The deal that City Council is about to sign binding taxpayers to the proposed Bull Street neighborhood for decades makes the city vulnerable to huge liabilities and appears to allow developer Bob Hughes to big-foot Columbia’s Realtors and homebuilders, critics say.
“What is unusual about this agreement is the developer can sue the bejesus out of the city if it (the city) doesn’t meet the agreement,” said Columbia attorney Toby Ward, who has followed the negotiations closely. “I think it subjects the city to liability for loss of profits, which could be enormous.”
But Mayor Steve Benjamin, a key negotiator in talks with Greenville-based Hughes Development Corp., dismisses the complaint as a “red herring.”
Council’s final vote on the development agreement for the 181-acre site in the heart of downtown is set for Tuesday. None of the issues raised at last week’s public hearing will postpone that vote, Benjamin said Friday. But he and former mayor Bob Coble, who is one of Hughes’ attorneys, say the agreement will be changed before the vote to address many of those concerns.
The changes will rework the language on the city’s liability, Realtors’ fees and the historic preservation of additional properties and will require noise and lighting studies before a baseball park is constructed. Those were among the many complaints raised in a packed public hearing July 1.
“It’s going to have some language that everyone’s going to be happy with,” Benjamin said of what he characterized as “about a dozen” updates, some of which he called clarifications.
Coble said Hughes has agreed to quite a few changes, especially to respond to complaints from Realtors that they were being shut out of commissions on Bull Street sales.
A longtime Columbia Realtor called a provision that allows Hughes to control which real estate companies may do business on the site “anti-competitive.”
The city’s homebuilders association might oppose the development agreement if that provision isn’t changed, Earl McLeod, the group’s director, said. McLeod, after meetings this week with Benjamin and Coble, said he’s optimistic the change will be made.
Still, other critics of the agreement are pushing, under a very tight deadline, to toughen parts of the deal, which council adopted tentatively last week at the mayor’s insistence. It passed by a one-vote margin amid complaints that the city was taking on too much risk and Hughes was not risking enough.
Coble said compromises have been reached on several of those concerns.
Benjamin on Friday told leaders at the Historic Columbia Foundation that council likely will accept “some of the (group’s) recommendations” to protect more of the nearly 200-year-old site that once was a community unto itself, founded for the treatment of mental health and addiction problems. Captured Union soldiers also were imprisoned there, in a section of the campus called Camp Asylum, during parts of the Civil War.
The mayor told The State newspaper that Camp Asylum is likely to gain protection in the updated agreement. But he did not specify what kind of protection that might be.
At last week’s public hearing, Chester DePratter. of the University of South Carolina’s Institute of Archaeology, called Camp Asylum “one of the most important archeological sites I’ve ever studied.” He said it has never been fully excavated.
Historic Columbia director Robin Waites said that for Benjamin to expect critics to evaluate the changes during a legally required second public hearing just before Tuesday’s vote is “unreasonable, to say the least.” That simply isn’t enough time, she said.
Here are some other concerns raised by a range of worried residents – from local businesses to neighbors, civic activists and skeptics on council.
• Hughes should have to abide by city procurement codes, which provide that some of the work contracts will go to local, minority-owned and women-owned firms.
“I just want him not to give it all to his friends or to Greenville developers,” said Councilwoman Tameika Isaac Devine, one of three council members to vote against the deal July 1, saying further negotiations were needed. She said she wants Hughes to commit to that “when possible.”
Benjamin and Coble said that commitment already is included for publicly funded projects on the site. But Hughes has agreed to a clarification that local and minority preferences in contracts should apply for private construction, too, Coble said.
“All he can say is, ‘I’m going to try to do this,’” Coble, who served as mayor for two decades, until 2010, said of Hughes. “He’s going to inform the people who buy property down the road that that’s a goal.”
Hughes should be required to conduct a traffic-impact study for the entire project, not just if a baseball stadium or a major shopping mall is built. He also should not be allowed to convert Gregg Street into a thoroughfare through the property because of the effect the increased traffic might have on nearby neighborhoods.
Elizabeth Marks, president of the Robert Mills Historic District neighborhood, said in an email to council that exempting the site from a traffic study “... is in direct violation of the city’s current zoning regulations” under the site’s customized zoning plan, which uses form-based codes that are new to the city. Council adopted that plan last fall after many residents complained that Hughes had too much control in the initial version of the plan.
Benjamin counters that “there is no violation of the city ordinance.”
Coble said traffic studies already are addressed in the zoning laws for the property that council adopted last fall.
Benjamin argues that the architect who first suggested a design for the Bull Street neighborhood, Miami’s Andrés Duany, advocated pass-through streets that would keep the project from seeming like a gated community.
The neighborhood will need a major north/south corridor, Benjamin said. He doubts that provision will change.
• Hughes should not be able to meet his commitment to construct 120,000 square feet of space by selling property to tax-exempt organizations. And that square footage figure, which triggers public money to build the first of two parking garages, should be larger, Councilwoman Leona Plaugh said.
“It needs to be taxable, whatever the square footage is,” said Plaugh, who joined Devine and Councilman Moe Baddourah July 1 in voting against the deal until their concerns are addressed.
Benjamin said the agreement will be amended to require that all of the 120,000 square feet be taxable property.
Altogether, the city committed in its first vote to $31.25 million in public money for roads, water and sewer service, lighting and the opening of Smith Branch, a creek that runs through the property in underground pipes.
But the construction of a minor league baseball ballpark and two parking garages is likely to add some $40 million more in taxpayer dollars.
Council has yet to say how it will pay for the construction.
Hughes has not detailed plans for what the sprawling community will look like. But he told the Greater Columbia Chamber of Commerce that by the time the neighborhood is complete in two to three decades, he envisions:
• 3 million square feet of rental property
• 580,000 square feet of commercial property
• 555,000 square feet of owner-occupied housing
• 500,000 square feet of office space
• 300,000 square feet of medical office space
• 250,000 square feet for townhouses
• the reuse of 200,000 square feet in the historic Babcock Building.
The baseball park is cited in the plan, but neither Hughes nor the city has signed an agreement governing that portion of the deal.
The liability question
Attorney Ward said that unless otherwise stipulated in a contract, South Carolina law allows property owners to sue for loss of potential profits. “The disgruntled builder would say, ‘This is what I would have made, and that’s what you owe me,” he said.
Ward, a general practice attorney who said he consulted with lawyers on both sides of the issue, cited a 1960 ruling on a breach of contract case between two finance corporations. In the case of S.C. Finance Corp. of Anderson vs. West Side Finance Corp., the justices wrote, “In a breach of contract action, the ‘measure of damages’ is the actual loss ... . And profits that have been prevented or lost ... are recoverable as an item of damages ... .”
Further, the court said, “The law does not require absolute certainty of data upon which lost profits are to be estimated, but all that is required is such reasonable certainty that damages may not be based wholly upon speculation or conjecture.”
Councilwoman Plaugh said she reviewed the deal with David Tedder, a Beaufort-based attorney the city hired to guide it through its first development agreement. “It’s clear to me (that) if we don’t provide the money, we breach,” Plaugh said. “It’s not real clear what the developer does to breach.”
The Historic Columbia Foundation, which is fighting to rehabilitate more buildings than the five Hughes is agreeing to in the deal, agrees that the agreement leaves the city exposed to a suit over lost profits.
Waites wrote council on Wednesday asking that, among eight proposed changes, the city alter the language in the agreement to spell out that “in no event shall the city of Columbia be liable for any ‘lost profits,’ consequential damages or special damages.” Consequential damages and special damages are legal terms for lost profits.
Benjamin said the language in the agreement was lifted from a similar deal the city of Myrtle Beach used in the redevelopment of the former Air Force base there.
“The issue of consequential damages is not a major concern for me,” he said.
Coble said “lost profits” is a vehicle to attempt to kill the agreement.
“Toby (Ward) is against the deal because he wants all the buildings preserved, period,” Coble said of his conversations with Ward, whom Coble once appointed to the city’s Planning Commission. “That’s what he wants.
“If you’re looking for other reasons to stop it, you can use that,” Coble said.
Squeezing the competition
Andy Walker, a Columbia residential Realtor for 25 years and a former president of the state real estate sales association, said his reading of the covenants and restrictions that accompany the agreement leaves him worried. Realtors in Columbia would be kept from representing sellers or buyers for resales without Hughes’ explicit approval.
“Is it pro-developer or is it anti-competitive?” asked Walker, of Bollin Ligon Walker Realtors. “I would probably come down on the side of anti-competitive.”
Walker said the deal would keep him from representing his mother if she wanted to resell a home she bought in the Bull Street neighborhood. “She could not say, ‘Andy, help me with this.’”
McLeod, of the Home Builders Association of Greater Columbia, said he feels better after meeting Wednesday with Benjamin, city manager Teresa Wilson and representatives of Hughes’ team in the mayor’s office.
“I came away from the meeting feeling the intent was not to be anti-competitive,” McLeod said. “The attorneys are drafting (new) language. I don’t think it’s going to be an issue.”
Coble said Hughes’ intent was to be sure that future buyers know the property-use restrictions that will come with building or buying in the neighborhood.
That would have been accomplished by Hughes choosing Realtors or designating which ones could sell in the neighborhood, Coble said.
But the developer has agreed to reach that goal by being sure that covenants are handed to buyers in writing at the time of sale, not just explained to them orally. Not understanding what the property-use restrictions are could cause confusion and misunderstandings, which could lead to lawsuits, Coble said.
“We’re working on the exact language,” Coble said Friday afternoon. “But that that will be resolved is absolutely correct.”
Columbia City Council is scheduled to cast its final vote Tuesday on a plan that commits taxpayers to spend $31 million to $70 million to help get the vast Bull Street neighborhood completed. An updated version of the proposed development agreement with Bob Hughes will be presented for public comment before the vote is cast.
Here are the major provisions of the development agreement between city leaders and Greenville developer Bob Hughes to construct a huge neighborhood in the heart of Columbia. A divided City Council has given the multimillion-dollar commitment in public money a first-vote endorsement. The final vote on the agreement – with any changes made – is set for Tuesday.
WATER, SEWER, ROADS
$31.25 million for water, sewer, stormwater lines, roads and lighting during four construction phases of the neighborhood during a 20-year period.
The first $15.4 million will be spent on construction phases one, two and three.
The remaining $15.8 million will be for phase four, with financial commitments from the developer.
$81.25 million return in private investment to get the full $31.25 million in public dollars.
To get the second installment from the city, the developer must commit to making $5 in economic development for every $1 the city puts into phase four.
Two parking garages with a total of 1,600 spaces. The agreement does not contain a cost figure, but estimates have put the public cost at about $20 million.
To get the first garage, developers will have to do one of three things: construct at least 120,000 square feet of property; rehabilitate the Babcock Building; or construct a baseball stadium.
To get the second garage, developers must have purchased half of the site’s total 181 acres or must have secured $75 million in private investment.
Developer is donating land for a police substation on the property, installing a pump station to provide pressure for the area’s water system and conducting a tree survey before building each phase of the project.
Developer agrees to preserve several features on the property: the Babcock Building, including its north and south wings; the former dining halls for men and women; the Williams Building; the Chapel of Hope; and the row of mature magnolia trees leading to the Babcock Building.
City Council has yet to decide precisely how it will pay for the utilities and amenities. A tax-increment finance plan is still on the table for the Bull Street development, but not in concert with the north Columbia area, Mayor Steve Benjamin said.