Council grants tax breaks for USM lot
Up to $6M for an office building and student housing
By Chris Busby
Last night, a divided, and diminished, Portland City Council approved a total of $6 million in property tax breaks for developers of city-owned property on the corner of Preble Street and Marginal Way – a parcel referred to as the “USM lot.” [See “Council approves sale of former USM lot.“]
Developer Ted West plans to build a multi-story office building on one part of the site, directly across from the AAA Building he built a couple years ago. The primary tenant is said to be Maine-based health care provider InterMed.
The other part of the parcel will be a student housing complex being developed by Rockport-based Realty Resources. Consisting of over 100 mostly four-bedroom units with shared common areas and facilities, the project could house as many as 400 students attending college in the Portland area.
At the request of councilors, the two developers added more parking to their plans earlier this year, but that change significantly increased the construction costs. For example, the addition of several decks of parking beneath the office building requires that pilings be driven so deep into the fill underneath the site that the structure will now actually be deeper than it is tall.
City Councilor Will Gorham has been a vocal opponent of the student housing proposal, questioning whether enough parking is being provided and whether students will be able to afford the units, which will cost $724 per month, per room (or $2,896 for each four-bedroom unit). “We’re being asked to give a [tax break] for high-end housing,” he said.
Councilor Cheryl Leeman agreed with Gorham, saying the Portland housing market is “softening,” making four-bedrooms for nearly three grand an impractical sell.
Joe Cloutier of Realty Resources said his company is confident the apartments will be rented. He said it needs to attract just five percent of the total college population in the area to fill the project. The company has no formal agreements with any colleges to provide housing. If the dorm set-up fails to attract enough students, Cloutier said the units can be rented to families as apartments (though it’s either one or the other, he said – families and students would not live side by side).
The tax-increment-financing (TIF) arrangement will return up to $1.2 million in property tax payments to Realty Resources over 10 years. West’s development company will get up to $4.8 million in property taxes back over a 15-year period. Audit stipulations in the agreement limit the TIF based on the project’s financial performance, and the developers will still pay almost half of the property taxes due during the TIF periods.
In addition to the $1 million the developers are paying for the lot, the deal to provide tax relief for parking decks beneath the office building frees the city from a prior obligation to provide West with surface parking needed for a development he’s building on the former site of the Miss Portland Diner.
The vote to grant a TIF for the office building was 6-1, with Gorham the lone opponent. The student housing TIF passed 5-2, with Leeman and Gorham opposed.
Councilor Donna Carr seemed to be leaning against the housing TIF, citing concerns over parking. A “no” vote by Carr would have killed the project, since Mayor Jim Cohen had to recuse himself due to his law firm’s involvement in the deal. City Councilor Karen Geraghty had left the meeting earlier to participate in a work-related conference call, she said on June 7 (Geraghty also said she would have supported both TIF agreements), leaving only seven councilors present to make the decision.
Carr was the last councilor called during the roll-call vote, and after a few beats’ hesitation, she voted in favor of the TIF, to the visible relief (and exasperation, depending on each person’s position) of those present.
