fenton. Without CDG Fenton’s purchase of the Property and entry into this development agreement, the timeline and cost for completing these Public Facilities, already planned in the Cary Community Plan, is not able to be known or assured.  This provision of the development agreement jump starts private and public infrastructure development in the Eastern Cary Gateway.

 

The development agreement also ensures that Fenton will reduce the amount of energy consumed by new development.  CDG Fenton has submitted an “Energy Efficiency Plan” that, among other items, requires all office buildings and vertically integrated office space eligible at the time of design to participate in the federally-recognized “Design to Earn” ENERGY STAR program to be designed to achieve an ENERGY STAR score of 75 or greater.  A Design to Earn ENERGY STAR score of 75 denotes that the energy use of the building is intended to be in the top 25 percent of all similar buildings nationwide.  This requirement applies to office space built in all phases of the development – A through D.  The “Design to Earn” ENERGY STAR program is a generally recognized standard established to reduce the amount of energy consumption.  In recognition of this commitment and the other measures in the Energy Efficiency Plan that will reduce energy consumption, the Town will pay up to $5,502,714 in development-related fees for Phases A and B of Fenton.  No fees will be paid for development in Phases C or D.  General Town laws and policies cannot require energy efficiency in private development, but the General Assembly authorizes adjustment to general development requirements and other incentives for a developer to agree to construct new development in a manner that makes a significant contribution to the reduction of energy consumption.  

 

Additional provisions of the proposed development agreement include:

§         A 25-year term, with provisions for termination if the Master Developer defaults on terms of the agreement;

§         Vesting of development rights so that Fenton may be completed under current Town regulations (except in limited circumstances) during the term of the agreement;

§         Requiring Town Council approval if CDG Fenton desires to assign any of its duties to a non-related entity;

§         Construction by Master Developer of a stormwater control structure on the Property to manage and treat both private stormwater and stormwater from Trinity Road (south) and Quinard Drive, to be maintained in perpetuity by the private landowner, with a perpetual easement granted to the Town in exchange for payment of $223,300;

§         Annual review of the progress of development; and

§         Completion of new traffic studies (funded jointly by the Town and the Master Developer) once office development exceeds 700,000 and 850,000 square feet, with the Master Developer required to contribute up to $500,000 towards traffic improvements constructed as a result of the new studies.

 

Fiscal Impact: The Utility Fund has financial position to afford reimbursement of utility-related costs without debt financing. With the Town’s strong AAA bond rating, the Town will have access to bond markets to obtain funding.  With prudent planning and structuring of debt, we will have the opportunity to match a portion of the debt service to property tax revenue.  The impacts of debt service will be minimal on the Town’s operating budget due to the additional tax revenue. 

 

Next Steps:  After execution of the Development Agreement, CDG Fenton will proceed to purchase the property from the State.   Upon the purchase of the Property, with the development agreement in effect, the zoning for the Fenton District will become effective.  Grading is expected to begin in 2019.