BIDDEFORD — A project to construct 71 apartments in the Biddeford mill district has moved another step forward, and could progress more this week.

On Aug. 20, the Biddeford City Council approved an agreement to temporary take ownership of one of the two buildings from property owner Draft Room, LLC, to use of a federal brownsfield grant to conduct environment clean-up.

The exchange agreement and master lease passed the council with a 4-1 vote, with Councilor McCurry in opposition and Councilors Robert Quattrone Jr., Norman Belanger and Laura Seaver excused.

Then on Wednesday, Sept. 4, Draft Room will appear before the Planning Board. The board will consider the preliminary subdivision/site plan for renovation of the buildings at 24 Pearl St. to include commercial uses on the lower levels. Plans call for more than 13,000 square feet of commercial space and the retention of some commercial tenants. In addition, 71 one-bedroom apartments on the upper levels are planned, 10 percent of which would be affordable units.

In order to use a $200,000 Environmental Protection Agency Brownfield remediation grant to remove lead pain and asbestos in buildings #3 and #4 of the Riverdam Mill, the city most own the buildings. The grant is to be administered through the Southern Maine Planning and Development Commission.

The entire cost of the project will be about $400,000, according to Planning and Development Director Mathew Eddy. The remaining $200,000 to complete the work will be supplied by Draft Room.

The city will enter an exchange agreement and master lease with Draft Room, Eddy said. No city funds will be used for the lease or the lead paint and asbestos removal.

The exchange agreement allows the city to take temporary ownership of the property and use the federal funds. “And in that time period there’s a master lease agreement,” said city attorney Keith Jacques, “because the city doesn’t want to be managing tenants and so the master lease agreement puts the burden of managing the tenants with the developer.”

“Upon completion of our share of the work, the land and structures will be conveyed back to Draft Room so that they may continue in their redevelopment of Riverdam,” Eddy said.

On Aug. 20, some members of the City Council said they were concerned that the city might invest funds but the development project would stall.

“What I’m concerned with is that we go through this whole process, do the remediation, and there’s still no guarantee that this would even start?” asked Councilor Marc Lessard. “Is that possible?”

“That certainly is a possibility,” Eddy said, but added, “I don’t foresee that happening, in particular because they own the property. They’re intent on developing.”

“If this remediation gets done, and gets rid of a cancer on the building, that certainly makes the building more valuable to be able turn around and flip it and sell it,” Lessard said. “And if that were the case and if they were to decide to do that, then what happens to our investment in the building, does it get recouped in the sale?”

On May 7, the City Could approved a joint development agreement with Draft Room. Under the agreement, the city would provide $500,000 for the demolition of the southwest corner of the building and would be responsible for repairs and maintenance of the easements to the RiverWalk and a river retaining wall. Removing the corner of the building will allow for the walk to sit on the wall, not cantilever over the Saco River, Eddy said. It will also provide an area to create a new public space that will become part of the RiverWalk design.

The city would receive easements from Draft Room for the further development of the RiverWalk, including ADA access to the RiverWalk through elevators within the Riverdam building, in perpetuity. The owner would be responsible to maintain the elevators and access to them within the building, Eddy said.

“We would not be putting in a half million dollars in that project until such time as they’re pulling permits to do the project,” City Manager James Bennett said. “And so they only thing they would have is the $200,000 that we’re receiving from the federal government as a pass through to do whatever they can do up to $200,000.”

Councilor John McCurry, who was the only one to vote against the exchange agreement on Aug. 20, said he didn’t think that the city owning the property temporarily to get brownfield funds to remediate part of the Riverdam buildings “passed the straight face test.”

“In my mind,” he said, “it’s just a shell game and (we’re) saying hey Mr. State we’re just stealing your money and giving it to these (guys).”

However, Bennett said, “It’s common for communities to take properties that have an unlikely unmarketability to use this method in order to be able to (clean up) brownfields. … It’s not like something that’s against the rules. It’s been identified as an acceptable methodology to achieve the results the feds want.”

Also on May 7, the council approved creation of the Riverdam Municipal Development Tax Increment Financing District. Both the TIF and joint development agreement passed 7-2, with Councilors John McCurry and Robert Quattrone Jr. voting in opposition in both instances.

Under the Tax Increment Financing, or TIF, agreement, the council grants a credit enhancement to Draft Room to aid with development of Riverdam Mill, which has been described by city officials as one of the more problematic properties in the city’s mill district.

The TIF credit enhancement would shelter the increased value of the redevelopment of the property for 20 years, so that aid from the state for education and for the city’s general fund isn’t dramatically reduced and also so the city doesn’t have to pay a much larger share of the York County tax bill. “Because of the nuances within state law, nearly 50 percent of new taxes that are generated from new development is lost due to a tax shift,”

Bennett said in a memo to Biddeford Mayor Alan Casavant and the Biddeford City Council dated March 29.

Over a period of 11 years, the credit enhancement would refund to the developers $1.9 million in property taxes that comes from the increased value of the property after redevelopment, money which would otherwise go to the city. The city would retain about $19,000 it currently collects in tax revenue for the property.

Bennett anticipates the value of the property to increase from $1 million — the current value — to about $10 million when the project is completed.
In addition to the current $19,378 in taxes per year that would go to the city’s general fund for the life of the TIF, more than $1.4 million of tax revenue produced during the 20 years by the new value from the project would go into the city’s TIF to pay for improvements in the downtown and mill district. The amount going to the city could be even higher “if the value of the building increases at a rate higher then we have projected,” Eddy said in an email on May 17.

In Bennett’s memo, he said the credit enhancement is necessary to push the project forward. “Several different parties have made significant attempts to rehab this building and make the project(s) work financially. Each party eventually walked away. The City has had intimate knowledge of each party and their financial modeling. The only conclusion is that the market rents are not high enough for a rehab project to work. Left to the private market place, the building will remain much as you see it today.”

The developers plan to start work on the project later this month or in October, Eddy said.

– Managing Editor Dina Mendros can be contacted at 780-9014 or dmendros@journaltribune.com

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