GATESVILLE – As is often the case in economic development deals, there are strings attached.

Such is the case for Gates County local government as the Board of Commissioners move forward with plans to develop an area along a stretch of US 158 in front of the high school.

As part of an estimated $2.65 million project to provide a sanitary sewer system to that commercial development – a.k.a. Merchants Commerce Center – the commissioners are currently engaged in the process of seeking grants from several entities. To date they have applied for $900,000 of financial assistance from the Economic Development Administration, an arm of the U.S. Department of Commerce, and are seeking $700,000 from the North Carolina Rural Center.

Gates County Manager Toby Chappell said he expects notification on the status of those two grant applications within the next few weeks.

To date, two unnamed businesses have agreed to open in Merchants Commerce Center. As part of the possible $700,000 grant from the NC Rural Center, that organization requires a promise of job creation. In this particular case, the Rural Center is requiring the creation of 70 jobs between the two businesses that have made a commitment to open in the Commerce Center. Failing to meet the Rural Center’s requirements will result in the repayment of $10,000 per job (referred to as a clawback provision).

According to a contact entered between Briarwoods Forest Products Inc., Quality Homes of Currituck, LLC (the developers of Merchants Commerce Park) and Gates County, Business 1 has said it will provide 50 jobs while Business 2 said it will take care of the remaining 20 jobs.

In the contract, filed Feb. 28 in the Gates County Register of Deeds Office, “Business 1 has agreed to repay the clawbacks, which could include up to $500,000, at a rate of $10,000 for each of the fifty (50) jobs that are not accepted and/or approved by the North Carolina Rural Center.”

“However, Business 2 has and will not agree to repay the clawbacks which could include up to $200,000 at a rate of $10,000 for each of the twenty (20) jobs that are not accepted and/or approved by the North Carolina Rural center,” the contract reads.

As noted in the contract, “The County, as part of the North Carolina Rural Center grant, must make arrangements for the repayment of the clawback provisions if the number of jobs that have been promised, in the North Carolina Rural Center’s Exhibit D Performance Agreement, are not realized.”

In layman’s terms, that means Gates County is held responsible for up to $200,000, or a portion thereof, if Business 2 fails to live up to its promise of creating 20 jobs that are acceptable by NC Rural Center standards.

But there is a safety net for the county…one worth $100,000.

According to the contract, “the Developer simultaneously and contemporaneously agrees to relieve Gates County of up to $100,000 of the aforementioned $200,000 burden that is obligated to the North Carolina Rural Center for repayment of clawbacks if Business 2 does not fulfill the obligation outlined in the North Carolina Rural Center’s Exhibit D Performance Agreement as executed between Business 2 and Gates County.”

That deal does not come in the form of cash. Rather, the developer, as noted in the contract, agrees to transfer ownership of three tracts of land, valued at $33,333.33 each, within the Commerce Center to the county to fulfill its $100,000 burden should Business 2 fail to produce 20 jobs.

The fact that the county may be on the hook for up to $200,000 has caused some measure of unrest among county citizens that have contacted The Index in regards to the contract.

However, Chappell said that amount of money is only speculation at this point in time.

“We have an opportunity for the business to help pay for the sewer project through their job creation verses the county simply using tax dollars only to pay for the project,” Chappell said in an interview late last week. “The only definitive number at this point is $200,000…that’s only if Business 2 does not participate at all. Anything else is speculative at this point.”

While he confirmed that the $200,000, or any portion thereof depending on the number of jobs actually provided by Business 2, is taxpayer money and will be taken, if needed, from the General Fund, there was no need to conduct a public hearing on the matter because it’s not known at this time if any of that money will be needed to repay the clawback.

“The best case scenario is that Business 2 fulfills its promise of 20 jobs and all grants we have or will apply for come in,” Chappell said. “That means other than the $300,000 we’ve expended to date for the engineering services for this project, we won’t spend another dime and in the end we’ll have the biggest ingredient to development in Gates County – sewer. That’s the jewel. That’s been an impediment to our development. It opens up opportunities that the county has been excluded from in the past.”

Even if some of the grants fail to produce, Chappell said that scenario has already been addressed.

“While we have the ability to expand the project, we can also limit it if some of the grants don’t come in or are partially funded,” he noted. “The engineer designed it that way for this purpose.”

The icing on the cake, according to Chappell, is that the return is greater than the investment.

“The commissioners are making positive steps in an effort to grow the county’s tax base; they want to lessen the tax burden on our citizens through commercial development,” Chappell said. “Businesses coming into the county not only grow the tax base, they also generate sales tax.”

To prove his point on the tax base burden now shouldered by Gates County citizens, Chappell said that 94 percent of the county’s property taxes come from property owners/homeowners. He said a more reasonable ratio would be 75 percent from homeowners and 25 percent from commercial properties.

“Our property owners, homeowners, are footing the majority of the bill,” Chappell said. “We need shift some of that burden away from them and economic development opportunities that are currently taking shape at the Merchants Commerce Center will help with that.”

Chappell added that county officials are in the early stages of applying for $200,000 in Golden LEAF funding; $350,000 from Community Development Block Grant (CDBG) and $500,000 from the North Carolina Industrial Development Fund, part of the NC Department of Commerce, for the sewer project.

All totaled, the $2.65 million in funding requests will pay for upgrades and expansion to the old wastewater treatment plant at the now closed Gates County Correctional Facility. Chappell said the county is in the final stages of completing the paperwork that will lead them to own the facility by the end of this month.
The work to the existing wastewater treatment plant will upgrade it to handle a capacity of 50,000 gallons per day (it’s currently rated at 25,000 gpd). The project also includes all internal piping to Merchants Commerce Center as well as extending sewer lines in both directions from the Center (1,500 feet east towards Eason’s Crossroads and 3,000 feet west towards Central Middle School) for future development as well as the pumping stations needed to handle the wastewater flow.

Central Middle School and Gates County High School will continue to have their wastewater needs met by the sewer system.