Pappas Properties wants public money.

The Arts & Science Council wants public money.

The Charlotte Knights want public money.

Grubb Properties and Spectrum Properties already have promises for public money.

This unusual surge of requests has landed squarely in the laps of city and county leaders, who have been developing new ways to analyze and finance public-private partnerships.

The governments' willingness to listen demonstrates their belief that the center city is ripe for a burst of retail development -- but only with a kickstart.

City and county officials tackle these projects one at a time. Each, on its own, looks like a good deal: a new amenity, a more vibrant city and a future boost to the property tax base.

But put them all together, and there's a lot of cash on the table -- more than $160 million in public money for private and nonprofit projects over the next 20 years. Monday, the city is expected to start an eight-month update of its economic development strategy, and the process is bound to feature questions about government support for retailers.

Is this sound public policy? Will it create a stronger city in the long run? Or does it feed public money to businesses that would flourish anyway?

Local governments already struggle to keep up with population growth. Charlotte city officials acknowledge that they aren't spending enough on road maintenance. Mecklenburg County commissioners just raised property taxes by 2.7 percent to avoid spending cuts.

And yet, while they struggled with tight budgets last spring, the city and county approved about $13.5 million in property tax rebates over 20 years to assist Grubb's redevelopment of Elizabeth Avenue and an additional $6.4 million in sales tax rebates and other help over 10 years for Spectrum's renovation of the old convention center.

City Council members and county commissioners say the projects will fill center-city dead spots and help the tax base grow.

"If they come with a good proposal to us and again, it fits those criteria of creating jobs, creating more tax revenue and not asking for up-front money from us ... I think it's a good deal," says county commissioner Dan Ramirez, a Republican.

Several major projects still await a final decision: the ASC's $102 million pitch, the Knights baseball stadium proposal, Pappas' planned revitalization of Midtown Square and Levine Properties' desire for a municipal parking garage in First Ward. Many elected city officials balked at the idea of public money for a Saks Fifth Avenue store in south Charlotte, though others left the door open.

But some officials worry about spending public money on projects that may not need help.

"I start out skeptical," says City Council member Susan Burgess, a Democrat. "We have been one of the fastest-growing cities in America without incentives, and we've had really no trouble putting what we want where we want it."

Supporters of arts, sports and retail projects make very different arguments for public money.Arts funding is a traditional type of government support for the private sector. Museums and theaters are nonprofit organizations, and governments often weigh them against other priorities, such as roads and fire stations.

Sports complexes, such as the new uptown arena and Bank of America Stadium on city land, fill a special niche. They require team owners to invest millions in the franchises, and they tend to draw vocal, organized opposition.

But the newer proposals, which ask the city to join with a private developer for retail-focused projects, are more subtle and more complicated.

Tax money has helped uptown developers before. Some were successful (Marriott hotel at Trade and Tryon streets), some were busts (the failed CityFair shopping center) and some just opened (the Westin hotel).

When elected officials consider a request, the debate often circles back to a core question: What would happen without the government's help?

Retailers looking near uptown face two major hurdles: high land costs that make low-rise buildings less profitable and the expense of providing the cheap, plentiful parking that shoppers expect.

To many local elected officials, those are reasons for subsidies. Otherwise, they fear, Charlotte won't get the dense, transit-friendly development they envision for the city's future.

For places such as Midtown Square, at Kings Drive and Baxter Street near uptown, the market clearly won't spark redevelopment, says Mayor Pat McCrory, a Republican. That's why the city and county are considering helping Pappas with its proposed $116 million remake of the dormant 45-year-old mall.

"We could either wait another 20 years," McCrory says, "or maybe we could speed up the market forces."

But, critics warn, speeding up the market is risky because the governments could stunt future growth in tax revenue.

"I just feel that we've opened Pandora's box, and that if we don't shut it soon, we're going to have a big fiscal problem on our hands," says Republican county commissioner Bill James, "because we are continuing to give away future property and sales tax monies at what appears to be an exponential rate."

So how can you tell a good proposal from a bad proposal?

A few years ago, the city had no way to know.

Enter "The Sustainability Index," a rating system the city developed over the past year as it considered the Elizabeth Avenue proposal for housing, offices, a movie theater and stores such as Whole Foods Market. The index weighs everything from a project's financing structure to its distance from future transit stations.

The city prefers projects that help high-crime areas, minimize public support and limit the city's risk. It tries to avoid proposals that would create few jobs, buck land-use policies and do little to spark future growth.

The city's approach is not perfect, McCrory says, but it's better than the old way.

The index and the city's approach miss several important pieces, local and national critics say.

Unlike Charlotte's other programs for assisting businesses (such as incentives designed to lure corporate jobs), the city's agreements with Spectrum and Grubb do not require retailers to pay more than the minimum wage.

"Retail is not economic development," says Greg LeRoy, executive director of Good Jobs First, a nonpartisan research group based in Washington that opposes government subsidies for retail. "Retail is what happens if people have disposable income."

Giving government support to retailers -- such as the Target and Home Depot EXPO Design Center planned for Midtown -- just gives those companies easy access to residents' money, LeRoy says.

Tom Flynn, the city's interim economic development director, says the jobs are just one benefit of helping retailers. More important, he argues, is increasing the property tax base.

Elected officials acknowledge that many of the jobs they're creating don't pay well.

"It's frustrating, but by gum, if you don't have a job, any job is good," says City Council member Nancy Carter, a Democrat.

Right now, many people who live near uptown shop in the suburbs. Officials hope that luring retailers and amenities can redirect their spending and invigorate the center city.

But is that really new growth, or are the city and county just changing shopping patterns to fit their plans for transit lines, greenways and uptown development? That's the question the city's analysis tries to answer.

The city and county build safeguards into each agreement. They negotiated for 18 months on the Elizabeth Avenue development.

The final arrangement became the measuring stick for other proposals, and it's a high bar. It protects the city-county investment by recruiting Presbyterian Hospital's parent company as a partial guarantor and requiring Grubb to spend millions before getting any public money.

As each proposal comes forward, developers and city officials often describe it as a win for both sides.How is that possible? How can governments essentially give away tax money and describe it as a good thing?

Here's how:

The city structures agreements with developers so the amount the public spends on a parking deck is always less than the new taxes generated by the project in any given year. As a result, supporters describe the excess money as a net gain for the government. The city payment, such as a contribution to a parking deck, is also confined to a set time period. When the deal expires, the government gets its full share of new taxes.

In most states, this is called tax-increment financing, or TIF, and the projected new taxes support government bonds. Cities across the country, including New Orleans and Washington, use this model to lure hotels and stores.

That method is illegal here because N.C. law requires voter approval of bonds backed by property taxes. A November referendum could change that, but two previous efforts have failed.

In the past year, even within the current law, Charlotte figured out a way to do a "synthetic TIF." The main difference is that the city does no borrowing. Instead, developers borrow the money and the city makes annual payments.

The approach has become so popular that Wachovia suggested it as a way to combine a 1,200-seat theater and a new office tower on South Tryon Street. A task force appointed by McCrory is looking at extending this model to other projects on the ASC's wish list.

So if the project gets built and the government gets money it wouldn't receive otherwise, everyone should be happy, right?

Well, maybe not.

The city collects property taxes from everyone. That's how you get citywide services, such as police and fire protection, trash pickup and housing inspectors.

By signing an agreement with the city, the developer gets to designate where the property taxes go, at least for the life of the contract. The developer still pays taxes, but the extra money goes for a parking deck on his land, not into the larger pot.

Charlotte tries to keep at least 10 percent of the increased property taxes created by the new project, in part to pay for those services. But there is no clear way to measure the actual cost.

Boosters say uptown is special for two reasons: It's the center of the region, and it's home to the highest land prices.

Stores that serve office workers -- restaurants, coffee shops and convenience stores -- survive in the center city. Other retail businesses struggle.

"Other than retail, there's just nothing that can't carry itself right now," says Jim Dulin, CEO of Spectrum Properties. "The city's done a good job."

Wachovia economist Mark Vitner says urban retail projects can work, but only with government assistance or unique stores.

"If you simply try to re-create a suburban shopping experience in a downtown area, that's doomed to fail," he says.

The uptown argument doesn't necessarily work on the east or west sides, where land is cheaper and parking decks are not required. The city has several programs aimed at revitalizing those areas and assisting small businesses.

Critics point to all the money Charlotte has spent uptown for purely public projects, such as the trolley and Convention Center.

"We're just chasing our tail here," said John Hood, president of the conservative John Locke Foundation in Raleigh. "First, we use city tax money to build uptown entities. We build convention centers and arts venues, and then we're going to use city taxpayers' money to try to generate business for these new entities."

Tom Flynn, Charlotte's interim economic development director, guides the city's new approach to public-private partnerships.

These agreements depend on his staff's ability to negotiate, analyze developers' projections and apply the rating system. To analyze Pappas Properties' complex Midtown proposal, the city is hiring consultants.

At first, Pappas presented public officials with a worksheet showing all of the sales taxes at the proposed Target store as a benefit for the city and county. But the company changed that, acknowledging that many future customers already shop in Mecklenburg.

As Charlotte helps bring stores and restaurants to Grubb's six-block Elizabeth Avenue project, for example, does that rob other potential businesses of the chance of tapping into that market?

The natural growth of the tax base -- new buildings and houses every year -- pays for employees' raises and expanded programs. Elected officials such as Bill James worry that unnecessary subsidies could limit a source of money that the county depends upon to avoid tax increases.

Flynn says the opposite is true. Revitalizing an area can open opportunities nearby for new businesses that want to capture some of the increased traffic. That would create an even bigger property tax base, he argues.

"I'm feeling the wave of more caution," says City Council member Nancy Carter. "We need to be wary. We need to be intentional in our choices. We need to make sure that we're not simply endorsing projects that would exist no matter what."

Private developers and nonprofits seek millions in public money for projects around uptown Charlotte. A look at some of them, 12A.

2004

City improves how it assesses requests for development aid

You can't help but think some developers may be treating the City Council the way teenagers sometimes treat their parents' wallets at prom season: as a font of ready money.

Two local developers recently won city help for in-town projects: Spectrum Properties for a redevelopment of the old convention center and a Grubb Properties' project on Elizabeth Avenue.

More such requests are in the pipeline. Among them: Pappas Properties wants city and county help for a mixed-use project at Midtown Square; Levine Properties is hoping for a municipal parking garage in First Ward for its proposed development; the Charlotte Knights want city and county help for a baseball stadium uptown.

The use of public-private development partnerships here is decades old. Examples include the Westin hotel, the ill-fated CityFair and Independence Center.

But why the recent boomlet of requests? Is all this smart policy? Should the city help any private developers? If so, which ones, and how much? And how should it decide?

The answer to "why now" is that in-town sites are hotter spots now than they've been in decades. So more projects are being proposed in general. Also, the city's willingness to negotiate and sometimes help lures more requests. Finally, the city's push for better urban design means fewer surface parking lots in close-in projects. But parking decks are much more expensive to build. Without help developers sometimes really can't make a project work financially.

Whether the city should help private developers at all is another question entirely. We think it's appropriate -- in some cases, with prudent safeguards. So far, a majority of the City Council has agreed.

The hard part, then, is figuring out when city aid is a good idea. The city recently devised a rating system for such requests, its "Sustainability Index." The system looks at three dozen factors such as whether the proposal supports the city's long-term goals, whether the developer has successfully built similar projects, how much risk the city would take on, and so forth.

The index is a key improvement over the city's previous approach. It's not perfect, but it's an excellent start.

Another difficulty the city may well face, which the index doesn't address, is how not to create a climate in which every developer of every project within 5 miles of uptown wants city money. Similarly, the city must be able to discern which projects are truly needed as catalysts, and which would likely happen anyway without city money.

Potential pitfalls aren't new, of course. CityFair was a city-aided catalyst project so poorly designed it never catalyzed much of anything and finally was demolished to build the Hearst Tower.