Portland, developers at impasse on Midtown project

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PORTLAND — Efforts to create a mixed-use development in Bayside could be headed back to court.

“We are pursuing the maximum amount of damages allowed by law,” local attorney Patrick Venne said Tuesday about suing the city for breach of contract over agreements to build what has been called the Midtown project on Somerset Street.

The threat of a lawsuit in Cumberland County Superior Court came after the city denied a building permit for a parking garage and city approvals for the project expired on March 24.

“Not a single shovel of dirt has been moved,” City Manager Jon Jennings said Tuesday as he questioned whether Federated Cos., with whom Venne works, has the financial capacity to carry out the estimated $85 million project.

Planned since 2011, and approved by the Planning Board in 2015, Midtown is intended to have the garage, 440 housing units and about 90,000 square feet of retail space on what had been city-owned land extending from Somerset and Elm streets to Somerset and Pearl streets.

Developers filed a building permit application for the garage in January; it was denied last Monday, Jennings said.

Under terms of the agreement for the $2.4 million sale of 3.4 acres, the city would also pay $9 million to construct the garage, with money loaned bythe U.S. Department of Housing & Urban Development.

Garage construction would also begin the process to elevate Somerset Street above the floodplain, at an estimated cost of $4 million. Federated would pay a third of the costs, with the city covering the rest with funding that includes other HUD dollars.

The Somerset Street work will not begin until there is a project underway, Jennings said.

Venne and Jennings continued to disagree Tuesday about the readiness of developers to move forward with the work. Also at issue is whether Federated should provide a performance guarantee to show its commitment to the project.

The city has already drawn down $1 million from HUD funding to reimburse Federated, Jennings said, while Venne noted the company tried to pay $84,000 in fees earlier this month. He said the check was retrieved and torn up yesterday.

On March 20, Venne emailed Jennings and said the city was in default for not meeting its financial obligations.

“What’s so frustrating for us is, the developer wants to continue to blame city staff,” Jennings said. “There are hundreds of other developers who could have gotten this done already.”

Suits and legal threats have dotted the Midtown landscape since the project’s first incarnation was approved by the Planning Board in January 2014.

Midtown was then envisioned to have double the number of housing units in four high-rise towers. A lawsuit against the city for approving the zoning needed for the project was dropped when developers scaled back their plans.

In 2015, developers threatened a breach-of-contract suit because of a dispute over paying the remediation costs for the contaminated land, once home to metal scrapyards.

Jennings eventually negotiated an agreement that would have the city reimburse Federated $50,000 for clean-up costs.

The city also has the right to repurchase the land where the garage would be built at the price for which it was sold.

“We would be open to a conversation about that,” Jennings said.

David Harry can be reached at 781-3661 ext. 110 or dharry@theforecaster.net. Follow him on Twitter: @DavidHarry8.

Portland City Hall reporter for The Forecaster. Baltimore native, lived in Maine since 1989. A journalist since 2005, covering much of Cumberland and York counties. I joined The Forecaster in 2012.