By Adam Swift
City leaders are negotiating a tax break for the developer of the Suffolk Downs development that they say could kickstart construction on the site.
The mayor and the director of planning and community development brought the potential deal for a Tax Increment Exemption (TIE) before the city council Monday night. The proposed 15-year agreement would mean a total tax break of about $15 million for HYM Development for its Portico high-rise residential development. However, Planning and Community Development Director Tom Skwierawski said the city is also negotiating a separate agreement that could see the developer returning up to $4 million or more to the city once it meets certain site-wide development goals, as well as ensuring increased union jobs for Revere residents.
Councillor-at-Large Juan Pablo Jaramillo introduced a successful voice motion requesting the mayor continue negotiations with HYM to potentially double the $4 million coming back to the city from the developer.
The council tabled the communication on the TIE and is expected to take up approval of the final agreement at its May 12 meeting.
Monday night, a number of councillors raised concerns about the potential tax break, the current status of the Suffolk Downs project, and how it will affect the city’s funding of the new high school project.
“On Feb. 10, the Revere City Council approved a Housing Development Incentive Program (HDIP) District at Suffolk Downs,” stated Skwierawski. “As discussed, this tool provides a housing developer with the opportunity to receive both state tax credits and to enter a local Tax Increment Exemption agreement with the City of Revere. This TIE agreement exempts the value of improvements on a housing development for a period between five and 20 years, exempting between 5 to 100% of the value created on a new development.”
The draft agreement proposes an increment of 50 percent for a period of 15 years.
“The intent was to get this tool approved for use at Portico, the 473-unit development which, hopefully with the support of HDIP, will break ground later this year,” Skwierawski said.
The proposed agreement also has a sunset clause, where the terms of the agreement would expire if construction is not underway before the end of the year. It also includes a clause where abatements on the property cannot be sought within the first 10 years of the agreement.
In addition, the city is working on the separate development agreement with HYM outside the scope of the TIE, Skwierawski added that includes the additional payments to the city tied to construction dates of other Suffolk Downs projects and other benefits.
Skwierawski said the TIE agreement is necessary for HYM to receive state tax credits on the Portico project, and must be submitted to the state by May 13 to be included in the next round of HDIP state tax credits.
“If they do not meet this round, it would likely delay this project by another construction cycle,” he added.
Councillor-at-Large Michelle Kelley raised a number of questions about the TIE, and said specifically that she would like to see language about construction starting by the end of the year tightened up.
“This whole thing rubs me the wrong way, because I began asking questions about this project about a year ago,” said Kelley. “I was concerned about the progress, or the lack thereof, the viability of the project, and every time I raised my concerns, I was told, oh no, these are just rumors, there is nothing wrong, everything is great there. Now, either that was, best case scenario, inaccurate, or worst case scenario, I was being deliberately misled.”
Now, Kelley said, the city council is being told that it has to pass the tax incentive plan in order to boost the development.
“I am not 100 percent comfortable with anything that has to do with this project now, which upsets and saddens me, because I want the project to be successful because we desperately need the revenue to fund the high school,” she said. “Everything was going fine until this tax increment plan became available, and now all of the sudden it is available and they need this money to get this going again because we need money to fund the high school.”
Mayor Patrick Keefe noted that the sluggish economy and construction market is an issue throughout the Northeast and the country.
“It is not what we ideally planned on in 2016, and I understand that there are pessimistic and optimistic views on any large-scale plan,” said Keefe.
With the tax incentive plan, Keefe said HYM and the city can hopefully push the Portico project forward, which would in turn spur the continued long-term development of the site.
“I say this all the time that 50 percent of 100 is better than 100 percent of zero, and that is unfortunately what we are facing,” said Keefe.
Councillor-at-Large Anthony Zambuto said that as a long-time backer of the Suffolk Downs project, he finds himself in a tough position relative to the tax break and the funding of the new high school.
“I am worried about the fiscal health of the city, and I’m sure you are, too,” Zambuto told the mayor. “I see a problem down the road here and we are at a crossroads and I’m not sure how we deal with this.”
Keefe noted that the TIE is a one-time deal for the Portico high-rise project and would not be part of future development at Suffolk Downs. He added that neighboring communities, including Lynn, have approved larger tax breaks to spur construction of large-scale projects.
Both Ward 3 Councillor Anthony Cogliandro and Council President Marc Silvestri raised some concerns about the TIE, and noted they wanted to make sure that the negotiations ensure increased union jobs for Revere residents on the project.
Several councillors also noted that the city should take a look at costs associated with the $500 million high school project. About half of the cost of the project is due to be reimbursed through the state’s school building authority.
“I think we need to go from a Cadillac to a Camry (when building the school) because we are going to be losing some money,” said Ward 1 Councillor Joanne McKenna.
Keefe stated that the next school building committee meeting will include value engineering for the project which could total up to $20 million in savings. He added that the project’s contractor has also brought recent school building projects in under budget without touching contingency funding.
The council approved Jaramillo’s motion to ask the mayor to ask for additional money from HYM in return for the tax breaks, but some councillors said they were wary to show their hand by putting a dollar figure to the request.
“What this motion might do is send a message to the developer that we’re not too happy about these terms and it might open the door for further negotiations,” said Kelley.
Keefe said he has heard the concerns of the council and understands its wishes.
“We’ll go back to the table and continue to negotiate for more in every facet, including the economic facet,” said Keefe.
