Portland officials are proposing development of a housing project in the Bayside neighborhood on land now occupied by the city’s public works department.

It is the first city proposal for the land, which also is being eyed by private developers and nonprofit agencies. The public works department is moving away from the downtown area to allow redevelopment of the neighborhood.

The City Council’s Housing and Community Development Committee could decide as soon as Wednesday to seek proposals for a “workforce housing” project on nearly three-quarters of an acre on Hanover Street. Workforce housing is homes that are not federally subsidized for low-income buyers but are sold at less than market prices, which are now out of reach for many working families.

The Bayside neighborhood has had an influx of affordable housing developed by the nonprofit Avesta Housing, the state’s leading developer of affordable housing. The group uses federal and state subsidies to develop projects like Pearl Place and 409 Cumberland Avenue, while keeping them affordable to low-income residents.

Meanwhile, 440 market-rate apartments are planned for Somerset Street in the coming years as a result of the Miami-based Federated Cos.’ “midtown” project.

The proposed workforce housing would seek to fill the gap between federally subsidized developments and market-rate units, according to Jeff Levine, the city’s planning and urban development director.

Sales prices were not included in the proposal, but Levine said the units would be restricted by deed or some other covenant for families making up to 100 percent or 120 percent of the area median income, which for a family of four would range from $75,000 to $90,000.

Steve Hirshon, president of the Bayside Neighborhood Association, said there is a tremendous need for that type of housing in Bayside, which has a history as an industrial neighborhood and has become a hub for social services.

“Our neighborhood needs more families,” Hirshon said. “We need more people who are invested in the neighborhood.”

According to a draft proposal, the city would be looking for someone to redevelop 65 Hanover St. and 52 Alder St. as a single four-story building. The site is located near downtown, Deering Oaks and Interstate 295. The development would include 45 owner-occupied, two- and three-bedroom units on the upper three levels. The ground level would be used for a restaurant of retail use, and 45 parking spaces would be provided for residents.

The proposal says the city would consider making funding available for the development, but would give “strong preference” to proposals that consider the value of the property as the only subsidy. In this case, both properties have a combined assessment of nearly $797,000 and total nearly 30,000 square feet.

A similar competitive bidding process would be used for 71 Hanover St., but the city must first come up with a plan for relocating its salt shed.

The city set aside $3.05 million in capital funds to begin relocating several public works departments out of Bayside starting July 1 to a new facility at 212 Canco Road. However, that move has been delayed, due to uncertainty surrounding the city’s General Assistance program.

The state has told Portland, as well as other communities, to stop providing aid to undocumented immigrants, but Portland has continued to provide assistance until a legal dispute is settled. The city has estimated that, if it loses the court case, it could cost the city up to $9 million.

Public service operations, such as the traffic division, originally scheduled to move this year are still in the buildings the city is looking to redevelop, according to City Hall spokeswoman Jessica Grondin.

Relocating public services will eventually free up a larger swath of land in Bayside for redevelopment, including the lower garage at 86 Hanover St., commonly referred to as the former general store.

“We’ve gotten a lot of informal inquiries,” said Levine. He noted that a few area businesses have expressed interest in using the land to expand, but he could not recall specifics. “I would say interest is high on the peninsula in general, but certainly it’s a good location.”

Already, a small-scale manufacturing space for college graduates and a 250-bed homeless shelter have been floated as potential reuses for the site, but those ideas do not seem to have generated much interest from the committee members.

“I am not advocating either of those outcomes,” said Councilor Kevin Donoghue, who chairs the committee.

Tom Blackburn, the owner of Maine Construction Services and a board member of the nonprofit Creative Portland group, has been advocating for a makers space at 65 Hanover St., where college graduates could use state-of-the-art equipment that would be difficult for them to acquire on their own.

However, that project – dubbed the Portland Arts and Creative Enterprise, or PACE, Center for Innovation and Design – would have involved the University of Southern Maine, which has been cutting programs to balance its budget. “The timing is not good at this point,” Blackburn said.

Blackburn said he unsuccessfully tried to persuade the committee to postpone its housing proposal so USM could elaborate on its desire to be a metropolitan university. With the city looking for housing at 65 Hanover, Blackburn said he will focus on acquiring the nearby site that was once a general store.

Preble Street, a nonprofit social services agency, is continuing to work with the city toward building a new shelter with 250 beds and a soup kitchen for the homeless on the site, according to Mark Swann, the nonprofit’s executive director.

Swann said he came up with the proposal after the city approached Preble Street about finding better ways to work together. A new, consolidated shelter would allow the city to vacate the Oxford Street Shelter and Preble Street to vacate its Resource Center at the corner of Preble and Portland streets. That would also free up additional land for development, he said.

Swann said a new shelter would help accommodate the existing number of homeless people in Portland. The city’s existing shelter for men can only house 152 people a night, forcing dozens more to sleep on floors and in chairs at other locations throughout the city.

“There’s a significant gap that needs to be addressed,” Swann said. “We’re trying to meet the existing needs in a way we think will be much more effective, efficient and humane.”

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