BRUNSWICK — Weighing the unpopularity of another financial concession to the developer of Maine Street Station against the prospect of losing its entire investment in the project, the Town Council on Monday approved a controversial tax rebate program for a 54-room inn.
The council voted 7-2 in favor of a measure that will rebate JHR Development an average of 85 percent of property taxes collected on the inn through a 10-year agreement. The first five years will rebate 100 percent of the collected taxes.
The 10-year program will add an estimated $907,000 to the town’s $5.2 million investment in Maine Street Station. The proposal was aired during Monday’s public hearing, and became the primary sticking point in a proposed downtown Tax Increment Financing district created to help the town recoup outlays for the project and fund future downtown endeavors.
During Monday’s public hearing, the council heard comments from local inn owners who said the rebate program gave JHR an unfair competitive advantage in a market that could not support another hotel.
Peter Anastos, manager of the Fairfield Inn & Suites on Old Portland Road, said he and other hotel owners have never objected to JHR’s receipt of grants or land for Maine Street Station. However, Anastos said, the rebate was the “steel beam” that could break his colleagues’ backs.
Anastos’ comments were echoed by other hotel owners, one of whom threatened legal action over the rebate.
Meanwhile, resident Mike Laskey objected to the town’s repeated outlays for Maine Street Station despite diminishing returns.
The project was originally valued at $36 million. It is now assessed at $14 million. Town officials have attributed the falling valuation to the project’s reduced size, from 15 acres to 5.5 acres.
However, the project’s value reduction has not coincided with the town’s investment, now 36 percent of its overall value.
“I thought all this economic development was supposed to ease the burden on residential taxpayers,” Laskey said. “But (the rebate) is a convoluted way of taking money out of my wallet and putting it into JHR’s.”
Several councilors expressed anguish over their decision, but the majority was persuaded by evidence from JHR’s lead lender stating the inn could not be financed if the rebate provision wasn’t included.
Town staff and the majority reasoned that if the inn failed, the remainder of the project would, too.
Another consideration, officials said, was the $2.3 million the town has received in grants. Officials warned that $750,000 in grants might have to be repaid if the project doesn’t create enough jobs.
Town Manager Gary Brown added that some of the grants were justified by the inn.
“If the inn is not built and the jobs aren’t created we may be able to satisfy the job requirements (through other jobs created in the development),” Brown said. “But if the inn is built, we will satisfy the job requirements.”
The uncertainty was enough to persuade most councilors.
“The best chance of recovering our costs is to have a successful completion of the project,” Councilor Ben Tucker said. “We are in this together with JHR.”
But two councilors, Vice Chairwoman Debbie Atwood and Councilor Benet Pols, were troubled by the rebate.
Atwood worried the program was unfair to other businesses. She also didn’t like that the town’s financial situation was superseded by JHR’s.
“If (JHR) can claim a lousy economy is the reason why he needs a tax break, then the town can claim a lousy economy as an excuse not to give one,” Atwood said.
Pols, meanwhile, said he was distrustful of the process, noting that preliminary negotiations between JHR and town officials had taken place “four or five months ago.” The proposal was delivered to the Town Council in late January with a March 1 agreement deadline, leading some councilors concerned that the tight window wouldn’t allow them to perform due diligence.
Pols said the rush to complete the deal meant that the town was “obliged to get the best bad deal we could get.”
Pols said he was disappointed the town couldn’t include performance standards in the rebate program. The current agreement is structured so that a new company could request the rebate if JHR abandons the project.
“I would’ve been fine with a larger tax break if there were performance guarantees,” Pols said.
Pols also objected to the sealing of so-called proprietary information about JHR, which he said was used to win council votes, but could not be shared with the public.
Ultimately, however, most councilors were convinced the deal was the best way to keep the project moving.
Councilor Suzan Wilson said she rejected the “zero-sum game” that “if something is good for the developer, it’s bad for the town.”
Chairwoman Joanne King said she was unwilling to gamble the fate of Maine Street Station by opposing the rebate.
“We’re not giving away (tax income) because we don’t have it,” she added.
The TIF district will now be reviewed by the state’s Department of Economic and Community Development.
Steve Mistler can be reached at 373-9060 ext. 123 or firstname.lastname@example.org