In the last week I have received 8 letters or e-mails with hard copies or links to the following article. As a of this outpouring I have decided to share the piece with all readers of Chapel Hill Memories. As a former merchant in Chapel Hill I share, and have experienced, many of the same concerns brought up by Mr. Deconto.

This is from the News and Observer and was published on Sunday June27, 2010:

Businesses flee Chapel Hill

BY JESSE JAMES DECONTO

DURHAM CEO Ron Helms says his Rho, Inc., is "a company a Chapel Hillian can be proud of."

One problem: Rho is in Durham.

The biotech research company is among numerous businesses that packed up and left Chapel Hill when they found more space, cheaper rent or more parking elsewhere. The exodus costs the town and Orange County millions in lost tax revenue, forcing the county's homeowners to pay some of the highest taxes in the state.

Perhaps the biggest loss was Quintiles, now the world's largest pharmaceutical research contractor, with nearly $3 billion in annual revenues, 20,000 employees - 1,400 in the Triangle - and offices in 60 countries. Quintiles started in a trailer at UNC-Chapel Hill under Helms' biostatistics colleague Dennis Gillings. Now it, too, has its headquarters in Durham, in a 10-story, $70 million building that is a glassy landmark for drivers traveling east toward Raleigh.

"That nice big building on Page Road would look nice in Orange County," said Orange County Commissioner Barry Jacobs, "in the right place."
Chapel Hill serves as an economic engine and bedroom community for the rest of the Triangle, sending most of its commerce to Durham and some to Wake, Chatham and Alamance.

Two Targets, two OldNavys and two Barnes & Nobles lie within a short drive from Chapel Hill - each off U.S. 15/501 and at Southpoint in Durham. Dillard's is Chapel Hill's lone department store, while Kohl's, Macy's, Nordstrom, Sears, JCPenney and others cluster within a short drive. Orange County does have its own Walmart in Hillsborough, but Durham's are more convenient for much of Chapel Hill.

Residents often ask tongue-in-cheek where you buy a pair of socks in Orange County, which has the second-highest per-capita income but the 24th lowest sales tax revenues out of 100 counties in North Carolina.

It might be unfair to compare Orange and Durham's tax bases because their differences run back decades, to Chapel Hill's founding as a university town and Durham's as a tobacco town, said Kathy Neal, a spokeswoman for the N.C. Department of Commerce. Technology and medicine grew up in place of the leaf, but Durham remains a seat of industry. Each county's strengths benefit the other and the entire region.
"It's not an either-or sort of scenario," Neal said.

But playing host to UNC means Orange County's largest employer is tax-exempt. Low sales tax revenues force the county and its town governments to rely on property taxes to fund services, and with few high-priced commercial properties to tax, the burden falls to homeowners.

As a  result, 87 percent of Orange County property tax revenue comes from homes, pushing up an already high cost-of-living driven by high quality-of-life, anti-sprawl development rules and high-performing, well-funded public schools. Wake County, by comparison, collects 72 percent of its property taxes from residential property owners.

Chapel Hill has the highest per-capita property tax burden of any city in the state, while Orange ranks third among counties, according to analyses by the conservative John Locke Foundation.

Chapel Hill economic development director Dwight Bassett points out that the average residence pays about 77 cents in taxes for every $1 it demands in services, whereas businesses pay more than four times the cost of services they demand, making a balanced tax base even more important.

That has local officials trying to figure out how to keep businesses like Rho and Quintiles inside the county.

"Economic development is the one area where we can apply resources to help us get out of the situation we're in," said Orange County Commissioner Steve Yuhasz.

Every candidate for Orange County commissioner made economic development a key issue in this spring's Democratic primary, and commissioners declined to cut the county's economic development budget this month amid cuts to most other services.

This fall, they plan to pursue a new 1/4-cent sales tax by referendum, tentatively targeting the revenue for economic development, among other things. They also plan to talk about building new infrastructure such as roads, public water, sewer and flex-space to attract and incubate businesses that might otherwise locate outside Orange County.

Didn't want to move

That's good news for entrepreneurs like Helms, because lack of adequate facilities pushed Rho out of town. Helms said Rho is just the sort of business that politicians now say they want: high-paying and low-polluting with strong ties to UNC-Chapel Hill.
"I am ecstatic that the attitude has changed toward commercial ventures," he said.

Rho began in 1984 in Helms' basement just north of the Chatham County line. When Rho reached two dozen employees, it moved into the Chapel Hill Professional Village on Estes Drive, then into another office complex, both in Chapel Hill.

More than 325 employees now occupy a 94,400-square-foot building on Quadrangle Drive just across the Durham County line, where Rho moved in 2003.

"We found good space at a good price," Helms said.

The company paid $16,000 in Durham County taxes for its business equipment last year, and its landlord paid more than $200,000 in property taxes for its building.

"We didn't really want to move to the [Research Triangle Park] because of our love affair with Chapel Hill and the university," Helms said. "We just couldn't find anything in Orange County that was big enough for where we thought we'd grow into."

Space available

That's the same reason most businesses say they left, but it's a perception that outlives reality. Now the supply of office space so far outpaces demand that Bassett said it could take five years to fill the space already planned for construction.

"We have space available," Bassett said. "It's the first time that we've ever had this much available office space in our history."

On the other hand, Bassett said, Chapel Hill has enough demand to justify as much as 2 million additional square feet of retail space. Even a quarter or half of that would keep sales tax dollars from flowing to Southpoint and New Hope Commons in Durham, Bassett said.

Also, some companies need flex-space for lab work and light manufacturing, rather than office space. But getting that built, and filling office space that's already available, will require changing perceptions.

"Chapel Hill has an image of being business-unfriendly," Bassett said. "We accept that's our baseline. We have to begin telling success stories of how we're working to change that."

But the image persists. Bassett's economic development department at Town Hall, created in 2007, recently interviewed 16 small-business owners and found they had "few, if any, positive things to say about the town government's role in private efforts to open and operate a business in Chapel Hill." They said town permits were hard to secure, while Durham provides more straightforward development review, cheaper rents, more parking, easier highway access and greater access to low-interest financing.

Before it moved to Durham's Quadrangle Park in 2003, Rho's leaders had considered leasing space in Meadowmont but decided it was too expensive and didn't provide enough parking because the Town Council had restricted the number of spaces. That's an example of how high development standards have discouraged commercial growth in Orange County.

'Not very practical'

Helms said he understood the town's efforts to force commuters into public transit, but with employees traveling from all over the Triangle, adequate parking is critical to Rho's success.

"That is apparently anathema to at least Chapel Hill's government," Helms said. "Being a conservationist, I am on their side in terms of wanting to get people to take the bus ... [but] we sometimes have ideals, and we're not very practical."

jesse.deconto@newsobserver.com or 919-932-8760

Tweet