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Rolling Hills: Third time's the charm for this redevelopment project

The Durham community of Rolling Hills–or what’s left of it–is well past its heyday. The center of two failed redevelopment efforts in the 1980s and 1990s, Rolling Hills is something of a Bermuda Triangle for real estate development dollars.

The Rolling Hills neighborhood, literally on the other side of the train tracks adjacent to where many Duke students enjoy Main Street’s diverse stores and restaurants, is replete with foreclosed properties, cracked windows and overgrown lawns. Rolling Hills is nearly entirely vacant, and the city owns almost all of the property.

But a mix of city officials, civically-minded residents and real estate developers hope that third time’s a charm for the 20 acres of prime real estate on a hill overlooking the Durham Bulls Athletic Park.

With outsized hopes that Rolling Hills can someday become a vibrant neighborhood with retail shops, family rental units and public parks, the city has drafted plans for a wide-ranging, $50 million, multi-year revitalization plan for Rolling Hills and the adjacent neighborhood of Southside to start this August pending the approval of financing measures.

To redevelop Rolling Hills, the city has enlisted the help of national developer McCormack Baron Salazar, a reputable firm that specializes in urban turnaround projects. Although Rolling Hills is arguably the community more in need of development, the adjacent neighborhood of Southside was included in the redevelopment project after MBS requested a larger development area, said veteran reporter Jim Wise, who covers Durham for The (Raleigh) News and Observer. Including Southside–which is larger than Rolling Hills–in the project will help the area attain the economies of scale necessary for organic growth beyond the initial development effort.

The current plans for redevelopment call for St. Louis-based MBS to build rental apartments and mixed live-work units in Rolling Hills along Lakewood Avenue between Roxboro and Fayetteville Avenues. Additionally, the Center for Community Self-Help is expected to build or renovate close to 50 owner-occupied houses in Southside. Financial projections complied by blogger Kevin Davis indicate that the total cost of the first two phases of the project is expected to exceed $50 million, of which about 45 percent will be paid for by the city, another approximately 50 percent by a mix of tax credits and government grants and the remaining 5 percent by a mortgage.

Notably missing from this cost projection, however, is any cost borne by MBS. Initially expected to contribute $350,000, MBS failed to raise any funds for the project. The developer blamed the recession for its inability to fundraise, and in its stead, the city has pledged additional funds to cover development costs in addition to an $800,000 development fee for MBS. The revised financing agreement—which simultaneously increases the cost and risk for Durham while lowering them for MBS—has some stakeholders voicing opposition.

“One of the key factors is risk: is this project too risky for Durham to be engaged in, and what kind of impact is it going to have on our nonprofits in the future?” said City Council member Eugene Brown. “It’s not a good deal for the city—the developer is getting everything and is putting in no equity.”

And the financing proposal isn’t all that detractors are criticizing. The plan suggests that the endeavor is a high-risk, high-reward gamble, especially as previous efforts to revitalize the area have failed. In the 1980s, a consortium of local business leaders tried to develop the area before the city passed the buck to businessman Larry Hester—who currently owns the nearby Phoenix Crossing shopping center–in the 1990s. Neither attempt succeeded in bringing investment back into the neighborhood as not enough houses were sold. The city foreclosed on the properties owned by Hester in 2003.

One thing that separates this effort from previous attempts, however, is the presence of MBS—a developer that boasts urban success stories as far-flung as Los Angeles and Jersey City. A successful redevelopment of Rolling Hills and Southside would mean an influx of residents, more tax dollars and more jobs for neighborhoods that have seen some of its wealthier inhabitants move south over the past few decades.

But a failed effort would mean millions in lost tax dollars and smaller budgets for local nonprofits that have had some of their city subsidies redirected toward redevelopment.

“Many times, people in the community are distrustful of government. Oftentimes a nonprofit can relate better,” said Mike Barros, head of Durham’s Department of Community Development, noting that previous failed attempts to redevelop the Rolling Hills and Southside neighborhoods have left residents skeptical of the city’s new plan.

The opposition to the project on a cost basis has increased since the start of 2010. Earlier this year, city proposals for federal grants were rejected. The failure to acquire federal funds, coupled with a lack of equity invested by MBS, has pushed the city to increase its financial stake in the project. City Council members Diane Catotti and Brown have voiced opposition to the financing plans and general strategy for redevelopment. As Durham attempts to scrounge its way out of a $15-million budget deficit, some have also questioned the wisdom of such a large-scale project with the city in uncertain financial straits.

Behind the technical debate about tax credits, zoning restrictions and property blueprints is the looming specter of eminent domain. Thus far, the city has purchased the properties in Rolling Hills from willing sellers. The reluctance of a few homeowners to leave their property, however, has residents asking the city if it will use eminent domain, the legal right the city has to force a resident off his or her property, to create a development zone entirely owned—rather than mostly owned—by the city.

Thus far, Mayor Bill Bell has been adamant in stating that the city will not use eminent domain. “We [won’t] make anyone move—if you’re happy where you are, you stay there,” Bell was quoted as saying by The Chronicle at a public hearing in April.

But some residents—including Hester—are skeptical of the city’s claim. They point to the city’s use of eminent domain in one of its more recent redevelopment projects: the renovation of the crime-addled neighborhood around Barnes Avenue in East Durham into Eastway Village. If worse comes to worst, then the city may have to build around the reluctant homeowners in the community.

Opposition to the project also comes from those who think the money is being misdirected. Rather than spend money on renovations, some residents think human capital development—education, job training, etc.—should be the primary focus.

“The south side [of Durham] has a remarkably robust underground economy,” Wise said.

In August, the final verdict on MBS’s application for tax credits is due. Without the credits, development will likely be delayed for another year or more. Otherwise, construction can begin—the culmination of several years of planning for the largest-ever effort at redeveloping Rolling Hills and Southside. For city officials and Durham residents, the next year may indicate whether Rolling Hills can be transformed into a vibrant community adjacent to downtown or if this current project will be just another disappointment in a series of development failures.

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