A state official and New Hanover County are at odds over the downtown Wilmington redevelopment plan known as Project Grace, according to county officials.

The New Hanover County Board of Commissioners signed a letter Monday asking State Treasurer Dale Folwell to change his mind about not including the county's $57 million Project Grace request on the Sept. 12 agenda of the Local Government Commission.

The LGC is responsible for approving most debt issued by local governments and public authorities in North Carolina. Project Grace, for which construction of a public facility would cost about $57 million, would transform the county-owned block bordered by Chestnut, Grace, Second and North Third streets, which contains the main branch of the public library along with a parking deck and other structures. This redevelopment would include a new, 95,000-square-foot facility housing the Cape Fear Museum and the new library main branch, along with potential residential and commercial space.

The county has partnered with Wilmington-based Cape Fear Development on the plan.

In its letter to the treasurer Monday, the board of commissioners stated the reasons for keeping Project Grace off the agenda by LGC staff were "1) You do not like or approve of the site, 2) you do not believe debt is necessary for our project. We are disappointed by your position and ask that you reconsider calendaring our application. LGC staff confirmed they have received all the necessary items from us that are needed for the application, and they will be reviewing the application over the coming weeks, as is their typical process for any submitted application.

"Given our complete application and that LGC staff will have reviewed the application in a timely way," the board's letter continued, "we request that you calendar us for the LGC's September 12th meeting."

Folwell, a Republican who is running for governor, said in an emailed statement Aug. 8, "Since the Local Government Commission (LGC) was established more than 90 years ago after the bankruptcy of Asheville, we as a government unit are supposed to ask the tough questions to protect taxpayers. Project Grace is no exception, especially considering it’s troubled past.

"Asking tough questions and challenging assumptions could result in the county saving money for city and county taxpayers by utilizing the low rent, free parking, and two bottom floors of the PPD/Thermo Fisher building. The county has hundreds of millions in the bank and is not required to borrow through the LGC for this project."

The letter from the commissioners addressed this statement.

"As noted above from staff and based on your media statement after our August 7th meeting, we understand your objections to hearing the item. So, below is a reaffirmation of our decisions ... First, the Board of Commissioners and county staff have explored and evaluated what is the best location for this project. We have evaluated adaptive reuse of the current library, evaluated where a new building could work best on the existing county-owned block, and also reviewed alternatives –  like keeping the library and museum in their current locations with renovations, as well as talking through the new city-owned building that was the former PPD location, upon your request.

"Ultimately, after many years of evaluating this project and a consistent vision that has been the guide from the start, we are committed to the county-owned block that is in the heart of downtown, bordered by Grace, 2nd, Chestnut, and 3rd streets. We all feel this is the best location for transformative change for our downtown, and it is a fiscally responsible location because we already own the block and will not have to pay additional costs to purchase or lease a new location."

The board had unanimously approved an amended agreement with Cape Fear Development on Aug. 7 that cut the price of construction by $4.6 million, to just under $57 million.

Addressing the idea of issuing debt, the letter stated, "We do not take borrowing lightly and have ensured that we will not have to raise taxes for our residents in order to afford the debt that is before the LGC for consideration. We will remain fully within our debt compliance policy."

Officials said in the letter that using the county's savings isn't an option they intend to pursue.

"As you have referenced, we do have a $300 million Revenue Stabilization Fund that the Board of Commissioners created from the sale of the hospital [to Novant Health in 2021 for nearly $2 billion]. It is our intention to preserve these funds for economic crises and for tax and fee stabilization purposes. Having this fund ensures that our residents' taxes aren't increased in the face of emergencies, and we can remain financially strong and stable for the many uncertainties we may face in the future," the letter stated. "We, as a Board of Commissioners, have confirmed a desire to limit the use of this fund to interest proceeds for community needs; Ideally, we would like to grow the corpus of the fund so that it can benefit the county's citizens for many generations into the future. Spending the corpus of the fund on this project would reduce future earnings and would result in less financial flexibility and lower liquidity for the county."

If the treasurer still won't put the item on the agenda, the letter stated, they ask that another LGC member make a motion and vote to place it on the commission's agenda.

The letter ended by stating, "We are committed to a new museum and library on our downtown block because it has transformational power and possibilities for New Hanover County, and we ask that you give us the consideration of a vote because we have met the statutory parameters for LGC consideration."