Portland City Council committee balks at Bay House TIF request

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PORTLAND — A developer’s pitch for tax increment financing for a project in the India Street neighborhood received a chilly reception from the first city committee to see it and from at least one city councilor, who is questioning the entire planning process.

The proposal is one of two TIFs the city is considering for proposed developments in the downtown neighborhood.

In June, the council’s Housing and Community Development Committee received requests for TIFs for the long-delayed Bay House project, proposed by Village at Ocean Gate LLC, and for the second phase of construction planned by the developers of the Hampton Inn at 209 Fore St.

Committee discussion on June 27 was dominated by the TIF request for the Bay House project, which India Street neighborhood community leaders have opposed since 2006.

The project, which was originally proposed as a three-building condominium complex with nearly 200 high-end units, has changed over the years. The current plan calls for 94 market-rate rental apartments in two adjacent buildings on land where the former Village Cafe once stood, bordered by Newbury, Hancock, and Middle streets. Developers now say that if there is enough demand, they will convert some or all of the project into condominiums after construction.

The Bay House TIF proposal was previously reviewed at the June 13 meeting, when councilors asked developer Demetri Dasco to reduce the amount of city assistance. Dasco originally requested more than $2 million in reimbursements from the city over 20 years.

At the June 27 meeting, he returned with a significantly pared down deal, having carved one of the buildings out of the TIF district entirely, and asking for about $848,000 over a 10-year period.

At the meeting, Dasco said the building that was removed from the request would likely be converted into condos almost immediately. Condominium projects do not meet state requirements for TIF districts; the TIF district would expire immediately if the remaining building is converted to condos.

The tax revenue the developers seek to recapture via the TIF would help pay for infrastructure improvements that the city would require of the developers, including rebuilding sections of Middle, Hancock, and India streets; installing underground power lines on Newbury Street; planting trees; installing new curbing, and replacing or upgrading sewer and water lines.

The total cost for the required improvements is more than $1 million.

But committee members said the TIF deal needs to specify which costs would be covered by the city’s reimbursed tax money, especially because some of the expenses would be required of any development project.

Rather than voting on the deal at the June meeting, the committee chose to delay its vote until the developers give them a list matching specific infrastructure costs to TIF reimbursements. Members plan to review the list and make recommendations to the full City Council at their July 11 meeting, which would allow the council to vote in August.

Before making that decision, committee member and City Councilor Cheryl Leeman questioned why the city’s infrastructure requirements are so costly, and why the site plan review process hadn’t made them clear to developers earlier, despite a review of that procedure in recent years.

“These costs in my opinion are absolutely astronomical,” she said, “which is why we’re here now talking about a TIF.”

Leeman and Councilor Kevin Donoghue broached the idea of awarding the developer waivers rather than a TIF district. ““You start to take some of these things off the list and it starts to bring it down to a more reasonable level,” Leeman said.

In a phone interview after the meeting, Leeman said confusion over infrastructure costs still comes up when projects like the Bay House have been granted contract zones. In the murky process, she said, developers may ask for TIF reimbursements to pay for things they previously agreed to during contract zone negotiations.

“That is the piece I think the council needs to take another look at,” Leeman said. “You can’t have it both ways. You can’t negotiate the terms of that contract and then come around the back door and say that it was too expensive and I need some of that back.”

At the committee meeting, Bay House representative Nathan Smith reminded the committee members that the project has a tight deadline: the project’s contract zone set to expire if construction hasn’t begun by Sept. 22. The wait for final City Council action sets their construction start date back several weeks, he said. 

“This has been a fascinating discussion,” Smith said, but “we’re under some very tight time frames in terms of some gear up to get under construction. We can’t solve all of the policy problems. We have sort of a here-and-now issue.”

The TIF request for a building with retail space, offices, and apartments on Hampton Inn block – the former Jordan’s Meats property – was first presented to the committee at it’s June 13 meeting by Greg Mitchell, the city’s acting director of planning and urban development.

The request, which would reimburse the developers nearly $1.15 million over five years to cover the costs of putting power lines on Middle Street underground, was not discussed at the committee’s meeting on June 27, although it was on the agenda for a closed-door executive session, according to Leeman.

Andrew Cullen can be reached at 781-3661 ext. 100 or [email protected]. Follow him on Twitter: @ACullenFore.