Portland’s Economic Development Committee recommended the City Council approve tax increment financing and credit enhancement agreements for a proposed affordable condominium development in the Parkside neighborhood.
The project proposed by developers Tom Watson and Renewal Housing Associates would include 23 condos in a four-story building called The Goodwin at 104 Grant St. With the exception of one two-bedroom unit, all but one of the units would contain one bedroom.
Twelve of the 488- to 768-square-foot condos would be deed-restricted as affordable to people making 120 percent of the area median income under either the city’s inclusionary zoning rules and affordable housing TIF regulations, or the state Affordable Housing Subdivision Grant requirements. The remainder would be targeted to middle-income buyers.
With total development costs for the project estimated at $6.5 million, the developers are seeking an affordable housing TIF district and credit enhancement agreement to cover a construction loan of $1.05 million.
They proposed two options of how a credit enhancement agreement would be structured.
Under the first option, the city would return to the developer the actual annual costs of the construction loan debt service, up to 75 percent of the increased tax revenue generated by the property each year, with a total cap of $2.5 million. This was the option ultimately recommended by the committee.
The second option would have returned to the developer a fixed 75 percent of the increased tax revenue generated by the property each year, with a $2.5 million cap. In this scenario any amount returned to the developer over the actual annual debt service would be used to pay down the principal of the loan, so that the debt could potentially be paid off early and the TIF expired.
Economic Development Director Greg Mitchell told the committee in a remote meeting May 5 that with the uncertainty of future property values, a potential revaluation, and the fluctuation of the property-tax rate, city staff was concerned that with a more traditional TIF agreement, the city could end up paying more than the cap proposed by these options. Staff recommended that the agreement be approved, but didn’t specify a preference for either option.
An analysis by Marko Chick Advisors provided to the committee concluded that without the TIF agreement, the developer would lose the incentive to generate below-market-rate housing and it would be unlikely the project would be able to include the 12 affordable units.
The analysis says Genesis Community Loan Fund provided a letter of interest with terms for a $1.05 million affordable housing TIF loan, with only interest payable during construction at a rate of 5.75 percent, after which the loan would be amortized over a 28-year term.
During the remote public comment period, Karen Snyder of Portland suggested that more affordable housing could be achieved for $2.5 million by renovating existing structures.
In written comments, Portland resident George Rheault reminded the committee of the difficulty of finding buyers for the deed-restricted units Renewal Housing Associates developed at Onejoy in the West End. He also suggested that the TIF projections should be based on a more-current valuation of the property.
“Using a dated assessment value from 2004 may make the TIF model look better, but absent the lethal pandemic, the city’s tax coffers were about to get a lot more bang out of this long undertaxed parcel,” he wrote. “It is this opportunity cost that the council must consider as part of its TIF determination.”
The property owned by Tom Watson currently has a net taxable value of nearly $420,000, according to city records. It consists of a vacant one-story building that does not conform to the R6 zone standards. Watson was obligated to develop the site into at least 23 units of housing under the terms of a sale of city property in the Bayside neighborhood.
The committee chair, Councilor Justin Costa, noted that the terms of that sale did not stipulate that the 23 units had to be workforce housing, and the development team is voluntarily building more affordable units than the three required by the city’s inclusionary zoning ordinance.
He said he supported the first option, pointing out that it has three caps on the amounts the city would return to the developer over the 30-year term of the TIF: the actual cost of the debt service each year, 75 percent of the increased tax revenue generated each year, and a total cumulative payout limit of $2.5 million.
“It’s an experimental arrangement,” Costa said. “I think all of us should feel good about supporting this proposal, even as we say we would love that the price be even lower (and) we would love that the units be larger, all of those kind of things.
“But what we know is that by experimenting in this kind of way, we’re going to get housing that’s cheaper and more accessible to more people than we otherwise would,” he continued. “And that’s really the cost-benefit analysis that we need to engage in more than anything else.”
Councilor Spencer Thibodeau said the proposal is an “exciting opportunity” to bring for-ownership workforce housing to the area.
“Looking forward 30 years is kind of difficult to do because we’ve been thinking in terms of days, the last two months with our response to COVID,” Thibodeau said. “But I do think that this … is the right thing for Grant Street, the right thing for District 2 and the right thing for the city of Portland.”
The committee unanimously recommended the TIF district and Option 1 of the credit enhancement agreement to the full council.