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County Council, September 21

To pay $33 million for buildijg in Chicora settlement
Will Bond rating change?
Warwick Jones

The $33 million offer by the County to buy the old Naval Hospital has been accepted, the County Attorney told the Finance Committee yesterday. Some minor issues remain but these are not expected to affect the sale.

There was no discussion about the offer and acceptance. Chairman Rawl offered to hold an executive session if there were. But it seemed that Council members had had enough and would like to see an end to the issue, and for the County, the unhappy outcome. Viewers may recall that the County had an agreement with Chicora Life Center (CLC) the owners of the building, to lease space for a number of County and Government services. The owner fell well behind schedule on the renovations to the property and necessary to enable occupancy. Clearly there were differences of opinion as to responsibilities and liabilities but in its wisdom, the County walked away from its lease obligations which in total amounted to about $30 million spread over 25 years. As it was the major tenant, the economic viability of the project collapsed with the County’s departure. CLC sought bankruptcy protection and also sued the County. We understand that the County was confronting damages of about $8 million.

There are or ought to be some red faces in the County. It is now paying $33 million for a building that the owners bought for $5 million in 2014. How much the owners spent in renovations and up-grading we do not know but almost certainly it was much less than the difference between $33 million and $5 million. Notwithstanding, the County thought it better to move to purchase the building rather than pay damages and have the task of finding another property.

Over recent months, there have been a number of executive sessions where the issue was discussed. Questions must have been asked about the legal opinions that encouraged the County to walk away from its contract. Were these opinions unfounded or was it possible that the Court erred in its judgment? It is telling perhaps that the County decided not to appeal the judgment.

What happens now? The Post and Courier reports that Chairman Rawl indicated that the County would issue bonds to raise funds to make the settlement. It may also sell other properties that would become surplus if staff were moved into the old naval hospital building. Importantly, what will happen to the County’s bond rating with the recent judgment? Compared with the General Fund budget of about $230 million, the $33 million obligation is not huge but not insignificant. Relocating County and other services makes good sense but it won’t happen immediately. And besides, substantial outlays on renovation may be necessary.

Perhaps it was only a coincidence that the County’s plans for 995 Morrison Drive were on the agenda of yesterday’s meeting. The property is in the City of Charleston, and the County is preparing a Planned Unit Development (PUD). To shape the PUD, it has held meetings with the City, neighbors and developers. Nothing is certain but it is probable that the County will sell the 7.4 acre property or parts thereof on completion of the PUD. The proceeds of any sales would be most welcome considering the unexpected addition of the $33 million liability relating to CLC.

Staff was tasked yesterday with giving an update on progress. It reported that the draft PUD provided for 12 story structure/s with a maximum height of 160’. For the housing component, there was no limit on density. The City of Charleston had requested that 15% of dwelling units be designated Work Force Housing. Staff noted that City zoning had an 85’ limit on building height and 24.6 units per acre for dwellings. It is likely that the development will also entail retail, and a parking garage.

Most of the discussion relating to the PUD was about parking. With a lot of the property undeveloped and the traffic problems of the Peninsula, the property could host a park and ride facility. This has not been unnoticed by developers. Staff will execute a short term agreement with one and allow the use of undeveloped space on a month to month basis. The experience and response will be used in shaping a longer term policy. Chairman Rawl also noted that CARTA had an interest in a Park and Ride facility on the site.