The city of Gardiner recently sold two lots in Libby Hill Business Park, the first sales since 2011 at the park the city built along Brunswick Avenue 15 years ago.

City officials say they hope the lots sold to Riverside Disposal earlier this month mean the more than $9 million in debt for initial construction and subsequent expansion will start paying off. Another lot sale is going to City Council next week.

Nearly half of the 28 lots remain vacant and unsold. Most of the empty lots were built as part of the expansion that began in 2008, just as the housing market crashed and led to the Great Recession.

City officials said the decision in 2006 to expand the park, taking on around $5.7 million more in debt, proved to be poor timing.

“I think the economy has to take a major share of the blame of why the park’s not filled yet, but I think also we may have gotten too ambitious,” said City Manager Scott Morelli.

A consultant’s report done around the time of the expansion painted a rosy picture of the subsequent years at Libby Hill, he said.

“Hindsight’s always 20-20. Some things sound like good ideas at the time, but — it’s like the FirstPark matter,” Morelli said, referring to the Oakland business park that 24 communities, including Gardiner, have lost more than $5 million on collectively.

“It sounded like a good idea at the time, but time has proven it’s been a financial drag on the city,” he said. “Long term, both of them will pay off, but in the short and medium term, both things have been tough to handle financially.”

Failing to sell lots meant the city not only lost out on the revenue from the sales, but it also meant not earning tax revenue from new buildings the city had hoped would be constructed on the lots by businesses.

City Councilor Logan Johnston, who joined the council about four years ago, said he’s excited about the recent sales because it appears buildings will be put up soon. He said it’s been a rough few years for the park, but the city is poised to gain now because the lots are priced competitively and the local and regional economies appear to be picking up.

Johnston said he’s sure people who decided to expand the park in 2006 wish they had slowed down a bit, but he thinks the project will ultimately help everyone.

“If I was sitting on the council at the time, I may have made the exact same conclusion, I’m not sure,” he said. “But to me, there’s no point in second guessing. We’re dealing right now with an improving economy. We’ve got the right park in a fantastic location — we’ve always known that.”

The city issued a $2.09 million bond in 1999 to pay for the clearing of approximately 140 acres of city land near Interstate 295 and for infrastructure costs, including bringing sewer lines down U.S. Route 201 and for the construction of roads in the park. Initial construction was helped by a $1 million federal Economic Development Administration grant and a $200,000 Community Development Block Grant awarded by the state. Additional federal and state grants also supported the 120-acre phase II expansion, along with another $4 million in local borrowing.

Substantial lot sales to Pine State Trading Co. and E.J. Prescott Inc. in 1999 helped the city sell around half of the park’s initial footprint before construction even finished.

But the first of the 12 additional lots from the expansion didn’t sell until 2011 when Oak Grove Cemetery purchased a lot for a crematorium. The next sale after that was 10.3 acres sold to Riverside Disposal this month for $208,000.

Morelli said the company plans to move its operation from Chelsea to the park. Representatives for Riverside Disposal didn’t respond to multiple requests for comment.

The potential sale councilors will review Wednesday may be using a new promotion from the city that allows businesses to put $10,000 down for the property and pay the rest off using credit enhancements from the city, according to Nate Rudy, director of economic and community development for the city. He wouldn’t disclose any details of the sale because it hadn’t been finalized.

The city created a tax-increment financing district for the park, meaning the tax revenue from its users is captured by the fund and can be designated for specific purposes. Four businesses or developers, including Pine State Trading and E.J. Prescott, receive credit enhancements. These are essentially tax rebates back to the businesses for a portion of the new tax revenue the city receives from their developments. Both Pine State Trading’s and E.J. Prescott’s credit enhancement agreements will be over by the end of this fiscal year.

The Libby Hill account has a deficit of around $1 million. That has been climbing and was projected to reach a peak of $1.32 million in fiscal year 2020, after which the revenue from property taxes was projected to exceed debt payments and lower the deficit. The city is projecting the business park will begin contributing to general fund by fiscal year 2030.

However, the financial projections provided by the city to the Kennebec Journal last week didn’t include the recent sales or projected tax revenue from future construction on the lots. Finance Director Denise Brown said those projections show the worst-case scenario of no additional lot sales for the remainder of the debt payments.

A deficit in the account means that amount needs to be dedicated from the city’s reserve fund balance to cover it, Brown said. As the deficit grows, additional money is needed from the city’s fund balance to cover the hole. The budget approved by councilors a month ago estimated the deficit would increase by around $127,000, meaning that money was unavailable to reduce the tax burden, fund city activities or maintain a healthy fund balance.

Rudy said the promotional program of using a credit enhancement to pay off the purchase price of a lot and the lower prices both aim to entice businesses to locate in the park. The lower prices could be raised if the city continues to see increased interest in the park, he said.

“We felt we needed to do everything we could to, again, lower the barrier to entry and make it clear to folks that Gardiner is very eager to work with them to start new businesses,” Rudy said.

Johnston said he is happy where the city is now and expects construction on the recent and upcoming lot sales to put the city in a better financial position.

“I’m hoping, obviously — and I think the rest of council is too — that this will create some momentum and we’ll see more,” he said.

Paul Koenig — 621-5663

pkoenig@centralmaine.com

Twitter: @paul_koenig