South End has been called the hottest area for apartment construction in the country.
The city of Charlotte, however, is still offering small subsidies to developers who build apartments and other projects in South End and near other light-rail stations – a program that has cost taxpayers $226,000 over the past decade.
To see if the incentives are still needed, the city’s planning department is now reviewing the program, under which the city sponsors some applications to rezone land along the light rail line to spur development.
“There are a broad range of options available,” said Ed McKinney, the city’s interim planning director. “It ranges from (the city continuing to offer the subsidy) to not doing it all and letting the market drive it.”
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City Council discussed the program in December and agreed that it should be reviewed.
Reducing or eliminating the subsidy could now have more urgency. The city announced last week that it expects a $15.6 million shortfall for the upcoming fiscal year, which starts in July. That budget gap was larger, but the city has already proposed eliminating pay raises ($6.9 million in savings) and a enacting 1 percent across-the-board cut for all departments ($6 million).
Council members have said they were stunned by the size of the budget gap, a result of the legislature eliminating a business privilege license fee and the county’s flawed property revaluation shifting values downward. City Manager Ron Carlee has said the city might consider raising taxes and fees, and it will study whether fees paid by residents and businesses are fully capturing the cost of the service provided.
When the city was building the Lynx Blue Line a decade ago, Charlotte wanted to spark new development near train stations – preferably walkable communities of apartments, offices and stores. It created a new zoning district to encourage that and also agreed that, in some instances, the city would sponsor a rezoning.
If the city sponsors the rezoning, it will waive the developer’s fee, which is now about $4,600. The city has waived fees for 64 rezonings since the project started. Beneficiaries have included the Spectrum Apartments on Hawkins Street, the Camden Gallery complex on West Kingston Avenue and the Mosaic apartments on South Tryon Street.
The city waived about $38,000 in fees for Charlotte Area Transit System stations being built along the existing rail line and the $1.1 billion extension to UNC-Charlotte.
The city doesn’t support all rezonings along the rail line. It won’t sponsor some projects that need special exceptions.
The city’s goal of spurring development along the rail line has been a tremendous success – at least along the four stations just south of uptown. There has been minimal development surrounding the stations farther south, such as the Tyvola and Archdale stations.
But it’s unclear whether the small incentives have been the deciding factor in whether a developer launches a project.
Chad Hagler is a partner in Woodfield Investments, which developed the recently opened Silos at South End complex on Remount Road. In 2008, the complex benefited from a $4,055 city-sponsored rezoning that changed part of its site to transit-oriented zoning.
Hagler said the monetary cost of the subsidy is a small consideration to many developers, who might be spending tens of millions of dollars on a large apartment complex or mixed-use project. What’s more important, Hagler said, is that the city-sponsored rezonings are supported by staff and can pass more quickly than they might for developers filing on their own.
Tim McCollum, president of Revolve Residential, said city-sponsored rezonings can help smaller developers, who are often investing their own money, get a project off the ground. Last year, his Lumina Townhomes project on Youngblood Street benefited from a $4,655 city-sponsored rezoning.
“The impact of the cost of rezoning on a 400-unit apartment complex is relatively inconsequential, but when there are 13 units then you begin to notice that in each unit,” McCollum said. “So, it’s not a big deal for larger parcels and developers, and impacts smaller parcels and developers disproportionately.”
The city hopes the light-rail extension to UNC-Charlotte will spark the same development that’s taken place in South End. In December, a study by MPF Research named South End as the most active apartment submarket in the U.S., based on recently completed apartments and those under construction. The area had 3,545 units under construction in late 2014, the group said.
There have already been a few city-sponsored rezonings along the extension, including a 14-acre rezoning at Tom Hunter Road and North Tryon Street. That is the site of a former Parks Chevrolet. The city waived $4,525 in fees for that 2013 rezoning.