PORTLAND – A City Council subcommittee on Wednesday sent two developers seeking financial assistance back to the negotiating table.
The developers — Opechee Construction and Village at Oceangate — were seeking tax reimbursements for their proposed developments in the India Street neighborhood.
The reimbursements, known as Tax Increment Financing, are being sought to help each developer receive financing for their respective projects in a tight lending environment.
The subcommittee’s action comes as the city is looking to tighten its TIF policy.
TIFs are incentives for economic development, allowing new tax dollars from the increased value of a redeveloped property to be reinvested into specified projects, such as infrastructure.
Opechee Construction is seeking a five-year financing deal to help pay for costs associated with meeting a city requirement to place utility lines underground along Middle Street.
The company, which built and owns the Hampton Inn at Fore and Franklin streets, is currently seeking city approval to build a second phase — 18 condominiums, 22,500 square feet of retail space and 66,000 square feet of office space — next to the hotel.
Gregory Kirsch, Opechee’s vice president and general counsel, said it would cost about $1.5 million to remove four utility poles on Middle Street and place the wires underground.
“It’s impossible to borrow money to do things in the public right of way, because it doesn’t increase the value of our project,” Kirsh said.
Kirsh said such utility work would typically cost about $250,000, but Portland’s downtown environment makes it much more expensive. Another developer in the room supported that contention.
Councilors, however, tabled the request until city staff could provide more information about similar projects in the Old Port to determine whether the estimate for the project cost could be lowered.
“I want to be sure we’re not setting a precedent,” said Councilor Cheryl Leeman, who believes the city should not have to pay for the entire project.
Precedent was also cited in tabling the other TIF.
Village At Oceangate is hoping to develop two market-rate apartment buildings, totaling 94 units, at 112-113 Newbury St. The project, known as Bay House, would also include a parking garage and 5,700 square feet of feet of commercial retail space.
The developer is seeking 75 percent of new tax revenue generated from the first building over the first five years. That percentage would drop in 10 percentage-point increments every five years and expire after 20 years. For the second building, the developer is seeking 75 percent of new tax revenue in the first five years, and nothing more over the next 15 years.
City staff estimated the developer would receive $2.05 million in all over the 20-year TIF and the city would receive nearly $7.5 million.
Village at Oceangate bought the property in 2006 and eventually won conditional zoning for a condominium complex. But the developer couldn’t secure financing for the project after the real estate market collapsed in 2008, so the council granted the maximum extension on the contract zone, giving the group until Sept. 22 to break ground on a project that is now fully permitted.
Demetri Dasco said the TIF is critical if the project is to receive financing. He said lenders are more open to financing an apartment project rather than for-sale condominiums, but not at the level needed. Before the real estate collapse, lenders would finance 90 percent of the cost of such a project; now, they’ll only finance 75 percent, he said.
“We’re faced with this hurdle of getting the project financed,” Dasco said.
Dasco said he’d market the apartments as for-sale condos as soon as they broke ground. As soon as the first condo was sold, the TIF for that building would become void. The developer would rent apartments until they could be sold.
But councilors said the request was too much.
“I’m struggling with the enormity of the request,” said Committee Chairman Nicholas Mavodones.
Councilor Kevin Donoghue took a hard line against subsidizing high-end housing, with rents around $1,600 for a two-bedroom unit, especially on the eastern waterfront.
Historically, TIFs have been awarded for affordable housing in blighted areas, Donoghue said.
“If the eastern waterfront is our disadvantaged area that we need to prop up market development in, then we have much bigger problems,” he said. “This is the high-value land.”
The committee told Dasco to renegotiate the terms of the TIF to lower the value or term prior to the committee’s June 27 meeting.
Dasco said he was optimistic a deal could still be reached to salvage the project before the Sept 22 deadline.
Staff Writer Randy Billings can be contacted at 791-6346 or at:
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