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Home My WebLink AboutORD-2023-025-Public Hearing Regarding Proposed Performance Agreement Between Orange County, North Carolina and Terra Equity, Inc., and Approval of Budget Amendment #10-A 1 ORD-2023-025 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: June 6, 2023 Action Agenda Item No. 5-a SUBJECT: Public Hearing Regarding Proposed Performance Agreement Between Orange County, North Carolina and Terra Equity, Inc., and Approval of Budget Amendment #10-A DEPARTMENT: Manager's Office Attorney's Office Planning & Inspections Department Economic Development Department ATTACHMENT(S): INFORMATION CONTACT: 1. Public Hearing Media Notice Travis Myren, Deputy County Manager, 2. Year-to-Date Budget Summary (919) 245-2308 John Roberts, County Attorney, (919) 245-2318 Steve Brantley, Economic Development Director, (919) 245-2326 Cy Stober, Planning & Inspections Director, (919) 245-2585 Christopher Sandt, County Engineer, (919) 245-2583 PURPOSE: To: (1) Receive information and hold a public hearing on the issuance of a performance-based agreement by the County to a private development company; (2) Consider approval of the proposed performance-based agreement, with claw-back provisions, for the extension of public utilities (water and sewer) into the Hillsborough Economic Development District; and (3) Consider approval of Budget Amendment #10-A. BACKGROUND: Beginning in FY 2014-15 and extending through FY 2017-18, the County budgeted a total of $2,590,000 (funded through the County's Economic Development Portion of the Article 46 Sales and Use Tax) to extend public water and sewer infrastructure to the Hillsborough Economic Development District (EDD). The Hillsborough EDD is an Economic Development Transition Zone containing approximately 160 acres of land served by Diversity Drive and located near the intersection of Old NC 86 and Interstate 40 in Hillsborough, North Carolina. The general footprint of the Hillsborough EDD is identified on the following map. 2 Hillsborough Area EDD CIP Project Area n — — ftp M z n a a PROPos�❑ RTLP PROJECT ray • Streams Future Land Use _City Limits -Water Bodies 10 Year Transition ETJ e� Water Supply Watersheds 20 Year Transition Activity Nodes i +•Mfeet ORANGE A p Q OCICHICA Joint Planning Area Rural Residential Economic Development Transition C� a 1.200 Rural Buffer Orange County Planning end Inspections sa s++srzoz3 The County completed the design, permitting, and easement acquisition activities for the Hillsborough Area EDD Phase 1 Water and Sewer Extensions project in late 2018, which would have extended Town of Hillsborough public water and sewer service under Interstate 40 and south of Interstate 40 to the eastern and western boundaries of the Hillsborough EDD. The County would have served as the project owner and manager. The primary purpose of the County's original project was to provide "backbone infrastructure" to service the Hillsborough EDD and facilitate development within the EDD. Public utility installation within the County's Economic Development Districts is a primary use of the Article 46 One-Quarter-Cent Sales and Use Tax. Revenues from the additional Article 46 tax, approved by voters on November 8, 2011, are split equally between Education and Economic Development. The funding allocation originally evidenced by a Resolution approved by the Board of County Commissioners on June 21, 2011 was renewed for an additional 10-year period on September 6, 2022. The County received construction bids for the Hillsborough Area EDD Phase 1 Water and Sewer Extensions project in early 2019, and the lowest qualified bid was $4,527,383, or approximately $1.9 million over the budgeted amount. The County paused the original project as staff evaluated alternatives to decrease the construction cost. All regulatory permits for the Hillsborough Area EDD Phase 1 Water and Sewer Extensions subsequently expired in 2021/2022. At its October 20, 2020 Business meeting, the Board of County Commissioners approved a Master Plan Development Conditional Zoning District (MPD-CZ) for the proposed "Research 3 Triangle Logistics Park" (RTLP) project to develop property in the Hillsborough EDD that would be served by the public water and sewer extensions very similar to those originally proposed by the County. The approval allows for up to 2.4 million square feet of light industrial development to occur on the RTLP site, shown in red outline on the map above. The developer (Terra Equity, Inc.) has coordinated with County staff, Town of Hillsborough staff, and applicable State and Federal agencies to reacquire all regulatory permits specific to the offsite public water and sewer infrastructure within the Hillsborough EDD that would be required to adequately serve the proposed RTLP development. On March 13, 2023, the Town of Hillsborough Board of Commissioners approved a Water/Sewer Extension Contract with the developer, allocating 108,000 gallons per day of public water/sewer capacity. The Water/Sewer Extension Contract has now been signed by both the Town and the developer. As currently designed, the offsite public utility project is located within public rights-of-way and/or recorded public utility easements and includes approximately: • 4,150 linear feet of 12-inch diameter water main, • 3,520 linear feet of 8-inch diameter water main, • 1,520 linear feet of 12-inch gravity sewer main, and • 1,190 linear feet of 8-inch gravity sewer main. The proposed public water lines will help improve public water service to the project vicinity by providing a "looping" of the existing public water mains from Old NC 86 to New Grady Brown School Road. The proposed water line loop will allow for: • Redundancy in the event of an isolated water main break/repair, • Improved residual chlorine content for better long-term water disinfection, • Improved available water pressure and volume, and • Better fire suppression needs for the local area. The proposed public gravity sewer mains will extend the existing public sewer system from the north side of 1-40 to the south side of 1-40 via a proposed bore and jack underneath 1-40. Terra Equity, Inc. will serve as the project owner and project manager for the installation of the offsite public water and sewer extensions associated with the RTLP development. Economic Development Approach: Local and state governments in North Carolina have the goal to promote economic development by encouraging the location of new businesses and the expansion of existing businesses. This activity serves to diversify the local tax base, increase employment opportunities and introduce desired job skills and related benefits to a community, and for the benefit of its residents. The Local Government Act, North Carolina General Statute (NCGS) 158-7.1, outlines the requirements of public hearings, and NCGS 158-7.1(a) specifically addresses the requirement that economic development appropriations "must be determined by the governing body of the city or county to increase the population, taxable property, agriculture industries, employment, industrial output, or business prospects of the city or county". The proposed public hearing as presented here has been scheduled in compliance. The proposed Performance Agreement between the County and Terra Equity, Inc. outlines the offsite public sewer and water infrastructure project in two phases, as follows. Phase 1 — This phase includes the public water and sewer main extensions that are required to reach and serve the proposed RTLP development. The County will reimburse Terra Equity, Inc. fifty percent (50%) of actual costs incurred for Phase 1, up to $2.2 million, assuming a total cost 4 for Phase 1 to be $4.4 million. However, if the total costs for Phase 1 are less than $4.4 million, the County's contribution will be less than $2.2 million. If the total costs are more than $4.4 million, the County's contribution is capped at $2.2 million regardless of the actual costs incurred by Terra Equity, Inc. Phase 2 — This phase is specific to the offsite public water line loop that will connect the public water mains located within the EDD to the existing dead-end public water main located at the end of New Grady Brown School Road. For this phase, the County will reimburse Terra Equity, Inc. the actual costs of Phase 2, up to $950,000. If the actual costs for Phase 2 are lower than $950,000, then the County will pay the lower amount. If the actual costs for Phase 2 exceed $950,000, then Terra Equity, Inc. will be responsible for those additional costs. The total potential County commitment under the proposed Performance Agreement is $3.15 million. The County will retain ten percent (10%) of the total potential County commitment ($315,000) until fifty percent (50%) of Phase 2 is completed. Thereafter, the amount retained will decrease to five percent (5%) of the total County commitment ($157,500) for both phases. An engineer will verify these milestones, and final completion is dependent on the Town of Hillsborough accepting the new infrastructure into the Town's public water and sewer systems. FINANCIAL IMPACT: Performance Agreement: The attached Performance Agreement contract between Orange County and Terra Equity, Inc. outlines a total financial impact of: a) TWO MILLION TWO HUNDRED THOUSAND DOLLARS ($2,200,000), plus, b) 100% of the Qualifying Expenditures for Phase 2 of the project up to and not to exceed NINE HUNDRED FIFTY THOUSAND DOLLARS ($950,000) for a total not to exceed amount and total County commitment of up to THREE MILLION ONE HUNDRED FIFTY THOUSAND DOLLARS ($3,150,000). Not more frequently than monthly, Terra Equity, Inc. shall submit to the County a draw request (a "Draw Request") which shall include a certification of Qualifying Expenditures, the percentage of completion of the Project and each Phase thereof, and a description of the work performed. The County shall remit payment to Terra Equity, Inc. within thirty (30) days following the receipt of each Draw Request in an amount equal to the County's share of the Qualifying Expenditures summarized in each such Draw Request, provided, however County's remittance of funds for any draw (or portion thereof) pertaining to Phase 1 of the Project shall be fifty percent (50%) of the amount specified in the Draw Request (or portion thereof pertaining to Phase 1), it being the intent that (i) the County and Terra Equity, Inc. each bear responsibility for fifty percent (50%) of the Qualifying Expenditures for Phase 1 of the Project, until such time that the County has advanced a maximum of $2,200,000 for Phase 1 of the Project; and (ii) the County bear responsibility for the Qualifying Expenditures for Phase 2 of the Project, up to but not exceeding $950,000. Expenditures are recommended to be funded with $2,345,857 unspent, available funds in the Hillsborough EDD project and $804,143 in the Eno EDD project. Budget Amendment #10-A repurposes funds from these two EDD projects and amends those ordinances, and will create the following RTLP EDD Capital Project Ordinance in the County Capital Fund: 5 Hillsborough EDD (-$2,345,857) - Project# 30048 Revenues for this project: Current FY 2022-23 FY 2022-23 FY 2022-23 Amendment Revised Alternative Financing -Article 46 Repayment $2,350,000 ($2,105,857) $244,143 Article 46 Sales Tax Proceeds $240,000 ($240,000) $0 Total Project Funding $2,590,000 ($2,345,857) $244,143 Appropriated for this project: Current FY 2022-23 FY 2022-23 FY 2022-23 Amendment Revised County Capital Fund Expenditures $2,350,000 ($2,105,857) $244,143 Article 46 Expenditures $240,000 ($240,000) $0 Total Costs $2,590,000 ($2,345,857) $244,143 Eno EDD (-$804,143) - Project# 30045 Revenues for this project: Current FY 2022-23 FY 2022-23 FY 2022-23 Amendment Revised Alternative Financing -Article 46 Repayment $1,605,000 ($684,707) $920,293 Article 46 Sales Tax Proceeds $120,000 ($119,436) $564 Total Project Funding $1,725,000 ($804,143) $920,857 Appropriated for this project: Current FY 2022-23 FY 2022-23 FY 2022-23 Amendment Revised County Capital Fund Expenditures $1,605,000 ($684,707) $920,293 Article 46 Expenditures $120,000 ($119,436) $564 Total Costs $1,725,000 ($804,143) $920,857 RTLP EDD Project($3,150,000) - Project# 30055 Revenues for this project: Current FY 2022-23 FY 2022-23 FY 2022-23 Amendment Revised Alternative Financing -Article 46 Repayment $0 $2,790,564 $2,790,564 Transfer from Article 46 $0 $359,436 $359,436 Total Project Funding $0 $3,150,000 $3,150,000 Appropriated for this project: Current FY 2022-23 FY 2022-23 FY 2022-23 Amendment Revised Project Expenditures $0 $3,150,000 $3,150,000 Total Costs $0 $3,150,000 $3,150,000 The amendment provides funding from the Hillsborough and Eno EDD projects with a combination of Article 46 proceeds and Article 46 funded debt financing. The cash proceeds will be transferred 6 into the County Capital Fund for ease of tracking and will increase the authorization in the County Capital Fund by $359,436. SOCIAL JUSTICE IMPACT: The following Orange County Social Justice Goal is applicable to this item: • GOAL: ENSURE ECONOMIC SELF-SUFFICIENCY The creation and preservation of infrastructure, policies, programs and funding necessary for residents to provide shelter, food, clothing and medical care for themselves and their dependents. ENVIRONMENTAL IMPACT: The following Orange County Environmental Responsibility Goal impact is applicable to this item: • RESULTANT IMPACT ON NATURAL RESOURCES AND AIR QUALITY Assess and where possible mitigate adverse impacts created to the natural resources of the site and adjoining area. Minimize production of greenhouse gases. RECOMMENDATION(S): The Manager recommends that the Board: (1) Receive the proposal to consider entering a Performance Agreement for the purpose of incentivizing Terra Equity, Inc.'s public utility investment in the Hillsborough Economic Development District of Orange County; (2) Conduct the Public Hearing and receive public comments; (3) Close the Public Hearing; (4) Approve the performance-based incentive agreement between Orange County and Terra Equity, Inc., subject to final review by the County Attorney, and authorize the Chair to sign the Performance Agreement on behalf of the County; and (5) Approve Budget Amendment #10-A as detailed above. Attachment 1 7 44 It. AXE 17 5a PUBLIC HEARING Tuesday, June 6, 2023 — 7:00 PM Whitted Building 300 W. Tryon Street Hillsborough, NC 27278 NOTICE OF PUBLIC HEARING REGARDING PROPOSED ECONOMIC DEVELOPMENT INCENTIVE AGREEMENT Notice is hereby given that in accordance with North Carolina General Statute 158-7.1 the Board of Commissioners of Orange County (the "Board") will hold a public hearing on Tuesday, June 6, 2023 at 7:00 PM at the Whitted Building 300 W. Tyron St., Hillsborough, N.C. 27278. This public hearing concerns Orange County entering into an agreement with Terra Equity, Inc., for the purpose of incentivizing the Company's investment in Orange County. PERFORMANCE AGREEMENT The Board will consider the appropriation of County Article 46 Sales and Use Tax funds to offset the water/sewer utility project construction costs for the south side of Interstate 40 in the Hillsborough Economic Development District by entering into a Performance Agreement with Terra Equity, Inc., a Texas Corporation. The work is proposed to occur in two phases with the total County commitment for both project phases not to exceed Three Million One Hundred Fifty Thousand Dollars ($3,150,000). According to the proposed agreement the County will cover 50% of qualifying expenditures, or up to Two Million Two Hundred Thousand Dollars ($2,200,000) for Phase 1, proposed public gravity sewer mains that will extend the existing public sewer system from the north side of 1-40 to the south side of 1-40 via a proposed bore and jack underneath 1-40. Phase 2 of the project would cover 100% of qualifying expenditures or up to Nine Hundred Fifty Thousand Dollars ($950,000) for public water lines that will help improve public water service to the project vicinity by providing a "looping" of the existing public water mains from Old NC 86 to New Grady Brown School Road. Anyone interested in the Performance Agreement or the nature of the agreement between Orange County and Terra Equity, Inc. may appear and be heard at the public hearing. Anyone who wishes to make comments in writing prior to the public hearing may do so via email to ocbocc _orangecountync.gov. Interested persons may contact the Orange County Economic Development office at 919-245-2325 with any questions. 8 Year-To-Date Budget Summary Fiscal Year 2022-23 Fund Budget Summary County Capital Original Budget Revenue $10,612,009 Interfund Transfer Revenue Fund Balance Appropriation Total Original Budget $10,612,009 Additional Revenue Received Through Budget Amendment#10-A (June 6, 2023) Grant Funds $436,177 Non Grant Funds $542,540 Additional Interfund Transfer Revenue $1,327,466 Additional Fund Balance Appropriation Total Amended Budget $12,918,192 Dollar Change in 2022-23 Approved Budget $2,306,183 % Change in 2022-23 Approved Budget 21.73% Authorized Full Time Equivalent Positions Original Approved Full Time Equivalent Positions (includes Permanent and Time Limited) 0.000 Changes to Full Time Equivalent Positions Amended Approved General Fund Full Time Equivalent Positions 0.000 Total Approved Full-Time-Equivalent Positions for Fiscal Year 2022-23 0.000