Revitalizing North Carolina towns

Standing in downtown Morganton, North Carolina, on a chilly autumn day in 2014, Tyler Mulligan looked up along the hills and saw a big problem. The kind that he and the team at Carolina’s Development Finance Initiative know how to solve.

Looming over the town was the sprawling brick building that housed Broughton Hospital — a state-run psychiatric facility open since 1883. The historic building was in good condition and soon to be left largely vacant when hospital operations moved to a new facility. The state planned to surplus it and a collection of outbuildings, barns and other nearby structures, all in varying states of disrepair.

DFI assessed the Broughton Hospital buildings, many in varying states of disrepair, for new uses in a redevelopment plan. (Courtesy DFI)

“Before it rots behind a fence, we needed to do some master planning and give some forethought about what could happen with it,” said Sally Sandy, Morganton’s city manager. “The hospital’s been a focal point in the center of this community for more than 100 years.”

The property’s continued vacancy and slow deterioration would mean lost opportunities for Morganton and its 17,000 residents in Burke County, just off Interstate 40 in the foothills of the Blue Ridge Mountains.

Sally Sandy, Morganton city manager

With the new hospital under construction, Sandy and other local stakeholders asked Commerce Secretary Sharon Decker for help. Decker visited the site and soon brought in Pat Mitchell, assistant secretary for rural development. Mitchell then connected Sandy with Mulligan, and soon afterward, the Department of Commerce engaged the UNC School of Government’s Development Finance Initiative to look at the property.

“Morganton had done a marvelous job restoring and adaptively reusing its downtown buildings,” said Mulligan. “That gave me a sense of optimism.”

Dozens of North Carolina towns

With its real estate development expertise, DFI’s 11-member team has helped dozens of North Carolina towns and cities create jobs, increase their commercial tax base, preserve historic properties and revitalize areas with new housing and businesses. Successful projects that have broken ground include:

• Hendersonville’s Grey Hosiery Mill, redeveloped into a collection of 35 market and low-income rental units, which was recognized in 2020 as the state’s Best Adaptive Reuse Project by North Carolina Main Street;
• downtown Kannapolis, 50 acres and eight blocks of buildings purchased by the town in its entirety from Cannon Mills’ successor, with a goal of transforming it into a vibrant business, recreational and residential area; and
• hundreds of affordable housing units developed in downtown Durham alongside parking, office space and market-rate residential housing.

DFI’s process is a proven one.

Tyler Mulligan

“We perform a predevelopment analysis that’s rooted in the literature,” said Mulligan, DFI director and Robert W. Bradshaw Jr. Distinguished Term Professor of Public Law and Government. “We collect and analyze that data in a way that helps the public sector and private sector understand what is possible under current market conditions.”

“We have specialists in community engagement, in market analysis and site analysis,” said Eric Thomas, DFI senior project manager. “DFI is strong in financial modeling and identifying tools for creating public-private partnerships while putting into perspective any tradeoffs for local governments and what private developers could expect.”

Eric Thomas

Thomas said that listening to local stakeholders helps DFI understand what people envision for properties, uncover the community’s interests and discover any conflicting goals. “Then we layer in the private development perspective. What would make private development occur here now and what needs to be done to unlock that potential?”

In the case of Broughton Hospital, the structures were in an 800-acre district of state and local institutional uses, including the North Carolina School for the Deaf, Western Piedmont Community College and even a jail. It wasn’t enough to look solely at the hospital; DFI had to reimagine the entire 800 acres.

The goal is to attract $192 million in private investment. When equipping towns to entice private investors, DFI combines all analyses, relevant data and architectural renderings into a “deal book” that shows the site’s potential and its financial feasibility.

“We essentially prove the concept for private investment. Private investors don’t have to guess at whether a project is financially feasible or invest in that analysis up front. It makes projects happen that otherwise would not happen,” Mulligan said.

A delapidated interior room in Broughton Hospital. (Courtesy DFI)

In revitalizing North Carolina’s towns, DFI doesn’t back down from challenges. Of the nearly 200 projects since DFI’s inception in 2011, more than two-thirds were located in census tracts classified federally as economically distressed or severely distressed.

For what would come to be called the Broughton District, DFI identified six development sites for institutional, hospitality, retail and residential uses intertwined with parks, trails and open spaces. DFI’s initial assessment also identified critical infrastructure such as roads, sewer and stormwater that needed upgrading to ready the sites for private development. The more recent master plan details how each building on the sites could be developed.

The Broughton District site plan. (Courtesy DFI)

Mulligan said that DFI looks to phase public investment so that it doesn’t get too far ahead of private investment. “It’s prudent financial management to invest in public infrastructure and private investment at the same time, to ensure that private facilities are constructed to provide tax revenue to help pay for the public facilities,” he said.

The project got early wins with the creation of a new western campus of the North Carolina School of Science and Mathematics, and development is underway on Murphy’s Farm, a mixed-use village with barns transformed into retail space and 240 new residences.

Unlocking potential

DFI and the School of Government regularly field questions about public-private partnerships from city and county managers, local economic development managers and state and municipal officials from across the state.

An architectural rendering showing the front of a redeveloped Broughton Hospital with people walking in front. (Courtesy DFI)

“Public-private partnerships are complicated,” Mulligan said. “They involve creative financing mechanisms like tax credits, brownfield agreements, debt products and equity. Sometimes the public sector needs our expertise in development and finance on their side of the table. We are always on the public’s side.”

DFI acts as a translator, explaining to public and private participants what the other side can do so they can work together toward a common goal.

Projects can be complex — whether it’s a distressed downtown or an unused corner of Main Street — and the Broughton District is one of the most complex so far, engaging all of DFI’s capabilities. The number of stakeholders alone is daunting: five state government departments, Morganton, Burke County and local development organizations. But Mulligan said that the potential for communities like Morganton is worth the complexity.

“If any community had the vision and capacity to tackle the hospital campus, it was Morganton,” Mulligan said.