February 22, 2013

Council OKs tax deal for hospital site


AUGUSTA -- City councilors unanimously approved a tax break Thursday to help a local firm redevelop the MaineGeneral Medical Center hospital building which is about to be left nearly empty when a new regional hospital opens later this year.

Without the tax-increment financing deal, officials fear the hospital would become a vacant white elephant looming over the neighborhood. With the TIF deal, and by putting in $23 million in private investment over the next several years, developer Augusta East Redevelopment Corp. hopes to bring new uses and new tenants to the building, which officials said eventually could provide as many as 1,000 jobs at the property, which sits across the Kennebec River from the city's downtown.

The proposal received no opposition at a public hearing Thursday and extensive praise from city councilors, who said providing the tax break now will result in future tax revenue on what, without the developer stepping forward, could remain a vacant building.

"The fear I had when MaineGeneral announced they were going to have a new building was the present hospital would be abandoned or torn down," Councilor Patrick Paradis said. "Everything leading up to this winter has indicated nothing would happen with that site. The only solution I see is this TIF and working with this developer to make this building come alive again, and put it on the tax rolls. At the end (of the agreement term), we'll recoup all our taxes. If not for this project, this hospital would become an empty shell and look like the former Augusta Tissue mill, and be a vacant lot in five years."

Augusta East Redevelopment Corp., a subsidiary of local company Mattson Development, recently purchased the East Chestnut Street building for $2.5 million from MaineGeneral, which is consolidating its core operations at a regional hospital under construction in north Augusta. The company is owned by Freeport resident Kevin Mattson and his partners.

Mattson's development company is seeking initially to get back 100 percent of the property taxes it would pay, to help defray the cost of converting the large building into new leaseable space.

Mattson's development company is seeking initially to get back 100 percent of the property taxes it would pay, to help defray the cost of converting the large building into new leaseable space.

It would get all of its property taxes back until 74 percent of the developable space is occupied by tenants. As tenants are found to occupy space, the developer would get correspondingly less tax revenue returned to it by the city over the life of the proposed 20-year agreement, shrinking to 50 percent of taxes returned once 95 percent of the developable space in the building is occupied. The parking lot areas of the hospital property would be in a different part of the TIF district, with only 50 percent of the property taxes on those parcels being returned to the developer over the 20 years of the agreement.

After the agreement ends in 20 years, the developer would be required to pay its full share of property taxes on the entire property. If investment and development progresses as the developer estimates, at the end of the 20-year period the property would be worth $27.6 million, and its annual property tax bill, in year 21, the first year the bill would be paid in full, would be nearly $490,000. Over the 20-year period, if development had taken place at the same pace without a TIF, the developer would have paid nearly $4.5 million more in property taxes. However, officials said without the TIF, the hospital building never would be redeveloped, and that new taxable value would not be created.

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