January 27, 2013

Augusta hospital's owner seeks tax break to fund renovations

The soon-to-be-former MaineGeneral Medical Center needs work to draw new users, backers say.

By KEITH EDWARDS Kennebec Journal

AUGUSTA - The new owner of the soon-to-be-former Maine-General Medical Center hospital on East Chestnut Street plans to spend $23 million on renovations to lure new tenants to the building.

But only if the city provides a generous, 20-year tax break to help make it happen.

Mayor William Stokes said he believes that if Augusta East Redevelopment Corp. hadn't stepped forward to buy the building, no one would have. And without a tax break, known as tax increment financing, the prominent seven-story, 317,000-square-foot building on the city's east side would likely stay vacant and deteriorate, he said.

With the nonprofit MaineGeneral Health previously owning the building, the city wasn't getting any property tax revenues from the property anyway, Stokes noted.

"In my mind, without this TIF, there's no way anyone's buying this building," Stokes told city councilors when they discussed granting a tax break for the project during a meeting last week. "This building would be a white elephant in Augusta."

Augusta East Redevelopment Corp., a subsidiary of local firm Mattson Development, recently purchased the East Chestnut Street building for $2.5 million from MaineGeneral, which is consolidating its core operations into a new, regional hospital under construction in north Augusta. The company is owned by Hallowell resident Kevin Mattson and his partners.

Mattson's development firm is seeking to initially get back 100 percent of the property taxes it would pay to help defray the cost of converting the large building into something that could draw new tenants to fill the space.

As tenants are found to occupy space, a correspondingly smaller proportion of tax revenues would be returned to the developer by the city over the life of the proposed 20-year agreement, shrinking to 50 percent of taxes returned once 95 percent of the developable space in the building is occupied.

The tax break proposal is scheduled to be discussed at a public hearing set for Feb. 21.

The $23 million the firm would spend on the project would be private investment, not a bank loan, according to William Dowling, a representative of Augusta East Redevelopment Corp. and a former Augusta city councilor and mayor.

That's because, according to City Councilor Michael Byron, a former commercial lender, no bank would touch a deal as risky as redeveloping the old hospital.

"This deal is not bankable, that's why they have to go after private money to fund this," Byron said when the council discussed the tax break Thursday.

MaineGeneral Medical Center will pay rent to Mattson to remain in the building until the opening of its new $312 million, 192-bed hospital near Interstate 95. The regional hospital, scheduled to open in November, is designed to combine inpatient functions of its Augusta site as well as its hospital at the Thayer campus in Waterville.

Dowling said nationally, when hospitals are vacated, the buildings are almost never redeveloped for new uses, because of their layout. They have individual bathrooms in each room, and specialized infrastructure systems, making redeveloping them especially costly, he said.

Without a tax break, no developer would be able to afford to take the project on, Dowling said.

"You'd have to tear it down, or you'd have a vacant building, attractive to vandals," he said. "If not for us, that building would go undeveloped."

Councilor Jeffrey Bilodeau said he wanted proof that, without the tax break, the building wouldn't be redeveloped, beyond taking the developer's word.

Stokes pointed out that before striking a deal with the developer, MaineGeneral had tried to auction off the building but found that there was no interest whatsoever.

Kennebec Journal Staff Writer Keith Edwards can be contacted at 621-5647 or at:

kedwards@centralmaine.com

 

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