Todd Paris, Associate Editor and Salisbury Attorney
♦ As seen on the RFP county commission video and recounted in Salisbury’s paper media, Rowan County Commissioner Craig Pierce (and he alone) expressed reservations concerning the legality and terms of the Economic Development Agreement under consideration between Rowan County, North Carolina, and EASTER CREEK PARTNERS, LLC, a North Carolina Limited Liability Company and the Town of Granite Quarry, concerning certain speculative buildings to be erected upon county owned property, next to Gildan. A full copy of this agreement is included for your edification and study for folks interested in such things.
As convoluted as the contract is, “the deal” boils down to this: the county gives all the remaining acreage (three tracts – 65 acres total) in our industrial park on Highway 52 to the LLC, the LLC commits to build one rather large building on the property and Granite Quarry agrees to provide funds to extend water and sewer to the property. This is done by the county owner financing the LLC’s acquisition (we “tote the note”) and forgiving 1/3 of the debt upon the clearing of all three parcels, another third upon the building being built and the remainder when that building comes under lease or is sold.
Commissioner Pierce took issue, in a recent County Commission meeting, with whether the contract or deal actually complies with the law, that is to say our Economic Development Statutes and specifically, N.C. Gen. Stat. 158-7.1(d) requiring “Before such an interest may be conveyed, the county or city governing body shall determine the probable average hourly wage to be paid to workers by the business to be located at the property to be conveyed and the fair market value of the interest, subject to whatever covenants, conditions, and restrictions the county or city proposes to subject it to. The consideration for the conveyance may not be less than the value so determined.”
http://www.ncleg.net/EnactedLegislation/Statutes/PDF/BySection/Chapter_158/GS_158-7.1.pdf
The challenge is that at least two of the three conveyances of the property under this contract (which is silent as to these statutorily required terms) will necessarily occur before any such information is available, because we don’t know who the LLC will eventually sell or rent to. No provisions exist in the contract to cover this and the LLC may rent or sell the building to a business that may create hundreds of jobs or, then again, create a warehouse with a lot of boxes and three watchmen.
There may be a larger legal problem hidden as well. N.C. Gen. Statutes, Article 12, which controls the sale and disposition of public property, requires that real property sales of county property valued at more than 30K be done in a manner to allow notice and be sold to the highest bidder, pursuant to N.C. Gen. Stat. 160A-265 through 270.
http://www.ncga.state.nc.us/EnactedLegislation/Statutes/pdf/ByArticle/Chapter_160A/Article_12.pdf
The clear intent of this statute, I argue, is to prevent county or city property from being sold, bargained or traded away in “sweetheart” deals without an opportunity for sale to the highest bidder and so as to obviate any possibility for self-dealing, graft, and corruption. It’s a good law.
It would appear that Edds and the gang are trying to use the economic development statute to “end run” the requirements of 160A that county real property valued more than 30K be advertised and placed up for bid. This has, in my humble opinion, potential for much bad legal “Ju-Ju.”
Now, I don’t know much of anything about EASTER CREEK PARTNERS, LLC, a North Carolina Limited Liability Company. For all I know, they may be fine honest folks and great business associates. But then again, none of us can know much about these folks. NC Limited Liability Corporations are governed by Chapter 57D of the General Statutes. I do know that the members/investors are not required to be revealed by the annual reports to the NC Secretary of State and NC law allows them remain anonymous.
http://www.ncleg.net/EnactedLegislation/Statutes/HTML/BySection/Chapter_57D/GS_57D-2-24.html
So who are we dealing with? One of the terms of the agreement says that “To the best of their knowledge, no officer or official has any interest (financial, employment, or other) in the Company or the transactions contemplated by this Agreement.” The problem with this is that with the secretive nature of NC LLC’s, how do we know if various and sundry government officials, private site selectors, policy and economic development “wonks” who have “had a say” in the LLC getting this contract, actually own a share in the LLC or if even they are a member of another LLC that owns a shares in this LLC. How do we know if there is self-dealing going on here, particularly with the single purchaser “sweetheart sale” or gift of real estate that is not subject to open bid under state law?
Granite Quarry’s issue is another concern to me. The town will provide water and sewer at considerable expense (hundreds of thousands of dollars) to this project and at their lower tax rate it will take much longer to recoup their expenses after the three year “grant” in the contract which prevents them from taxing during this term. What happens if after three years, no one buys the building or if the LLC declares bankruptcy or fails to perform? Granite Quarry’s budget is not large enough to absorb the loss without great financial stress. Perhaps Mayor Bill Feather should have negotiated a Indemnification Agreement with the county to make sure that the county (with a much larger budget) would pay the town back if this project goes “bust.”
Another important item to remember is that LLCs protect individual investors from any civil legal liability should the project fail. There appears to be no performance bond required, so where we could get relief if this thing falls through. Who do we sue and where does the money come from? What happens if the project fails after the land is graded? In that case, would a bankrupt LLC now own a 1/3 undivided interest in the entire business park or the whole kaboodle?
In the end, I do not want not it to be said that I am anti-development. The prospect of gaining hundreds of decent paying industrial jobs is a wonderful thing, however, I suggest:
The County Attorney should file a declaratory action in Superior Court to make sure this scheme is legal or at least get the NC Attorney General’s opinion to that effect.
That the LLC be required to disclose who their individual and corporate holders are, so we can be sure this deal is fully “in the sunshine.”
That Granite Quarry be indemnified for any losses should this deal “flop” after they have performed.
That the LLC be required to disclose any deals with private site selectors (local “folks” who contractually take a percentage of incentives to “help make the project go” who may obtain from the LLC a large percentage of their incentives.)
Should we negotiate some price for the land instead of giving it away?
Let’s let the sunshine in and if it all checks out, maybe we can all get behind this deal. By the way, good job Craig Pierce! Someone needs to question stuff like this, rather than rubber stamp every development deal that comes down the pike.
Land Tract Agreement:
https://app.box.com/s/z38e1picoykweal1o7ba1p7qn8noq9o7
Land Tract Map:
https://app.box.com/s/rrubxkrp0ivhg8ut70rkme25ex4r5n46
