The Town Council unanimously approved plans last week for a new town-sponsored small-business incubator at 321 W. Rosemary St.

The incubator is the first joint government venture of its kind in Chapel Hill, subsidized with taxpayer dollars, and is part of an effort to bring more businesses to town and retain local talent.

The town will partner with 3 Birds Marketing, Orange County and UNC-Chapel Hill to develop the space for new small businesses, particularly those started by recent graduates of the university.

Business incubators typically offer cheaper or free rent and Internet so business owners can reinvest in their operations. The incubator on West Rosemary Street will house three to five start-ups.

“What we hope it to be is a potential mixture of both incubator tied to instruction at the university to some mentoring and coaching for students who are trying to start a new business,” Town Manager Roger Stancil said. “It’s a combination of social entrepreneurship and a commercial venture.”

3 Birds Marketing has outgrown its space at 321 W. Rosemary St. It plans to move to the top floor of 505 W. Franklin St., the building owned by Scott Maitland that also houses The News & Observer and The Chapel Hill News.

The marketing company was formed in 2009 in the San Francisco area. It moved to Chapel Hill in 2010 and has 38 employees. The town is providing a 29-space downtown parking lot off West Franklin Street from 6 a.m. to 6 p.m. at no charge for 3 Birds through Dec. 31, 2015, with a two year extension option. Outside of those hours, the town will charge for parking at the normal downtown rate.

The parking incentive depends on 3 Birds growing to 52 total full-time employees based in Chapel Hill by 2013 and 80 total employees by December 2014. If the company doesn’t meet its projections it will pay the town $42.50 per month per job it is short until the quota is reached.

If the town were to open the 3 Birds lot for public parking during the day, the maximum revenue it could earn is $103,530 for 29 spaces over three and a half years, according to the town.

The town will sublease the 3 Birds space from the company for $80,000 a year, and Orange County has tentatively agreed to commit $40,000 annually for three and a half years to help pay for rent.

3 Birds will contribute $20,000 per year through 2015 to the incubator, half in cash and half in time working with young entrepreneurs and the town to improve economic development, according to the town.

Being located in Chapel Hill is a big part of 3 Birds’ identity, said Megan Gardner, director of client services for the company. Employees often go out downtown after work and play in local sports leagues, she said.

“We participate and include ourselves in a lot of areas in the Chapel Hill community, and we want to stay here,” Gardner said.

Dozens of entrepreneurs, small-business and downtown property owners supported the incubator at last week’s council meeting.

For too many years the town has leaked entrepreneurial talent to other towns, said George Draper, a downtown property owner.

“This is a good starting point, and I couldn’t think of a better place,” he said. “It’s going to help all of our downtown businesses, and this is what we need.”

Jon Young started his nonprofit Community Empowerment Fund when he was a student at UNC. The group offers savings opportunities, micro-loans and financial education to people who are underemployed and unemployed. When Young graduated, he moved to local entrepreneur Jim Kitchen’s incubator space on East Rosemary Street and tripled his nonprofit’s size with volunteers from the university and community, he said.

“Being in that space on Franklin Street was extremely valuable to serve the university,” he said.