Quality at what cost?

When the Home Depot Foundation recently honored North Charleston for excellence in sustainable community development, officials rolled out the red carpet for foundation officials and trumpeted the award as a reliable sign that the city's quality of life is on the way up.

The award focused particularly on a new neighborhood developed by city government. Oak Terrace Preserve was cited as "a role model for the successful completion of a sustainable community."

The first phase includes almost 60 attractive and affordable single-family homes, all different but with similar materials and a traditional architecture recalling early 20th century bungalows and arts-and-crafts homes. Each house is independently certified as being energy efficient.

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Oak Terrace

Oak Terrace Preserve, a city-developed neighborhood has won national recognition for its innovative steps to save energy and minimize stormwater pollution.

The neighborhood also preserved more than 500 trees and was rebuilt with a unique drainage network of bioswales, absorbent alleys and seven pocket parks, all designed to filter out pollutants before they reach Filbin Creek.

The houses are served with alleys, meaning that driveways don't interrupt the main sidewalks, making them more attractive to walk. Ten more parks are planned for later phases, and an absorbent path made of recycled rubber ultimately will surround the oval-shaped development.

But absent from all the hoopla was any discussion on just how much North Charleston taxpayers are spending on this attractive, environmentally friendly neighborhood just northwest of Park Circle.

The answer? More than $10 million already, and while the city expects that its subsidy will drop as more lots are sold off, no one knows for sure what its bottom line will be.

Doing 'the right thing'

Like any other developer, the city realized its profit or loss on Oak Terrace Preserve would be shaped by the vagaries of the Lowcountry's real estate market.

Like other developers, the city assumed some risk.

Ray Anderson, special assistant to Mayor Keith Summey, said the city initially figured its bottom line would range from breaking even to as much as a $4 million loss, depending on how quickly Oak Terrace's homes were built and sold and how rapidly lot prices rose.

But that was before the national housing bubble began to burst right as Oak Terrace Preserve was taking space -- a burst that has caused the real estate market to slow to a crawl in recent years.

While the project posted its first profit in the past fiscal year, it's about $800,000 in the red so far this fiscal year, as of Nov. 30, according to city figures.

The city's budget showed it planned to spend about $13.4 million on the development, while it expected to receive about $10.1 million from home sales, property taxes and other income.

However, the project is only one-third complete, and the city already has spent $18.2 million and received $7.3 million in return. Only $2.3 million of the Oak Terrace income is from property sales, while $2.6 million was transferred from other city funds.

To date, the city has subsidized each of the 60 homes by about $181,000. These homes have sold in the range of $170,000 to $300,000.

Summey, who lives in a separate private development near Oak Terrace, said he is not worried.

The city took on the project because no one in the private sector, not even the Noisette Co., would. And while the city might have the same financial risk as a private developer, it is interested in much more than the financial bottom line.

"I think the city's main intent was to take a stand and do the right thing in the community and to say we're going to stop the decline in the Park Circle area," Summey said. "We knew it was going to take time."

Most of the city's costs already have been spent, such as the $4.7 million land buy, the $606,000 demolition tab and its $6.4 million in street and utility construction.

Even under the $4 million worst-case scenario, the city -- unlike a private developer -- can reimburse itself from the increase in property taxes collected from the development.

And the city also would benefit from the positive economic ripples sure to come from converting one of the city's most blighted neighborhoods, a deteriorating collection of homes thrown up in haste to house shipyard workers during World War II, into a new, attractive place to live.

"Oak Terrace Preserve falls into the same category as the coliseum, convention center and performing arts center," Summey said. "We don't break even on those on an annual basis, but the benefit comes from the economic impact of what's around it."

A brighter future

The idea of the city becoming a developer was controversial from the beginning. Councilman Steve Ayer said developing neighborhoods should be left to the private sector, not city government.

"I'm glad that the project is doing what they want it to do. It's changed the area, but I still feel the same ... about the financing of it," he said. "My belief is we're still not in the real estate business. We're a government agency, and we need to worry about police, fire and garbage pickup."

Ayer said he also objects to the municipal golf course at Wescott Plantation, which also has lost money for the city but has attracted new residential development. "If you keep looking around, millions and millions add up," he said. "I know of several communities that have wanted to get sidewalks lately, and we just don't have the money to do it."

The city's role as developer has been a bumpy one. While it hired the Noisette Co. to manage the project, getting things going took time. A company hired to tear down the old Century Oaks project was hit with a restraining order for failing to pay an old bill and couldn't finish the job. While it hoped to recycle much of the building materials there, most everything ended up in a landfill.

But perceptions began to change as the first homes were completed.

Twenty-four homes closed last year, and construction on the first 32 of 74 planned townhomes is expected to begin in a few weeks, said Elias Deeb, who is managing the project.

All but one of the neighborhood's 58 homes are lived in.

Joan Brasier and Paul Wilczynski looked at more than two dozen homes after they decided to move from Boston to the Lowcountry, and they began and ended their search in Oak Terrace.

They not only found the right-sized home at the right price, but they value being relatively close to most everything in the metro area. They also valued the camaraderie of their new neighborhood.

"We knew more people in the first five days we were here than we ever knew in five years up in Boston," Wilczynski said.

"People tend to just walk over and introduce themselves," Brasier added. "It's great."

Future phases of the 55-acre, football-shaped site are expected to benefit from the new campus for the Charleston County School of the Arts and Academic Magnet high schools, which are right next door. The old School of the Arts campus, which lies in the middle of the development, will be converted into an arts-infused elementary school.

Those changes, plus Boeing's new plant and Clemson University's wind turbine project nearby, are expected to increase the area's desirability.

Councilman Bob King, who often is one of Summey's more conservative critics, lives just a stone's throw from Oak Terrace Preserve. He joined in celebrating its recent award.

"We won't make any money on it," he said later. "We'll be lucky if we break even, but it does give us a nice community. It's a quality of life issue."

Reach Robert Behre at 937-5771 or at rbehre@postandcourier.com.