Welcome to Zombieland: The aftermath of Chatham’s pro-growth era

This is a road trip that takes many sad turns.

Start on Jack Bennett Road in rural northern Chatham County. The paved ribbon passes cozy homes settled on rolling farms, battered trailers shrouded by bare trees and abandoned buildings crumbling into the underbrush.

And then you reach Westfall, originally known as Booth Mountain. Westfall’s 310 acres were clear-cut to make room for 182 homes whose $500,000 sales price would have included breathtaking views of a wooded valley. Yet today, the only completed structure is a wastewater treatment plant tucked into the hillside, its clay basin guarded by knee-high brambles and chain-link fences.

But wait, there’s more: Seven miles southwest of Westfall on Bynum Ridge Road, another ghostly subdivision takes shape. Near a herd of cattle grazing on a rock-strewn hillside appears The Retreat on Haw River, its gated perimeter emblazoned with a No Trespassing sign. The Retreat’s developers, Crescent Resources, now bankrupt, had planned to replace the 650-acre forest with 185 homes worth $800,000 each. However, today there are no families coming home from work, no kids playing in the yard, no couples walking their dogs at dusk, only silence occasionally punctured by cawing crows, rustling leaves and the thundering hooves of spooked deer.

Head west near the Haw River. Between Old Graham Road and N.C. 87, The Parks at Meadowview‘s imposing thick stone gates open to what would have been an “executive” community of 715 homescomplete with a butterfly parkon 793 acres. Now only 12 empty spec houses are huddled near the entrance.

This is the legacy of former Chatham County Commissioner Bunkey Morgan, who, abetted by his growth-hungry allies, ramrodded close to 50 subdivisions through the county’s planning approval process from 2002 to 2006 (2004 and prior, 2005, 2006). Morgan and company promised the developments would translate into millions of dollars in revenue for the county, sparking new school construction and other public projects.

But the pro-growth cabal didn’t plan on the housing bust. Now nine large luxury subdivisionswhich would have included a total of 1,921 homes on 3,238 acresare foreclosed on, stalled or bankrupt (download PDF map and table). And all were unanimously approved during the Morgan era by the Chatham County Commissioners and the planning board.

Five years later, the land remains untouched or worse: Forests were cleared to accommodate homes that never materialized. In some developments, only a dozen empty houses are parked on a rural outpost where the sidewalks abruptly end. At other subdivisions perched near Jordan Lake or the Haw River, runoff from the construction site has polluted the water.

As for the tax base, the county has fallen far short of the nearly $1 billion it had planned to add as a result of these vast developments. And although Morgan has been out of office for four yearshe lost his re-election bid in 2006Chatham County is stuck with these vacant or half-developed acres.

“We do not have a written plan to remedy the situation,” said George Lucier, chairman of the Chatham County Board of Commissioners.

Even if the commissioners had a plan, it would be hard enact. Last year, the homebuilders lobby succeeded in persuading the state legislature to pass House Bill 1490, which prohibits counties, including Chatham, from imposing new, more stringent development standards on these old, bankrupt subdivisions for at least three years.

Morgan is unrepentant about the ramifications of his pro-growth policies, telling the Indy last week: “They say one man’s misfortune is another man’s gain.”

Perhaps the most apt symbol of the misfortune in northern Chatham County is Belmeade Farms. A project formerly owned by Charlotte-based luxury real estate company Crescent Resources and developer Patrick O’Neal, Belmeade was planned as a 565-acre equestrian community embellished with million-dollar homes.

But Crescent went bankrupt; not a single house was constructed. But the property has found new life for the dead. Last February, the Chatham County Commissioners approved a plan for Belmeade Farms to become Belmeade Cemetery and Memorial Gardens.

In addition to the Belmeade graveyard, Crescent Resources is responsible for two more bankrupt subdivisions: The Retreat on Haw River and The Parks at Meadowview. They were originally known as Williams Pond and the Sanctuary at Haw River and Meadowview, respectively. (Like a person seeking a new identity, the subdivisions have changed their names.)

These two high-end projects initially were developed by Wake County-based Robert Swain, Thomas Fonville, Frank Robusk and John Morisey, key members of the real estate industry. As the Indy reported in a series of stories from 2002-2006 (see links at right), development interests contributed more than $13,000 to Morgan and other pro-growth commissioner candidates. Fonville and Morisey and their wives pitched in more than $1,200 to Morgan and fellow commissioner candidate Carl Outz.

(These figures come from the Indy‘s previous coverage; the Chatham County Board of Elections has since destroyed most campaign finance reports dated prior to 2008; it didn’t keep electronic copies. State archives policy permits counties to toss campaign finance records two years after the last election cycle. Visit the State Board of Elections Web site to see who receives money from the N.C. Home Builders Association political action committee.)

But when Crescent Resources, a joint venture between Duke Energy Carolinas and Morgan Stanley, began moving aggressively into the Triangle, Swain and company signed over their speculations to the deep-pocketed realty group.

Swain and company’s fortuitous move proved to be Crescent’s undoing. Crescent overestimated the demand for gated luxury communities. Last June, it filed for Chapter 11 bankruptcy, owing more than $1 billion to contractors and banks, according to federal court documents.

Crescent did not return repeated calls from the Indy seeking comment.

Builders in those subdivisions also are hurting. They constructed their homes to Crescent’s exacting specifications, but in this housing market they can’t recoup their investment, even if the houses do sell.

“We spent $600,000 on these homes’ construction line. We might be able to sell the house for $250,000, leaving us liable to the bank for $350,000,” says one local builder, who asked not to be named for fear of retribution from Crescent.

“Pleading with Crescent is useless; they just shrug their shoulders and throw up their hands. They’ve disconnected the Parks number,” said the builder, who owes his bank $1 million in construction loans but cannot sell his homes. “We’ve tried the legal course of action, but Crescent is so bigit has bigger and better resources than us builders, and they have protected themselves so we can’t get their help. Our best course of action right now is prayer.”

The 650 acres at The Retreat on Haw River have been partially developed, but construction has stalled. Meanwhile, The Parks at Meadowview promised builders and buyers a wealthy paradise with a $10 million amenities center that was to include indoor/ outdoor pools, open space and a butterfly park. Instead, there is only a sign at the entrance and an untouched children’s playground being overtaken by the woods.

The lack of action at The Parks is delaying seven more developments along Old Graham Road: Crescent Hill and Shively Tracts I, II and III, developed by Community Properties of N.C., based in Raleigh; and The Bluffs, Creekside, The Woodlands, The Glen and The Estates at Laurel Ridge, developed by Chatham Partners and Polk-Sullivan, whose managers are Fonville, Morisey, Robusk and Swainthe same people who unloaded their properties to Crescent Resources.

These developments are stalled due to a contractual dispute between The Parks and Aqua North Carolina, a wastewater service company based in Cary. Crescent Resources, developers of The Parks, anticipated it would need service for 715 homes, but they were never built. Now Aqua North Carolina is refusing to extend service to the remaining seven subdivisions until it gets its “promised” business from The Parkswhich is unlikely.

Aqua North Carolina and Nicolas Robinson, attorney for The Parks, did not return repeated calls to the Indy. But in a July 2009 memo from Robinson, who also handled cases for Westfall, The Retreat on Haw River and similar financially shaky developments, e-mailed the Chatham County Planning Department on behalf of Laurel Ridge, pleading for an extension to its development schedule. In that e-mail, he confirmed the conflict between Aqua North Carolina and The Parks.

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Chatham County’s commission conflict began in 2002, when conservative real estate-backed group Chatham County NOW plotted to unseat Commissioner Gary Phillips, a “slow-growth” proponent, in favor of Bunkey Morgan, a car wash owner and Apex resident who at the time claimed to live in Silk Hope.

Coached by the Triangle Community Coalition in Raleigh, which represents homebuilders and real-estate companies like Fonville Morisey Builder Marketing Group, Chatham County NOW worked to achieve its growth agenda. Over the heated objections of slow-growth citizen groups, such as Chatham Citizens for Effective Communities, Morgan and his real estate buddies preached a message of economic wealth for Chatham County that would surely come from increased property and sales taxes, and additional construction money for the schools derived from impact fees.

The sermon worked. Morgan beat Phillips, and as feared, he steered the board, which had a pro-growth majority, toward luring developers from as far away as California to buy Chatham County land, present subdivision plans for approval and begin building.

By 2006, Chatham County was called one of the fastest-growing areas in the Triangle, attracting new residents with its low cost of living and small-town feel. Under Morgan’s leadership, the pro-growth county commission approved as many as 15,000 new homes that were to be built by the end of 2010. Among those projects was the controversial 2,389-home Briar Chapel subdivision, developed by California-based Newland Communities. Commissioners also approved the 577-acre Homestead, now known as The Legacy at Jordan Lake, where homes would run from $775,000 to $2 million.

Few of the pro-growth promises have been fulfilled. In addition to the bankrupt and stalled developments, Briar Chapel has fallen short of expectations, its builders switching to townhomes in order to fill out Phase Four of the construction. The 475-lot Legacy at Jordan Lake, owned by Jordan Lake, LLC and Holland and Rebecca Gaines of Virginiaalso Morgan contributorshas only seven homes constructed. They are for sale.

“A lot of people jumped on Chatham County like it was the horn of plenty,” says David Klarmann, a local Realtor and former Chatham County Planning Board member. “Many developers assumed this area was easy to develop, but we don’t have the infrastructure, like water and sewer, to make this a simple process.”

High infrastructure costs, coupled with the housing bust, have saddled Chatham County with thousands of fallow acres. Yet the county can’t buy the bankrupt developments. “That’s not something we’ve ever done,” said Chatham County Commissioner Sally Kost, who worked for more than 20 years as a government budget professional. “Chatham County is not in this subdivision business. Eventually, someone will buy them.

“I know there are many Chatham citizens that wish we would buy Westfall,” added Kost, noting the development’s proximity to the new high school and the environmental significance of nearby Herndon Creek. “But our real dilemma is that of ensuring the county’s infrastructure keeps up with its growth.

We’ve got 10,000-plus houses approved but not built. They will be built, eventually, and we have to build the schools and facilities for that growth, and it’s a big question mark as to when these things will happen.”

Morgan contends these developments will ultimately benefit Chatham County. “I don’t regret a single project I voted on. I cannot control the economy,” he told the Indy last month. “All those developments could still mature if someone buys them, and I have no doubt that will happen.”

Few people share Morgan’s rosy outlook.

“The market is glutted,” said David Monroe, Pittsboro town planner. “These projects were aimed at larger, high-end homes, and we have more large homes and large lots than we know what to do with.”

MacGregor Development President Mike Whitehead, who was among Morgan’s campaign contributors, doubts the market for $750,000 houses will rebound in Chatham County. “No one is buying that kind of house right now, and even after the economy recovers,” Whitehead added, “the demand is going to be less than it was for those kinds of houses.”

Based in Cary, MacGregor filed for Chapter 11 bankruptcy in November 2008; Westfall subsequently reverted to the lien holder, Branch Banking and Trust (BB&T), which is trying to sell the property.

“We had significant fiscal problems,” Whitehead said. “We assumed the need for high-end homes would continue to exist; everyone was assuming that, but things just got slower and slower and we couldn’t overcome that.”

MacGregor isn’t the only one who has suffered financially from the housing bust. Chatham County has not realized the potential tax revenue, including $400,000 in projected sales taxes and another $2 million in impact fees from Westfall, The Retreat at Haw River, The Parks and Belmeade.

“Our sales tax is down, and our motor vehicle revenue has fallen,” Commissioner Kost said.

Margaret Goldston, paralegal for the Chatham County Tax Office, said the county has lost property tax revenue on Westfall, The Retreat on Haw River and The Parks at Meadowview. The levies have been paid for 2009; tax bills have not been sent for 2010. Property taxes are lower on undeveloped properties than on those with luxury homes.

Chatham County Commissioner George Lucier, who was elected in 2006 in a backlash against the pro-growth candidates, insists the county is in a “pretty good financial situation” and that the benefits of property taxes are overrated.

“People would argue that tax dollars are a big thing, but if you look at residential developments, we spend more money on services than we get back in tax dollars,” said Lucier, who plans to run for re-election this year. “Developments are not, nor never were the solution. Look at agriculture, which is very strong in Chatham County. For every dollar we invest, we get two [dollars] back.”

Despite his optimism, Lucier said the county hasn’t been able to meet its financial goals, thus postponing construction of a new judicial building in Pittsboro. The new developments would have generated revenue in impact fees, which Chatham County schools use to pay construction debt. Without that extra money, new school construction will be delayed.

The fiscal fizzle is not the only fallout from the county’s previous ill-conceived growth policies; the subdivisions have damaged the environment, felling forests and polluting water.

The Westfall subdivision was staked on a steep, picturesque ridge straddling Jack Bennett and Lystra Church roads. But when contractors began clearing timber, dirt and debris poured down the ridge into Herndon Creek, eventually flowing into Jordan Lake. (The Parks at Meadowview also displaced large amounts of sediment and polluted Haw River and Herndon Creek.)

“Westfall cleared too much land too quickly on a very steep grade, creating a fragile sediment environment,” said Lucier.

“Westfall was particularly egregious,” says Elaine Chiosso, executive director of the Haw River Assembly. “It is a very steep piece of land, and the Haw River Assembly and surrounding neighbors of the site opposed it being developed as it was approved, since the amount of clearing and grading seemed a recipe for erosion and muddy streams.”

According to Chatham County Soil Erosion & Sedimentation Control Supervisor Jim Willis, the county cited Westfall for several environmental violations in July and September 2008, including failure to control erosion and to provide adequate groundcover to help stabilize the hillsides. The county cited The Retreat at Haw River in 2007 for erosion control violations and The Parks in 2006 for allowing dirt to flow into Brooks Creek and the Haw River.

MacGregor Development would not comment on the environmental damage.

Chatham County Commissioners are stabilizing these sites and implementing stronger environmental regulations for new developments, increasing buffer zones near creeks and limitingand in some cases, prohibitingclearing on steep slopes.

However, these old developments are grandfathered under old regulations in effect during the Morgan administration. And because of a bill passed by the state legislature last year, commissioners can’t hold these old developments to new standards for at least three years.

Co-sponsored by seven Democrats and seven Republicansincluding state Reps. Ty Harrell (D-Wake) and Nelson Dollar (R-Wake), House Bill 1490 granted automatic extensions for development permits and applications that would have expired. In effect, the extension allows anyone who wants to redevelop or jump-start Chatham’s stalled and bankrupt subdivisions to comply with the more lenient regulations under which they were originally approvedduring the Morgan era.

The real estate and homebuilders associations lobbied heavily for the bill’s passage, which used the economic recession to justify the extension. “There exists a state of economic emergency in the State of North Carolina and the nation, which has drastically affected various segments of the North Carolina economy, but none as severely as the State’s banking, real estate, and construction sectors,” the bill reads.

“The legislature has tied our hands with the extension,” said Lucier, adding he had hoped to require the developments to seek reapproval under the tighter ordinances. “The legislature took a tool out of our tool chest that would have helped us improve those developments Bunkey approved.”

“The extension act extended the validity of almost all of the old approvals,” said Jason Sullivan, Chatham County acting planning director, “and it could very likely happen that those houses may still be built if the developers decide to move forward instead of letting the projects expire.”

Burdened by these zombie subdivisions, Chatham County faces the question of how to responsibly redevelop these projects. In one development, the builder spec has manicured the lawns in front of his spec houses, set the lights on timers and, in two houses, installed renters to keep the subdivision from feeling abandoned.

As the road trip ends, the desolation in these zombie subdivisions fades in the rear-view mirror. Soon the winding thoroughfares are flanked by modest houses, their chimneys billowing smoke, their yards cluttered with toys. These Chatham County families may not have access to private golf courses, parks and swimming pools. But they are home.

Corrections (Jan. 18, 2010): The print version of this story incorrectly quoted Margaret Goldston as saying Chatham County has not lost revenue on failed developments; the county has lost revenue. Also, the taxes on those three developments have been paid for 2009; the 2010 tax bills aren’t due until later this year.