Shown is a rendering of a proposed affordable housing development at The Downs in Scarborough that is geared to people with mobility issues. Courtesy rendering / 3i HoMe

The Scarborough Town Council voted 6-1 in favor of a credit enhancement agreement (CEA) with 3i Housing of Maine (3iHoME) and Preservation of Affordable Housing (POAH) on Dec. 6. The agreement aims to support the development of a state-of-the-art accessible apartment community known as 3i Housing of Maine (3iHoME) at the Downs in Scarborough.

The project, 3i Housing of Maine (3iHoME), will be located at the corner of Downs Road and Market Street in The Downs in Scarborough. The Omnibus Downtown Tax Increment Financing District enables local approval of CEA for incentivizing development within the district. The building proposed will have around 67,845 square feet and will have four stories on a 1.25-acre parcel. 3i Housing of Maine is a 501(c)(3) nonprofit organization working to create independent community-based living options through affordable housing.

A CEA is a financial mechanism that may be used within a TIF district to compensate a developer or business fully or partially for approved development project costs using Municipal Tax Increment Financing (TIF) funds. TIF Tax Increment Financing is a flexible finance tool used by municipalities to leverage new property taxes generated by a specific project or projects within a defined geographic district.

“The request is for a 50% credit enhancement agreement for 15 years,” Town Manager Thomas Hall said.

Karen Martin, executive director of the Scarborough Economic Development Corporation, provided an overview of the project in a memorandum, stating that the proposed CEA would reimburse 50% of the property taxes to 3iHoME. Martin said, “For every $1,000 of public investment, the project can leverage an additional $15,000 in financing from other sources.” The project timeline will depend on when the POAH/3i team is able to secure financing from the state and other sources. “They have consistently advised that they are hopeful that they will be able to break ground later this year.  The determination on financing through MaineHousing should be known any day now,” Hall said.

Council Chair Nick McGee noted this would be the second CEA on the property. “Yes, there’s two CEAs in play here,” McGee said. One of them is The Down’s CEA; “they get 40% regardless of what’s going in, wherever its going in that Down’s area. The request is coming from our current applicant is for a CEA of 50% that is to help offset their operational costs. … Ninety percent  of the tax revenue generated is going back to either The Downs or the developer in front of us,” McGee said the 3iHoME/POAH CEA as a means to support operational costs. McGee said, “It’s not a charitable contribution but it’s actually ability to borrow.”

Susan Hamill expressed concern about the financial burden on Scarborough taxpayers. If the CEA is granted, she said, the project will place a great financial burden on Scarborough taxpayers while The Downs benefits and collects their 40% CEA. “Who has the job ensuring policies like this are followed? There was no attempt to do financial analysis on the cost to serve as required by policy. The 10% remaining of the tax revenue is available to offset any cost to serve. But when you consider that this is 51 units including four three-bedroom apartments and 16 two-bedroom there will be cost to serve the children who attend Scarborough schools. That 10% tax revenue will average $15,000 per year. How does that cover the cost to serve even one student? The Town Council has not done its job on this item. It did not follow our policy and it has done no analysis on the financial impact and cost to serve,” Hamill said.

Town Manager Thomas Hall acknowledged the limitations of the current policy, designed for traditional economic development TIFs, and suggested the need for a separate policy catering to affordable housing TIFs. “The preservation for affordable housing is the developer, and so they are the recipient of the credit enhancement agreement,” said Hall.

Councilor Jean-Marie Caterina said, “I know I’ve made it very clear that I support this project and I don’t have a problem with the CEA at all.”

Councilor April Sither and Councilor Karin Shupe said they also supported the CEA to move the project along. The second reading passed 6-1, with Councilor Don Hamill casting the lone dissenting vote.

Former Planning Board member Bill Shanahan, also supported the project. “I’d like to speak in favor of the project. This project is even more compelling because of the vulnerable population that is designed to serve, so I’m very much in favor of it.”

The project now moves forward, subject to the anticipated funding awards from MSHA and the subsequent construction timeline.