Former mill city creates new tax programs to spur development

The partially dismantled MERC incinerator in downtown Biddeford could be a site for economic development. According to the city’s mayor, demolition could be finished by the end of summer. (David Arenstam photo)

The partially dismantled MERC incinerator in downtown Biddeford could be a site for economic development. According to the city’s mayor, demolition could be finished by the end of summer.


BIDDEFORD – Amid cheers and applause, the Biddeford City Council voted Dec. 12 to purchase MERC and permanently close the trash-to-energy plant that has occupied a prominent part of the downtown area since 1987.

The city quickly signed a sales agreement on Dec. 31 with Casella Waste Systems to officially acquire the 8.5-acre site adjacent to the Saco River.

Now, a little more than six months later, the plant stands idle and empty. The lingering smell is gone. The noise and the trucks are gone. There is just a dull, gray, 6-foot tall, steel portable fence that surrounds the property. Sometimes, on a crisp clear summer morning, it’s hard to tell where the pale blue siding on the building stops and the coastal Maine sky starts. Its almost as if the skeleton of the building refuses to give in – the site of so many disputes -it refuses to fall.

The Biddeford City Council held a public hearing Tuesday, July 16 and voted to approve two new Tax Increment Financing (TIF) programs, both of which are designed to assist commercial real estate developers build housing in the downtown area and the former mill area.

The MERC tower in the early morning light as workers labor Tuesday to finish sealing the remaining smoke stack. (David Arenstam photo)

The MERC tower in the early morning light as workers labor Tuesday to finish sealing the remaining smoke stack.

“Currently, there are two large TIF zones already defined within the city limits,” said Daniel Stevenson, director of economic and community development for Biddeford.

One is on Route 111, the Biddeford Crossing TIF, and the other is downtown in the mill district.

The zones were established by the city and approved by the state and, as Stevenson explained, “they were created as a way to encourage and promote development.”

The two economic zones also allow the city to shelter some of the assessed property values from the state.

“Each city or town is allocated state funds or revenue sharing based on their total assessed value,” Stevenson said. “These TIFs allow the city to keep 65 percent of the increased value out of that calculation.”

Stevenson said state statutes allow for at least two types of TIFs, one based on a geographic boundary, such as the existing Route 111 TIF, and one based on a specific development project.

“The public hearing and vote at the council meeting on the 16th is to separate the proposed TIFs from the existing ones,” Stevenson said.

In part, he said, this is because the proposed new TIF programs have different parameters. The first one has been labeled “the Lofts at Saco Falls Municipal Affordable Housing Development and Tax Increment Financing District & Development Program.”

Nathan Szanton and Robert Monks are the two principal developers, and together they hope to build 78 new rental units on property they own next to the space where MERC is located – 52 of them will be designated for low-income residents.

“When a developer comes to us and requests a TIF, it’s because they need the TIF to make the deal work,” Stevenson said. “Nathan Szanton gave us all of their (financial) documents showing all their sources of income for the project and the only way it worked is with a TIF.”

Stevenson said the tax program for the Lofts at Saco Falls is a 30-year rebate program. During the first 15 years of the TIF, property owners will pay the city property taxes based on 100 percent of the assessed value. The city will annually rebate 75 percent of the taxes paid.

Stevenson and Szanton both estimate the finished project will be assessed at $6.5 million.

“That’s nowhere near the assessed value today,” Stevenson said.

MERC 6 Mos. Later - 17

For the next 15 years, the Lofts at Saco Falls property owners will receive an annual rebate that decreases by 4 percent per year. In year 16 the rebate will be 71 percent. The next year the rebate will be 67 percent, and so on. At the end of 30 years, the property owners will not receive any type of rebate.

Stevenson said the 90,000-square-feet of property at The Lofts at Saco Falls, if used for residential space, would require 70 to 80 parking spaces. The city council also was supposed to consider at its July 16 meeting leasing that number of spaces to the project on the Maine Energy site. The city would lease the surface spaces at a cost of $40 per space, per month. The annual income from the lease of these spaces would be $38,400.

“These types of public, private investments are done all the time,” Stevenson said. “The city is paid more in taxes than if the property remained undeveloped, certainly more than they pay now, and over time, the owners pay 100 percent of the taxes.”

Szanton said the TIF would help close the gap between the costs of the project and the revenue. His company is also applying for low income housing tax credits through Maine State Housing.

“If neither project gets it, it won’t be funded,” Stevenson said.

The way it works, Szanton added, is that if the proposal for tax credits is accepted, his company would receive $900,000 worth of tax credits annually for 10 years – $9 million in total. The credits can then be packaged or “syndicated” and sold to investors for about $7.8 million. This money would be used to help develop the property.

The Biddeford City council, on July 16, approved the creation of a second new TIF program for a 43-unit affordable housing project at former mill building No. 19 of the Pepperell Mill Campus. The building is on the lower end of Main Street near the Emery Street intersection.

The city has labeled this program, “the Laconia House Municipal Affordable Housing Development and Tax Increment Financing District & Development Program,” and the main developer is Doug Sanford.

“The housing project was approved by the planning board last year, but in order for the deal to work, he requested a TIF,” Stevenson said. “I’ve seen his numbers too, and made the determination that it would work with a TIF program.”

Stevenson said the city then hired the firm of Moors and Cabot, an investment, audit, and consulting firm from Boston, to complete an independent review of the financial statements and TIF application. Moors and Cabot rendered an opinion confirming Stevenson’s analysis of the financial situation that the projects were both viable and feasible.

“They don’t tell me if it’s a good business decision for the city. They just tell me if it makes sense financially,” he said.

If approved, the TIF program for the Laconia House project will be in place for 15 years. The property owners will pay 100 percent of the taxes each year and the city will then reimburse them 50 percent.

“At the end of 15 years, the TIF will expire,” Sanford said.

Both Stevenson and Sanford expect the finished Laconia House project to have an assessed value of $5 million.

“For 15 years we’ll be paying taxes on a value of $2.5 million,” Sanford said when asked about the TIF. “After that … $5 million.”

Sanford said he expects each unit in his new project to have a value “somewhere near $50,000, and that’s probably more than most of the units already in the city.”

Both developers agree that building affordable housing is one of the keys to completing the projects today.

“I’d build market rate units if we could,” Sanford said. “But the numbers just don’t work. The price of the hot dog is what the market will bear.”

Area business owners agree the development may help the downtown in terms of occupancy, but for them, affordable housing is not the necessarily the right type of development.

“There have been two projects so far,” said Grady Sexton, owner of Gradys Radio & Satellite TV located on Main Street, across the street from Pepperell Mill Campus. “From Mr. Szanton we’ve seen zero customers, (Saco Falls property) and I think we’ve only seen one tenant from Mr. Sanford (North Dam Mills).

“I just don’t see how affordable is going to help,” he said. “The tenants can’t afford to pay market rate for the apartments. How are they going to have any extra money for the downtown area?”

Sexton bought the building his business occupies at 5 Alfred St. in 1998 and over the years he has seen Main Street and the political climate change many times.

“There have been some new businesses established, and I hope they stay,” he said. “But I don’t think affordable housing will help.”

Both the mayor and the city’s economic development office realize there are varying opinions about development, and that every day that passes with empty storefronts and buildings has a cost associated with it. According to Mayor Alan Casavant, MERC paid $900,000 per year in property taxes and city officials have worked to attract new businesses and commercial development to the center of the city to replace that lost income.

To make matters more difficult, the city will also receive less from the state each year in revenue sharing. According to Curt Koehler, Biddeford’s finance director, under previous state budgets, the city received as much as $1.6 million annually. Based on the current two-year budget that was approved by the state legislature, that amount will be cut by $410,000 during the first year and $502,000 during the second.

However, for Casavant and Stevenson, the general mood concerning the city remains upbeat and positive.

“Since we closed Maine Energy there has been a definite change in attitude … even before the closing, when there was just a hint that the plant would shut down, that triggered a huge increase in interest for development of the mill area,” Casavant said.

He cited the sale of the commercial building at the corner of Elm and Main streets as one of the promising economic indicators. However, that building continues to remain empty after a smoke shop briefly occupied one of the building’s storefronts.

As he has traveled throughout the state, Casavant (D-Biddeford, Kennebunkport), also a state representative, said there has been an increased buzz about the city and the possibility developers will come in and work with members of his staff.

“There have been a number of developers who have contacted John (Bubier, city manager) or Dan (Stevenson), directly about projects, and there are several projects now in front of the planning board reflective of mill development,” Casavant said.

“Doug Sanford has his plans for the Café Miranda and a hotel. All that is because Maine Energy is gone. Maine Energy stays and none of that happens.”

Casavant said he knew the first year or so would be “tricky” financially as MERC demolished the existing plant, cleaned up the site and developers sought the appropriate permits to rebuild the property.

Casavant said he’s heard from several people that Casella Waste has been removing equipment and clearing out most of the machinery in the plant that still had any value.

“I expect by the end of the summer the plant will be gone,” Casavant said. “The site then needs to be brought back to a neutral environmental position. Once that happens, the permitting process may begin.”

Stevenson echoed the mayor’s sentiments.

“Since the council took a leadership role to buy out Maine Energy, what we hoped and anticipated would happen, is happening,” Stevenson said. “We have both increased prospects and real deals coming.” Stevenson declined to give specific details at this time, but said the proposed development would come before the city council this year.

All of this takes time, and there are many pieces to the development puzzle, Stevenson said. “Development begets development and one of the things we need is a parking garage and green space.”

Sanford said he has heard this for some time, but still there are no concrete plans to solve the parking issue.

“I was told three years ago that we would have a garage,” Sanford said. “Then I was told this spring it would happen. Now, it’s July.”

Stevenson understands the frustration of the developer and said, “The garage is absolutely necessary and I see it as a catalyst that will spur further development. We will have a decision on it by the end of the summer.”

A presentation was made to the city council in December 2012 about building and managing a new garage. The initial estimate for the cost of the garage was a little more than $10 million.

“We hired Winton Scott Architects and Rich Associates to study the issue and it is clear we need to do this,” Stevenson said.

Delilah Poupore, executive director of The Heart of Biddeford, agrees.

“Everything you hear about Biddeford, about this area, is because of the signing,” Poupore said referring to the MERC buyout. “A turn has been taken here and we have a chance to do something special.”

Not everyone agrees that the current proposal for the municipal garage is the best plan, however.

“When this was first presented, I thought it was a good idea, but now I can’t support the current plan,” Brian Keely, chairman of the Biddeford Downtown Development Commission.  “Last I knew, it was going to be built in three phases and each phase was going to cost $10 million.”

For Keely, one problem with the current proposal is the allocation of the parking spaces to private developers. “I think there were something like 550 spaces in the first phase and only 50 or 75 of those would be available to the public,” he said. “The remainder were leased to a private developer who would rent them to his tenants. That doesn’t seem to help the downtown businesses,” he said.

The other concern Keely expressed is the cost associated with the project and the manner in which it would be approved.

“In total, it’s a $30 million dollar project and the proposal called for the first phase to be financed by TIF money from the Biddeford Crossing project. I just don’t think that’s a good idea,” he said.

Stevenson said he would like to see the city build the garage and develop green space within the urban core.

“We do not want to develop every single square foot of concrete,” he said. “If developers see we are committed to the process, that will only accelerate things,” he said. “But it all takes time.”

The proposal made by Winton Scott Architects and Rich Associates included a 2.5-acre city park. According to the company’s report, “It would give Biddeford much-needed open spaces for gatherings and activities for the hundreds of new office workers, artists, apartment dwellers and other city center workers.”

The proposed garage and housing projects are two new sources of revenue for the city. But it will still take time to plan, approve and build this new infrastructure.

Stevenson believes if things move along as planned, without any interruptions or construction delays, “the first new occupancy will take place in 2015.”

David Arenstam

About David Arenstam

Originally from away, but here to stay - Maine is my home and I love writing stories about the people and places from my end of the state. I am a teacher and writer and my first novel, "Homecoming: A Soldier's Story of Loyalty, Courage, and Redemption" is available now at www.BrysonTaylorPublishing.com