GARDINER — A planned subdivision on Brunswick Avenue could bring the first hotel to to the south end of Kennebec County, but probably not without an incentive.
While the Brunswick Avenue property is in a desirable location, less than a mile from the Exit 49 interchange on Interstate 295, its sloping topography presents a development challenge.
The Gardiner City Council is expected to consider the request at a meeting in September. But on Wednesday, councilors got their first look at a proposal for an omnibus tax increment financing district and a credit enhancement agreement for Central Maine Crossing to pay for a road, underground utilities and a sewer and water pump station on the property that would remain under the ownership of the developers.
The 22.8-acre site is where an urgent care center for MaineGeneral Medical Center is currently under construction.
Central Maine Crossing is owned by Greg Farris, an attorney, and Steve McGee, owner of Steven McGee Construction. Kevin Mattson is the developer.
They want to be able to leverage the investment in the medical building through a tax increment financing district and a credit enhancement agreement to pay for infrastructure that will open up the steeply graded property to development with a potential worth of $25 million to $30 million.
Central Maine Crossing is located not far from the city’s Libby Hill Business Park. The developers say the new development, with its focus on hospitality and other customer-serving business, will complement the industrial, manufacturing and distribution businesses located in Libby Hill.
And Central Maine Crossing may be able to lure the first hotel to the southern end of Kennebec County.
They estimate the value of the building, which is expected to be complete in October, to be about $7.2 million, generating about $154,000 in property tax revenue at Gardiner’s current property tax rate. While MaineGeneral is a nonprofit entity, it is leasing the 15,915-square-foot building, which will remain on the tax rolls.
Raegen LaRochelle, a consultant for the developers, estimated the cost of putting a road and utilities on the property to be about $960,000.
The credit enhancement agreement would reimburse the developers for that cost over a 10-year period, and the rest of the property would be opened up for development, LaRochelle said. As the proposal is structured, 100% of the new tax revenue generated in the first three years would go to the developer. In years 4 through 6, 75% of the tax revenue would be returned, and in the remaining four years, 50% would be returned.
The tax increment financing deal would shelter any new value created at Central Maine Crossing, so what the city receives in state education aid, state revenue sharing and pays out as its assessment to Kennebec County, would not be affected, she said.
Workers install siding at the new MaineGeneral building being built by LaJoie Brothers Inc. on Friday on Brunswick Avenue in Gardiner. Kennebec Journal photo by Joe Phelan
While no action was taken, some city councilors had questions about the proposal.
District 1 City Councilor Terry Berry asked why the developers are seeking a payback over 10 years, when the infrastructure they plan to build will last longer than that.
“The reason we need the help now is my partner and I are taking zero money out,” Farris said. “We put money in, so our return is also going to be over the 25-year, 40-year life of the project. We have covered the cost to date. That’s why it’s front-loaded now.”
Farris said he has wanted to attract a hotel to the city for a long time. Restrictions in the city’s historic district made putting one in downtown Gardiner impossible, he said so now he’s hoping to attract one to Brunswick Avenue.
“I think it would change the whole landscape,” Farris said.
Mayor Patricia Hart said when the urgent care center is open, the number of ambulance calls is expected to increase. She asked whether the city could recover any of the additional cost.
Tracey Steuber, economic development and planning director for the city of Gardiner said the omnibus agreement allows the city to apply its TIF revenue for specific uses such as public safety, which could be spent on additional ambulance costs.
The first revenue would come in year 4 of the agreement.
Two city residents, George Trask and Jack Skehan, don’t favor the proposal.
Trask, a longtime city resident and former city councilor, said he thinks the development team can afford to do what they want to without help from the city.
“If I bought something on the side of a mountain, I would expect to have to do some infrastructure on it,” Trask said. “And I wouldn’t expect my tax dollars to pay for it. A million dollars is nothing.”
The stretch of Route 201 from the former armory to Interstate 295 is the most valuable property the city has, he said.
Trask said the sewer line the city installed on Brunswick Avenue was designed for one business park, not two, and officials opted to go with a smaller line to save money.
“This is something everybody ought to be looking at, because it could cost you several million dollars,” he said.
Skehan, owner of the tax preparation firm Jack Skehan & Associates, said TIFs tip the scales in favor of the people who have them.
“The city manager said we want to grow the tax base. This doesn’t grow the tax base,” he said. “I don’t know why we are giving a tax break to an organization that can afford a $7 million-plus project.”
“The idea of requesting a credit enhancement agreement is the developer comes to you with the standard that, but for this request, this development will happen,” LaRochelle said. “I think the developers in this case have made a very clear argument that this infrastructure is prohibitive. They are building their development on lot 2 and asking for that credit enhancement agreement to build a further development that otherwise would not happen.”
On Friday, Mattson said TIF districts don’t give away tax dollars. They exclude new tax dollars from calculations for revenue sharing and education aid. When a municipality’s value increases, its revenue sharing and education aid drops.
“TIFs pay for themselves in the tax shift,” he said. “You have to prove there’s a public benefit. You have to make the hard case.”
At the meeting, Berry also asked why future developments in Central Maine Crossing can’t pay for the infrastructure that benefits them.
Mattson said his own experience shows that doesn’t work.
“It’s hard to pitch dirt,” he said. “It’s much easier (to market a property) when it’s permitted and the infrastructure is in place.”
The proposal is expected to come back before the City Council meeting at a public hearing at its Sept. 18 meeting.
Discussions about the TIF will take place in open City Council meetings; discussions about the credit enhancement agreement would take place in executive session, but any action taken would take place in an open session.
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