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Is the Chatham EDC working in the public's interest?

By John Hammond
Posted Saturday, August 20, 2005

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Is the Chatham County Economic Development Corporation (EDC) really doing economic develop in the public’s interest or in the special interests?

In order to answer this question let us examine one of the EDC’s major projects the Kayser-Roth project in Goldston. As many know Kayser-Roth ceased business at 751 S. Church Street in Goldston prior to January 31, 2000.

A search of the Registrar of Deed’s records in Chatham County for this property show that a deed was filed on July 18, 1969 by E. M. Harris, Jr. and wife transferring the property to Kayser-Roth Corp., a New York Corporation. On January 28, 1971, this same property was deeded to James R. Greene, 914 Sudekum Building, Nashville, TN by Golroth Properties, Inc, a Delaware Corporation, with offices at 229 S. State St., Dover, DL. Mr. Greene held the deed on this property until he sold it to Goldston, LLC, a Missouri limited liability company as subsidiary of Commercial Development Co., Inc., 1650 Des Peres Rd., Suite 303, St. Louis, MO on May 15, 2002. This company’s website is www.cdcco.com and the Kayser-Roth site can be found advertised on this website.

It would appear that Mr. Greene owned this property continuously from 1971 until 2002. This period includes the time Kayser-Roth operated it facility and for two years after it ceased operations at the site.

The Chatham County Tax Office records shows that prior to 2000 tax bills for this property were mailed to Kayser-Roth Corp., 102 Corporate Ctr. Blvd., Greensboro, NC 27408. From January 2000 until May 21, 2002 tax bills went to Mr. James R. Green, PO Box 1343, Brentwood, TN 37024. From May 15, 2000 to present tax bills have been mailed to Goldston LLC, C/O Commercial Development Co, 1650 Des Peres Rd, St. Louis, MO 63131.

Further tax records show that the Mr. Greene’s property was valued at $1.7 million in 2002. Tax records also show that this property sold for $484,500.00 in May 2002 and is currently valued at approximately $1.5 million a seeming anomaly. It would appear that Mr. Greene took a major loss on the sale of this property. Such a loss may be useful in terms of dealing with long-term capital gains taxes on this sale. It could have been a direct sale or it could have a sale with a long-term leaseback provision that would then allow Mr. Greene to retain contorl of the facility and give the Commercial Development a long-term tenant and income stream. If this was the case Mr. Greene could then sublease it to an appropriate tenant. The nature of this sale is unknown at this time.

Commercial Development Co. describes itself as:

“Commercial Development Company, Inc. (CDC) blends a rare combination of real estate, environmental, legal, financial and insurance expertise into one entity capable of acquisition, remediation, redevelopment and sale or lease of environmentally challenged, distressed, unique or otherwise impaired properties. CDC achieves success by tackling the difficult issues inherent in these kinds of property transactions by developing solid solutions within a proven framework of capabilities. Whether it requires demolition, environmental clean up, development or redevelopment, CDC has a proven track record of successfully completing complex projects.”

Mr. Tony Tucker, Executive Director of the Chatham County Economic Development Corporation told me that during that time that Kayser-Roth operated the facility modifications were made to the septic system without obtaining county permits or county inspections and as result the building could not be used until the septic system was repaired to code or an alternative was found to the septic system such as connection to a public sewer system.

Thus, this property was a perfect candidate for purchase by the CDC. The price was discounted substantially from the fair market value based on what CDC thought it might cost to mitigate the septic system problem. Further, if the septic problem were solved then the value of the property would immediately return to the fair market value at least for tax purposes of $1.5 million in 2005. Also, if the sale to CDC were a lease back to Mr. Greene then the value of the leases would immediately increase if the sewer problem was mitigated.

Enter American Moulding Co, a Lee County company that was looking for expansion space for its manufacturing operation and a short distance for it operation in Lee County was this empty ex-Kayser-Roth facility in Goldston where it might employ 75 workers. Enter the economic development forces and political leadership in Chatham. American Moulding presumably worked with public officials in Lee County and agreement was reached that would allow extension of its Lee County sewer services to facility in Goldston. Further any excess capacity of the line might become available to Goldston after the American Molding operation was operating in Goldston facility.

The next challenge was how to pay for the estimated $750,000.00 cost of the sewer line? Historically the taxpayers of Chatham through their elected officials have been averse to building public infrastructure to support real economic development. These same taxpayers have never been averse to letting other taxpayers federal and state to pay for public infrastructure in Chatham County. The obvious solution is to apply for a Community Development Block Grant (CDBG) to serve American Moulding & Millwork Co. from the NC Department of Commerce provided the company would commit to create 75 jobs, 60 of which would be low to moderate wage jobs in a two year period. After two years there were no further commitments and the Company would be free to expand or close.

Further in order to facilitate the immediate occupancy of the ex-Kayser-Roth plant Chatham County installed a sewer holding tank on property at a cost of $25,000.00 which will allow American Moulding to begin to operate there while the permanent sewer line funded and constructed. Presumably American Moulding would pay for the sewer disposal from the tank.

What are the positive and negatives of this deal?

Positives:
1. Commercial Development Co. upon the connection of the sewer line to its property the fair market value of the property returns to at least $1.5 million with little or no investment of their own in mitigation of the defective septic system. The block grant solves the problem and eliminates CDC’s cost for mitigation of the septic system.
2. Mr. Greene, if he holds a leaseback agreement, with CDC now has much more valuable lease space once the sewer line in completed and may recover over the length of the lease much of his loses in the fire sale of his property due to the illegal modification of the septic system when he owned the property.
3. The Town of Goldston gets potential access to Lee County’s public sewer system but must install sewer system infrastructure within the town. How will that be funded? Another grant?
4. Additional commercial development may occur along the path of the sewer line. Who benefits from this development?
5. Chatham County gets 75 jobs, 60 low and moderate wage jobs. Maybe more maybe not.

Negatives:
1. Is it appropriate for the County taxpayers to pay for sewer storage tanks on private property?
2. Should taxpayer’s bail out private property owners who fail to seek proper permits for modification of septic systems rendering the property unusable?
3. Are the jobs coming into Chatham in the facility jobs that pay a living wage and improve the economic opportunity of workers in Chatham County? Or does this development continue Chatham’s tradition of attracting low wage industry?
4. Will the low wage jobs coming into this facility expand the Medicaid rolls in Chatham County?
5. Is this project compatible with the Research Triangle Partnership’s “Staying on Top” for Economic Growth which focuses on ten industry clusters for new growth including: Pharmaceutical; Biological agents and infectious diseases; agricultural biotechnology; pervasive computing; advanced medical care; analytical instrumentation; nanoscale technologies; informatics; vehicle components parts; and logistics and distribution? At face value the answer appear to be no. What is the EDC doing to help clusters develop around the Biolex facility in Pittsboro which is a real biotech company?
6. Will Lee County continue to provide sewer service to Goldston if American Moulding closes the facility?
7. As the state mandates limits of point sources of nutrients from sewer plants in the Cape Fear River system will Lee County continue to provide sewer services to Goldston?
8. Is this project an appropriate use or an abuse of NC Department of Commerce Economic Block Grant Funds? County and state expenditures are $775,000.00.
9. Does Mr. Greene have any local business partners?
10. Should the NC Department of Commerce Economic Development Grant be used to enrich CDC a Missouri company?

Of course the final question of all public actions does this project pass the smell test?

 
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