PORTLAND – A city councilor is opposing plans to use $9 million in public money to help a developer build a $38 million mixed-use project in the Bayside neighborhood.

Councilor Cheryl Leeman said the public subsidy amounts to a “sweetheart deal” for the Federated Cos. – even better than some controversial tax increment financing deals, which return property taxes to developers for as long as 30 years.

“TIFs are nothing compared to this,” Leeman said. “It’s such a huge, enormous subsidy, unlike any I have ever seen before.”

Leeman serves on the council’s Housing and Community Development Committee, which will publicly review the proposal for the first time Wednesday. Other city councilors are comfortable with the deal.

Last year, Florida-based Federated Cos. entered into a purchase and sale agreement to buy seven lots totaling 3.25 acres of city-owned property along Somerset Street for $2.3 million.

Since then, company and city officials have met privately to work out the details of a public-private partnership for the project, which would help to fulfill a vision for Bayside that includes market-rate housing, retail space and offices.


Details of the development were not disclosed until recently, when Federated Cos. proposed seven buildings and two parking garages in two phases.

The first phase would consist of 10- and 12-story buildings and a parking garage with at least 700 spaces. The two towers would have 160 to 176 housing units. Also planned is 37,500 to 41,650 square feet of retail space.

The parking garage, with commercial space, would cost about $15 million to build, according to a memo to the council committee, dated Friday.

The memo says the city would provide $9.07 million to Federated Cos. “in the form of a grant” to help build the garage. Of that sum, $8.2 million would be from a low-interest loan through the U.S. Department of Housing and Urban Development that would have to be repaid by the city.

The city plans to use new property-tax revenue generated by the project to pay down the loan, according to a memo to the committee from Greg Mitchell, the city’s economic development director.

Using HUD funding to build a parking garage isn’t unusual, said the department’s spokeswoman, Rhonda Siciliano.


“What is unusual here is that, rather than the city itself constructing the parking garage, or loaning the funds to a private developer, Portland is granting the funds for this garage to be constructed and owned by a private developer,” Siciliano said.

The deal was structured that way because city councilors have dismissed the notion of owning and operating another parking garage, Mitchell said. The city now owns and operates two garages.

Mitchell said the council approved using $9 million to build a similar parking garage for MaineHealth, but the project didn’t happen.

The investment is justified because Federated Cos. is building more than the 200 or so parking spaces that would otherwise be required, and is agreeing to keep at least 200 spaces open to the public for 30 years, said Mitchell.

“This is building for the future,” he said, speculating that the garage would draw more development to the area.

Siciliano said the interest rate on the loan is pegged to U.S. Treasury bonds, so the exact rate that Portland would pay wouldn’t be known until it borrowed the money. The city has estimated that the interest would total $2.8 million over 30 years.


Leeman said the city should have some ownership of the garage, given the level of subsidy. At the very least, Federated Cos. should pay the city back for the loan through garage operations, rather than property tax revenue, she said.

Federated Cos. could not be reached for comment Tuesday afternoon.

Councilor Kevin Donoghue, who is on the Housing and Community Development Committee, said he isn’t enthusiastic about subsidizing a parking garage, but the city persuaded the developer to build nearly 200 units of housing at the same time.

“By guaranteeing the creation of these apartments in the same construction phase as the parking garage, the support is effectively spread to the entire project, including far more housing than was contemplated,” Donoghue said.

Committee member Edward Suslovic said he is excited that the project is finally ready for public review. He hopes fellow councilors will be equally supportive of the proposal as it stands.

“I think we have pounded this one nearly to death,” he said.


The committee will make a recommendation to the City Council.

Councilor John Anton said the city’s support is appropriate because the developer has a project that is in line with extensive community planning efforts.

The public money is “absolutely critical to the redevelopment of Bayside,” said Anton, who doesn’t think the city should own or operate any parking garages.

Federated is obligated to build only the first phase of the development, raising the possibility that the property could be sold.

There is no timeline or estimated value for the second phase, which would include 250 to 268 two-bedroom apartments and 180 to 196 one-bedroom units.

Another garage would be built, with at least 340 spaces, and nearly 50,000 square feet of retail space would be developed.


This story was updated at 11:30 a.m. Sept. 12 to correct the status of Federated Co.’s deal for the seven lots. It has entered a purchase and sale agreement for the property.


Staff Writer Randy Billings can be contacted at 791-6346 or at:


Twitter: @randybillings


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