The Portland City Council voted unanimously Wednesday to seize by eminent domain a parcel in Bayside that was part of the now-defunct “midtown” project.

Councilors noted that the city had received a loan from the U.S. Department of Housing and Urban Development to build a public parking garage on Lot 6, 59 Somerset St.

But after working with a Florida-based developer for the last decade, neither the parking garage nor the associated housing and commercial uses have been built, even though the project had approvals for three years.

Although the project approvals have expired, Portland taxpayers continue to pay interest on an $8.2 million federal loan meant to help finance a public parking garage on the site. As of July, the city had paid more than $784,000 in interest, including nearly $633,000 in interest toward the garage, according to the city’s finance director.

That led to Wednesday’s action to reclaim 6,300-square-foot parcel using eminent domain.

“This isn’t something we do a lot,” Mayor Kate Snyder said. “There was a commitment (for a parking garage) made to the community, whether you were on the council or not. I look forward to making good on that commitment.”

City Councilor Belinda Ray, who represents Bayside, said that the parking garage remains “absolutely essential” for area businesses and residents. And she said the city could get creative with its garage design, making it a transportation hub for buses and other modes with affordable housing on top.

“There are a lot of ways we can make it compelling as a garage,” Ray said. “It’s quite clear it won’t happen unless we take the property and make sure it gets done”

The city chose the Federated Cos. to develop 3.25 acres of city land on Somerset Street in 2011. Its initial site plan, which included about 800 units of housing in four 165-foot towers, was approved in January 2014, but challenged in court by a group called Keep Portland Livable.

Federated Cos. scaled down the project to settle the lawsuit and received its site plan approvals in March 2015 to build three, four-story apartment buildings and a parking garage at 59 Somerset St.

In 2015, Federated floated the idea of converting some of the housing units into a hotel. That prompted the city to declare their contract as void and Federated threatened to sue. The impasse was resolved and Federated closed on the property in June 2016, paying the city $2.2 million.

The developer had three years from receiving its site plan approvals to apply for and obtain building permits before that approval expired. That deadline passed in March, 2018.

The project’s failure is the subject of ongoing litigation. Federated Cos. is accusing the city of a breach of contract – a charge the city strongly denies. The two sides were not able to reach a settlement, after two court-ordered settlement conferences.

Eminent domain allows a municipality to seize private property for public use. It’s typically used to acquire land to build public facilities, like schools or fire stations, or accommodate infrastructure projects, like running utility lines or building new roads. Often, municipalities threaten to use eminent domain to compel a voluntary sale. And when it is invoked, it can produce a strong public reaction, often ending up in court.

When seizing land by eminent domain, a municipality must pay the owner a fair market value.

An appraisal conducted on behalf of the city determined that Lot 6 had a negative market value, because of deed restrictions.

The city plans to pay three limited liability companies – two controlled by Federated Cos. and one called Redwood Development Consulting, which holds a ground lease – only $10 each for the property.

Only one person spoke during public comment. Brackett Street resident Steven Scharf said he opposes building a garage on the site and urged the city to post its appraisal online.

City Councilor April Fournier questioned whether the city would be able to build affordable housing on the site, instead of a garage.

City Manager Jon Jennings said that may be possible, if the city were to return the HUD loan.

Russell Pierce, an outside attorney hired to oversee the eminent domain issue, said that the fair market value for the remaining parcels would cost the city $13 million to acquire through eminent domain.

City Councilor Spencer Thibodeau said taking property by eminent domain is a power that the council does not take lightly.

“This is not a perfect outcome, but of the options before the council, I think this is a good one,” Thibodeau said.

City Councilor Nicholas Mavodones, who is the only councilor still serving who was part of the HUD loan process, said he hopes the move and subsequent garage construction will spur future development on the site.

“It’s important we take this step tonight,” Mavodones said. “I hope this gets us back on track for what we planned initially.”

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