Markeshia Ricks Photo
Downton Alder Abby Roth with Hill Alder Dolores Colon after Monday’s meeting.
Tom Breen Photo
The Ninth Square.
The Board of Alders voted final approval Monday night a deal that aims to keep housing affordable in the Ninth Square.
The alders voted unanimously to approve a 20-year tax abatement for the new owners of a complex of buildings along Orange Street from Center to George. The vote came during the alders bimonthly meeting at City Hall
At least three alders expressed heartburn over the length of the abatement, but said they concluded the public benefits outweighed that loss of tax revenue.
Boston-based real estate company Beacon Communities, LLC, plans to purchase the 335-unit apartment complex from the tax-credit partnership that currently owns it. The tax-credit partnership is controlled by McCormack Baron (which originally developed the mixed-income, mixed-use district in the 1990s) and the Related Companies, which announced back in 2013 that they had failed to refinance tens of millions of dollars of existing debt on the property, and was looking to sell.
Earlier this year, Beacon Communities, which already manages the 339-unit Monterey Place in Newhallvile, beat out around 20 other competitors to purchase the building from the Ninth Square Partnership. It subsequently struck a deal with the city that would preserve the complex’s share of affordable units in exchange for a two-decade tax abatement. (Read earlier articles here and here that detail all of the terms of the deal.)
The deal includes the following:
• Beacon will pay the city $660,000 per year in property taxes for the next 20 years, with a slight increase kicking in every five years by a percentage equal to the increase in adjusted gross revenue over that five-year period.
• Beacon will reserve 56 percent of the housing units for tenants earning 60 percent or less of the region’s average median income, which is around $52,860 per year out of an $88,100 annual benchmark for a family of four. The rest of the units will be available for rent at market rates.
• Beacon will pay the city $2 million in return for the forgiveness of over $5 million in debt that the Ninth Square Partnership owes the city.
• Beacon will convey the 290-space parking garage at 270 State St. to the city in exchange for $3.6 million paid out over 30 years.
• Beacon will deed the surface parking lots at 31 and 39 George St. to the city for $80,000.
• Beacon will retain the complex’s current staff for a minimum of one year.
Downtown Alder Abby Roth said she had to weigh the human and the financial costs to the city, noting that a failure to strike a deal could have meant that the 189 units of affordable housing would have been lost to market rate housing and the opportunity to recoup any of the debt to the government likely lost.
She said she heard from constituents who impressed upon her the need to preserve affordable housing downtown and that the city couldn’t afford to replace the affordable Ninth Square units with new housing. She also heard from people who are staring down an 11 percent increase in their property taxes while developers come to the city looking for tax breaks.
“So the question is: Does this deal give too much away?” Roth asked. She concluded she determined that it did not.
She noted that although the city faces an estimated $94,000 in environmental cleanup needed on the surface lots it gets as part of the deal, it can still develop and make money on that land. Roth also pointed out that the garage that the city will get out of the deal is expected to generate about $360,000 a year, which would be a net positive against the $120,000 it is paying per year for the next 30 years.
“I wish it weren’t 20 years,” Roth said of the abatement. “But there are 189 affordable housing units with people in them right now, and if we didn’t support this, people would be harmed.”
Newhallville/Prospect Hill Alder Steve Winter expressed similar sentiments. He noted that Beacon plans to invest roughly $40,000 per unit in improvements. To construct a new building would cost about $200,000 per unit, he said. Like Roth, he criticized the 20-year abatement, pointing out that there had been no clear justification for it: Beacon had asked for a 30-year abatement; the city had settled on 20 years.
“I’m not certain the proposed deal is the best the city could have gotten,” he said. “But I believe it is a reasonable one.”
East Rock Alder Anna Festa said for her it came down to preserving those affordable units because the city needs more affordable housing, not less. She urged her colleagues not to forget that homeowners in town are facing an 11 percent increase in their taxes, but she urged them to support the deal.
“I feared that if we denied this that I don’t know what happens after,” she said.
Click the Facebook Live video below to check out the debate.
I'm all for a deal to save affordable housing but the real question is how many of these promises will actually be kept before the property is sold in a year or two to someone else that will come in and make them market rate units anyway? (See those $40,000 improvements per unit)
The city needs to find a way to front load these contracts to recoup some revenue in the first few years and give incentive for the owning corporations to stay invested in the property rather than develop and pass along for immediate financial gains.