Mayor and Town Council


Roger L. Stancil, Town Manager


Public Forum:  Revised Proposal for the Downtown Economic Development Initiative


November 20, 2006


The purpose of this report is to inform the public of revisions regarding the current proposed agreement between Ram Development Company and the Town of Chapel Hill to develop a Town-owned parking lot at the corner West Franklin, Church, and Rosemary Streets.  The Town Council is holding a public forum tonight to receive public comment on the proposal.


The Town Council has undertaken a planning process for the downtown sites based on the Town’s Comprehensive Plan and Downtown Small Area Plan.  The 2000 Comprehensive Plan’s goal for downtown is to “enhance the downtown’s role as the center of the community, with a pedestrian orientation and a human scale.”

The Council has made implementation of the Downtown Economic Development Initiative the number one priority in its annual goals.  In developing the Initiative, the Council has fully involved the public in an ongoing process as the project has evolved, including the process of concept plan review in the spring of 2006 (see Summary of Project History in Attachment 8).

On October 24, 2005, the Town Council authorized a Memorandum of Understanding with Ram Development Company, which outlined the basic terms and conditions of the relationship between the parties for the future development of two downtown sites owned by the Town of Chapel Hill.  The sites were Parking Lot 5 bounded by West Franklin, Church, and West Rosemary Streets, and the Wallace Deck site on East Rosemary Street, and adjacent corner lot at Rosemary and Henderson Streets.  The Council authorized the Town Manager with the participation of a Council Committee to negotiate a Development Agreement based on the concepts described in the Memorandum of Understanding for Council’s consideration by March 31, 2006 (please see Attachment 1).

Subsequently, the Town Council extended the negotiating period until December 5, 2006 to allow the developer to revise its proposal based on changing economic conditions caused by increases in construction prices and rising interest rates.

The Town Negotiating Team now brings forward a revised proposal for public comment and Town Council consideration.  The revised proposal focuses on the development of the Lot 5 site, and proposes to defer development of the Wallace Deck site until a later time. 



Below we compare the provisions in the October 24, 2005 Memorandum of Understanding with the new revised Ram Development Program (please see Attachment 2).  Ram Development Company has also provided a summary comparison of key points (please see Attachment 3).  A draft Summary of Terms Sheet proposed by Ram Development Company and being put forward for public comment by the Town Negotiating Committee is contained in Attachment 4.

Plans of the Lot 5 project proposal provided by Ram Development Company are shown in Attachment 5.

Background – The Original Lot 5 and Wallace Deck Projects.

On May 2, 2005 Ram Development Company (the “Developer”) submitted a proposal (the “Proposal”) in response to a request for proposal (the “RFP”) from the Town of Chapel Hill (the “Town”) to develop an urban mixed use development on two downtown development sites, Lot 5 and the Wallace Deck Site.  On October 24, 2005, the Town and the Developer entered into a Memorandum of Understanding outlining the proposed business terms of an arrangement between the Town and the Developer respecting the development of such sites. 

Under the original October 24, 2005 Proposal, the Developer would construct on Lot 5:

Under the original Proposal, additionally, the Developer would undertake to construct on the Wallace Deck site:

Terms of the original proposal in the Memorandum of Understanding included:

The Town would pay to the Developer an aggregate of $7,900,000 for the cost to design, permit and construct the Lot 5 Parking Garage and other Town improvements (such as the public space) which would be owned by the Town.  Additionally, the Town would be required to pay $500,000 to support parking for affordable housing units in the two projects.  The Town proposed to use the rent to be paid by the Developer with respect to the Lot 5 and Wallace Deck leases aggregating $7,900,000 in order to pay the Developer for the cost of the Lot 5 Parking Garage.

Economic Changes Since the Memorandum of Understanding

In the time that has elapsed since the Developer formulated the development plan for Lot 5 and the Wallace Deck sites and the Town negotiated the October 24, 2005 MOU with the Developer, construction costs have increased by as much as 30 percent and interest rates have increased significantly.  As a result of these material economic changes, the Town Negotiating Committee and the Developer have reevaluated the proposed Lot 5 and Wallace Deck projects.

The Town Negotiating Committee and the Developer have concluded that the redevelopment of the Wallace Deck is not feasible at this time.  However, the opportunity for redevelopment of the Wallace Deck property remains and the Wallace Deck will continue to be a part of the Town’s Downtown Economic Development Initiative.  Development of the Lot 5 site is proposed to go forward on the basis of the revised development plan described below.  We believe it would provide the Town with a quality urban mixed use project that will begin to set a standard and serve as a catalyst for economic development, revitalization and long term viability to the Town’s downtown area and move us forward in attaining the goals of the Comprehensive Plan.

Outline of the New Lot 5 Project

The Developer has, over the past several months, worked with the Town Negotiating Committee in an effort to formulate a development plan for Lot 5 that would meet the Town’s objectives and would be economically feasible from both the Developer’s and the Town’s standpoint.  After further negotiations with the Developer, a revised development proposal for Lot 5 is being brought forward which the Town Negotiating Committee believes will meet the Town Council’s objectives and is economically viable.

The revised proposal for the Lot 5 project will incorporate the main features of the original Lot 5 proposal contained in the October 24, 2005 Memorandum of Understanding with numerous enhancements and will consist of the following: 

To achieve efficiencies and cost-savings, the Developer proposes a single connected building with the retail space and “for-sale” condominiums to be built on top of the Lot 5 Parking Garage. At the public plaza ground level, the building would still be differentiated into three sections, the design of which is essentially the same as proposed earlier in the process.  The Developer proposes to delete the alley which formerly was adjacent to the interior property line, and proposes a courtyard off West Rosemary Street (please see Attachment 5 for the plans).

Terms of a new Development Agreement would include (please see also Summary of Draft Terms Sheet in Attachment 4):

Town Financial Commitment

Assuming that the Town finances the full purchase price of $7,245,000 using a tax-exempt borrowing at an interest of five percent (5%) per annum (a rate believed to be reasonable in light of present market conditions), the Town would incur an estimated annual debt service cost of $725,000 in the first year, decreasing annually by about $18,000.  The borrowing would require Local Government Commission approval.

We anticipate that cash flow from the project in Year 1 (project completion) would be negative but would be positive in the fourth year.  Please see Attachment 6 for our financial analysis.

Revenues to pay the debt service on the proposed borrowing would be property taxes, sales taxes, and parking revenues above those we are currently receiving.  We estimate the cash flow needs to be $341,000 in Year 1.  These funds are available in the Off-Street Parking Fund.


The proposal of Ram Development Company to develop Lot 5 in a mixed-use project of housing, retail, and parking would result in the following potential public benefits:

Peer Review Process

The Council has had the benefit of a peer review process to examine the proposed design of the Lot 5 project.  Marvin Malecha, Dean of the College of Design at North Carolina State University, met recently with Ram Development Company and reviewed the potential revisions to the project now being brought forward tonight.  His report is contained in Attachment 7.  He concluded that the revised schematic design ideas are worthy of further development and are ready to move toward the next phase of design development.



On December 4, 2006, the Town Council would consider the revised proposal and comments received tonight and consider whether to authorize the Manager and Attorney to prepare a formal Development Agreement between the Town and Developer.  If the Council on December 4, decides to move ahead, we recommend that the Council set a 60 day time period for completion and execution of a Development Agreement.


We recommend the Town Council receive public comment on the revised proposal and refer comments to the Manager and Town Negotiating Committee.



  1. Memorandum to Council of October 24, 2005, Memorandum of Understanding for Downtown Economic Development Initiative (begin new page 1).
  2. Revised Ram Development Program for Lot 5, November 15, 2006 (p. 2-1).
  3. Summary Comparison of Request for Proposal, October 24, 2005 Memorandum of Understanding, and Revised Ram Proposal, November 15, 2006 (p. 3-1).
  4. Summary of Draft Terms Sheet between Ram and the Town of Chapel Hill, November 14, 2006 (p. 4-1).
  5. Plans of Lot 5 Project Proposal, November 20, 2006 [1.1 MB PDF] (p. 5-1).
  6. Cash Flow Estimates Related to Lot 5 Development (p. 6-1).
  7. Dean Malecha Report, Peer Review Session Eight, November 6, 2006 (p. 7-1).
  8. Summary of Project History (p. 8-1).