AUGUSTA — Big changes are coming to a prominent Augusta property that counts the State House as one of its neighbors.

Virginia-based developer FD Stonewater’s proposal for two new office buildings, one a massive 104,000 square feet and the other 26,000 square feet, and a 675-space parking lot at the former site of the state Department of Transportation’s maintenance facility at 109 Capitol St., goes to the Augusta Planning Board on Tuesday for a major development review.

The developer plans to demolish the large old green DOT buildings and build office space it will lease to the state, which plans to move workers from other buildings in Augusta to the new offices.

The plan now also includes the Maine Public Employees Retirement System, and its building at 96 Sewall St., on the northwest corner of Sewall and Capitol streets. That black-and-blue building, according to plans filed with the city, would be demolished to make way for parking for the new buildings.

The approximately 90 retirement system employees who work in that building would move into the smaller of the two buildings to be built in the FD Stonewater project.

Sandy Matheson, executive director of Maine PERS, said the agency’s current 24,000-square-foot building, which city records indicate was built in 1975, is in need of substantial repair and renovation. So leaders of the quasi-public entity agreed to a deal with FD Stonewater to transfer their building to the developer and lease space in the smaller of the two new buildings, on the upper, western portion of the 109 Capitol St. former transportation department lot.

“A lot of money needs to go into our current building, and we don’t think that’s a good use of our money, so we decided we wanted to become lessees instead,” Matheson said. “We had been looking at what to do (about the building’s need for major renovation, including new exterior siding) for several years. When everything is considered, we’ll be spending less if we lease.”

State workers would occupy the larger of the two buildings, which would be built on the lower portion of the lot, closer to the State House complex.

David Heidrich Jr., communications director for the state Department of Administrative and Financial Services, said about 520 state employees would move into the new building when it is completed, which is projected to be by July 2019. He said the vast majority of employees moving there work for the Department of Health and Human Services.

State employees expected to occupy the new facility, according to a letter filed with the city of Augusta from William Leet, director of the state Division of Leased Space, include 230 DHHS and Department of Administrative and Financial Services workers now located at 221 State St., 166 DHHS workers now at 242 State St., 91 DHHS workers from 19 Union St., 17 DHHS workers from the Marquardt building on the former Augusta Mental Health Institute grounds, and 17 DHHS workers from 244 Water St.

The state owns 221 and 242 State St., 19 Union St. and the Marquardt Building. It leases space at 244 Water St.

Heidrich said 221 State St., DHHS’s current headquarters, is outdated and has reached the end of its useful life and wouldn’t be occupied by state workers after the move. He said the state is considering several new potential uses for the property. He said 242 State St., after the move, would be used as “swing space,” becoming a temporary home to state workers in other agencies as they transition to new or renovated facilities. He said different state workers will occupy the space being vacated at 19 Union St.

DHHS workers within the Maine Center for Disease Control and Prevention, who previously were scheduled to move to the new building, will remain in their current location in Key Plaza in downtown Augusta, now that the state has reached a long-term lease agreement with the owner of that building.

Heidrich said the layout of the new building would be a mix of open office space and walled offices. He said it would be well-insulated and highly efficient.

The state would lease, not own, the building.

That’s significant for Augusta because when the state owns buildings, it doesn’t pay the city property taxes, because it is exempt. However, when the state leases space in a building owned by a private entity, the building owner must pay property taxes.

Ward 4 City Councilor Anna Blodgett, who is a city representative on the Capitol Planning Commission, a group that oversees development on the State House complex, said she looks forward to the new, taxable building being constructed.

“I think it’s great. My big interest is that it will be leased, so it will be on the tax roll,” she said. “And the new building should make a huge difference. (The current building) is so ugly and gross right now. I think it is a positive thing for that area.”

Some city officials said previously they hoped the project also would include uses other than office space. But Blodgett said her understanding of the proposal is that it would consist entirely of office space.

City Manager William Bridgeo said previously the developer has indicated it would approach the city to seek a Tax Increment Financing, or TIF, deal, which could decrease the amount of property taxes to be collected on the building for a set period of years.

The proposal is up for Planning Board review at the board’s 7 p.m. Tuesday meeting in council chamber at Augusta City Center. The property is in the city’s Institutional, Business, Professional and Local Business zoning districts, within which offices are a permitted use.

Developer FD Stonewater is partnering on the project with Scarborough-based contractor Landry/French Construction, which built the building leased to the DHHS and Department of Labor near the Portland International Jetport.

Heidrich said the state is pleased so far with the work of the developer and its partners.

“Their team has done an excellent job designing a facility that blends in well with the Cross Office Building and State House,” he said by email Friday. “While any new construction on this site would be an improvement over the existing DOT Fleet Services facility, we are particularly pleased that FD Stonewater had made a concerted effort to make this new building part of our west campus. I think there is a certain psychological value in having that sightline to the Cross Building and the State House. To me, seeing the capitol dome each morning is a reminder that we come to work each day to serve our fellow citizens.”

The state has been looking to get rid of the 10-acre, eight-building property since October 2014, when the DOT moved its maintenance operations to a new facility in north Augusta at 66 Industrial Drive.

Last March, state officials rejected all three proposals submitted in response to a previous state proposal seeking a developer to provide 225,000 square feet of state agency office space within 1 mile of the State House after determining they would not have saved the state money.

The state, in seeking a developer for the current project, specified it would pay $19 per square foot for space in the large new building.

FD Stonewater officials, in a news release, said the firm is a leader in designing, developing and owning facilities leased and occupied by government tenants.

Keith Edwards — 621-5647

[email protected]

Twitter: @kedwardskj