Morganton takes new approach with developer of proposed 144-unit project

KEY TAKEAWAYS

• City backs affordable housing without taxpayer risk

• 144-unit project planned on East Union

• Bonds fund development; city earns fee

City leaders are taking a new step to support more housing in Morganton, using a financing model that could bring apartments with 144 affordable units to East Union Street without putting taxpayer dollars at risk.

The Morganton City Council voted Monday evening to start the multi-month process of issuing up to $12 million in multifamily housing revenue bonds for a project known as Leonhardt Landing, proposed by developer Sari and Co. The development is planned for about 25 acres on the 1300 block of East Union Street, a site rezoned in November 2025.

Unlike traditional public funding, the bonds would not be backed by taxpayer dollars, but instead by the private developer.

“This is a first for us, and I think it’s a great opportunity,” City Manager Sally Sandy said. “We talk a lot about the need for housing, all types of housing, especially a need for affordable housing in our community.”

Under North Carolina law, municipalities can act as a conduit issuer, allowing them to issue bonds on behalf of private developers for projects that serve a public purpose. In this case, the City of Morganton would assist with facilitating bonds for the development, but would not be responsible for repaying the debt.

Instead, Sari and Co. would repay the bonds, and the city would receive a $120,000 fee, which is 1% of the total bond amount, and can be used for any of the city’s projects, City Manager Sally Sandy said. McGuireWoods LLP will serve as bond counsel for the city. The firm has assisted with similar deals throughout the state.

Sandy added that the structure allows Morganton to support much-needed housing development while limiting financial risk.

The Leonhardt Landing project is expected to serve individuals and families earning between 30% and 70% of the area median income. It’s a range that remains underserved, especially as Western North Carolina continues recovering from Hurricane Helene’s destruction of over 50 homes in the City of Morganton alone.

Plans call for a mix of 144 units, including:

• 24 studios
• 24 one-bedrooms
• 48 two-bedrooms
• 48 three-bedrooms

Amenities include a community/multi-purpose room, fitness center, business center, playground, resident laundry facilities, covered picnic area, resident pool and clubhouse, and a pet relief area.

Rent prices per month, with a utility allowance included, are about $681 for studios, $873 for one-bedrooms, $1,035 for two-bedrooms, and $1,211 for three-bedrooms.

The city council approved an inducement resolution, which is an early step that allows the developer to move forward with financing applications. The city still has the right to withdraw from the process if at any point the project does not get funded, Sandy said.

The developer will seek additional support through a special pool of funding for western counties impacted by Hurricane Helene. Sari and Co. estimates that as much as $15 million in federal funds will be up for grabs in the current application cycle.

Sari and Co. submitted a 4% tax-exempt bond preliminary application for the development to the North Carolina Housing Finance Agency in January, and plans to submit a full application by May 15.

Led by Jim Sari, Sari and Co. has completed more than 50 housing developments across the country since 2001, including projects in Marion, Lenoir, Cramerton, and Statesville.

“We made some calls to a couple of other communities that he has done deals with, and received very positive responses back from them, saying that they would do another one of these projects in a heartbeat,” Sandy said.

City leaders acknowledged that the financing model is unfamiliar territory.

“This is new to me on my third tenure here, and it’s a little scary, so I feel very confident that the due diligence has been done by our staff so that we can go ahead and move forward with this,” Mayor Pro Tempore Wendy Cato said.

The project will still require additional approvals, including a public hearing and state-level review.

The development timeline, provided by Sari, has construction beginning shortly after the bond sale and final closing, expected in the second quarter of 2027. Sari and Co. plans to have the development substantially completed by December 2028.

The project team consists of TBA Construction as the general contractor, Martin Riley Architects, Timmons Group as the civil engineer, and Nelson Mullins’ David F. Leon as the tax attorney.

A public hearing on the project and the bond issuance will be scheduled for a later date.