2018-08-03 / Front Page

City creates tax district to aid affordable housing

By Duke Harrington
Staff Writer

SOUTH PORTLAND — Having previously re-zoned the property around the former St. John Catholic Church on Main Street to clear the way for a 42-unit housing complex, the South Portland City Council has taken a second step to ensure that project’s success, voting unanimously to create a new tax increment financing (TIF) district.

Named for the new four-story building that will span the distance between Thirlmere and Aspen avenues, the Thornton Heights Commons Affordable Housing TIF includes a credit enhancement agreement that will return 75 percent of all new property tax realized from the project to its developer, South Portland Housing Authority. The remaining 25 percent would be earmarked to the South Portland School Department.

“That’s in recognition that this project will likely create more students in (the) elementary, middle and high schools,” said City Manager Scott Morelli said.

The TIF district will be in place for 30 years.

The 2.33-acre St. John’s property is assessed by the city at $729,700.

Built in 1940, replacing a church on the property since 1926, St. John’s was enlarged in 1962 to accommodate Mass for up to 800 people. However, by the time of its last service in 2013, the parish was reportedly down to 75 members. Three months after the church was deconsecrated, it was purchased by a holding company branch of Cafua Inc., a Massachusetts-based developer of Dunkin’ Donuts restaurants.

Cafua never got to replace the church with a Dunkin’ Donuts, however, as the city council responded to public outcry by rezoning the property before the company could submit a development plan. Among other things, the new Main Street Community Commercial Zone, established in May 2014, outlawed drive-thru windows within its borders. Meanwhile, half of the church property was placed in the Residential A zone, which limited residential housing to four units per acre.

Cafua eventually moved its Main Street Dunkin’ Donuts next to Sawyer Park to the site of the former Wok Inn restaurant. It has since paid more than $12,000 per year in property taxes ($13,499 at the current $18.50 mil rate) on the St. John’s lot.

The housing authority reportedly has the property under contract for $1.2 million.

The new building, which will include 7,214 square feet of commercial space on the ground floor, has been described by housing authority officials as a $9 million construction job. Assuming the city were to assess the property in that ballpark, it would realize roughly $166,500 in property taxes each year at the current mil rate – $124,875 of which would be returned to the housing authority, with $41,625 going directly to the school budget.

The ground floor commercial space is slated to be put into a condominium-style ownership, meaning it will not be part of the new TIF. Also to be split off and taxed at full rates are three small house lots to the rear of the St. John property that South Portland Housing Authority Executive Director Michael Hulsey has said will be marked off and sold as part of the site preparation.

Meanwhile, some councilors noted that state TIF law, created in 1977, establishes what Councilor Claude Morgan termed “an invisible dome” over covered development. That dome effectively shields all property value realized by new development from inclusion in state assessments. And, because state education subsidies are calculated largely on that assessment, the practical effect of a TIF district is to make a municipality look less well-off than it is in reality, helping to preserve some state dollars it might otherwise lose out on to neighboring communities.

For members of the council, new tax dollars to be realized on the commercial space and three new house lots, and money saved in state education funding, will more than make up for any losses in property tax revenue returned to the housing authority.

“If there’s any more tax burden because of it, I’m not sure that they don’t balance out,” Morgan said.

There was an additional reason why housing authority officials asked for the TIF deal. Funding its new housing project depends on recovering some of its construction costs via refunded property tax dollars. To get the project off the ground, South Portland Housing Authority will need to reap at least some of its financing from the Low- Income Housing Tax Credit program administered by Maine State Housing Authority.

“The project applications received by Maine Housing are scored on a points system and because of the limited tax credits available, only two to three projects are typically funded each annual application cycle,” Morelli wrote in a memo to the council.

Last year, the city council approved a similar TIF for Avesta Housing for its proposed 64-unit affordable housing complex on Westbrook Street. That application “just missed” a financing award from Maine Housing and Avesta is expected to re-apply this go-round, Morelli said, adding “(South Portland Housing Authority) believes (its) project will score well.”

A TIF deal will help in that regard, Morelli said, as having such a deal in place garners extra points from Maine Housing in scoring process. That’s because a TIF deal is viewed as public policy support and shows, “how much skin in the game” South Portland has, Morelli said.

Even so, not everyone was motivated by the need for extra application points alone.

“I do not care about the points, frankly,” Morgan said. “For me, the driver is that projects like this, with TIFs, have been very successful for our city. I do not see why this (one) would not be the case, as well.”

Audience members who spoke urged consideration of the Maine Housing application.

“The affordable housing crisis is definitely here in South Portland and it’s not going to get any better,” said Cara O’Claire, who lives in the Port City Apartments on Latham Street.

“To provide this added asset to the application for something that is really needed in this city and is going to benefit it in multiple ways, I would ask for (council) support,” she said.

“If you’re going to do a job, do it well, and this is part of doing it well,” said Devin Deane of Thirlmere Avenue. “The council has already voted in favor of this project (with the zoning change). Now let them get the funding to do it exactly the way it should be done. It will be a benefit to the neighborhood.”

Not everyone supported the TIF change. Micah Engber of Sunset Avenue said Deane was, by his count, one of only two neighborhood residents in favor of the project, from about 14 who spoke in May, when the council moved the church lot into the new Conditional Residential and Limited Commercial Use District G, granting it far greater housing density than previously allowed on site to clear a path for the project to happen.

“The community did not want this,” Engber said. “And, well, I guess the camel got its nose into the tent again.”

“Everybody who has made the argument for this has made some wonderful, beautiful, emotional arguments. But they are not logical arguments, and we need to make our decisions based on logic, not emotion,” Engber added. “Affordable housing is an important thing and, yes, we do need to have it, but we don’t need to be giving out corporate welfare and making those who do not want to pay for it, pay for it with their tax dollars. That’s not fair at all.”

Engber’s argument was that money refunded to the housing authority will have to be made up by rank-and-file taxpayers to cover the difference in increasing city and school budgets. Moreover, he said, if South Portland Housing Authority could not make the numbers work and at least break even without the TIF and/or the Maine Housing award, then it was paying too much for the property. In that case, he said, the sale should go to some other developer who’d put in something that might allow a better return on its investment.

“They (SPHA) want a tax break. They want a TIF. What they want is corporate welfare,” he said. “They want my taxes to go up in order to pay for them to put in this affordable housing project.”

However, Rose said if the sale went to another church, or some other qualified nonprofit, the property would fall right back off the tax rolls, costing the city everything it had gained with the Catholic church’s sale to Cafua.

Besides, he said, whatever cost the TIF deal might transfer onto the backs of residential property taxpayers, if anything, was worth the price.

“Spread out across the entire city, it might be a cent or something that each of us is contributing,” he said. “I’m willing to contribute that so this project can go forward.”

Ultimately, that appeared to be the view of the entire council, even those like Morgan and Mayor Linda Cohen, who had came down against the earlier zoning change, having sided at the time with neighbors who called the SPHA proposal out-sized next to their homes.

“I did not vote in favor of the zoning, but the majority of the council did,” Morgan said. “And, so, now that that’s in place, it’s time for me to pull my oars in the same direction and make sure this is the best possible project with the best possible outcome.”

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