AUGUSTA — City councilors expressed support for a tax break to help developer Richard Parkhurst renovate the prominent but long-neglected downtown building that previously housed Gagliano’s restaurant and Java Joe’s prior to that and that for years was home of the former Farrell’s clothing store.

Councilors said returning some of the tax revenue expected to be generated by the project over the next 30 years is an investment that could yield a variety of benefits to the city. The tax break would be provided through a Tax Increment Financing, or TIF, agreement with Parkhurst, who has developed other buildings downtown and who also is leading efforts to restore the former Colonial Theater, all on Water Street.

At-Large Councilor Jeffrey Bilodeau noted the building, in its current dilapidated and nearly-vacant condition, is of so little value that it is generating only about $4,000 a year in property taxes.

The building is assessed at $176,500, according to city assessing records. With Parkhurst’s plan to invest about $1.6 million into the building to create 12 to 14 market-rate apartments on the upper floors and retail space on the first floor, it is projected to be assessed at more than $1.6 million.

“Now that building is generating roughly $4,000 a year in tax value to the city,” Bilodeau said. “This is $32,000. And the building would deteriorate (if it’s not redeveloped). When you look at it, there’s a significant amount of money we’re making on this. We get back a lot of money in taxes. If we do nothing, over the next 30 years, we get $120,000 from it. But over the life of the TIF, we get $640,000. That is a net gain of $500,000 that taxpayers don’t have to pay out of their pockets. That’s the bottom line. Plus we have a building that’s livable, providing a place for business, providing sales tax, and providing a place for people to live.”

The TIF agreement councilors expressed support for Thursday, at an informational, nonvoting meeting, would help offset the developer’s cost of renovating and redeveloping 275-287 Water St., the building housing Patricia Buck Bridal and the former Gagliano’s Italian Bistro.

The proposal, recommended unanimously by the city’s TIF Committee, would return 100 percent of the new tax revenue generated by the project for the first five years of the 30-year agreement, with the developer’s share decreasing to 75 percent in years six through eight of the agreement, 50 percent in years nine through 12, and 25 percent in years 13 through 15.

In the final 15 years of the agreement, the city would retain 100 percent of the tax revenue generated by the project, to use for city infrastructure and other uses allowed with TIF funds by state rules.

Over the life of the TIF, $320,158 would be reimbursed to the developer and the city would retain $640,136, which could be used to fund city projects such as the future renovation of Hartford Fire Station, according to Keith Luke, deputy development director.

Parkhurst said the project wouldn’t be feasible without a TIF agreement.

He said he’s already put $160,000 into the building just to fix its roof, make the building safe and conform to city building codes.

“The obstacle I face, as probably does anyone developing property downtown, is the properties are in pretty bad shape,” Parkhurst, of Manchester, said of his proposal to redevelop 275-287 Water St. “The roof probably has been leaking for 10 or 15 years. I don’t believe any work was done to maintain that building for the last 20 years. I spent $160,000 on the building without making any improvements. That already puts it in a hole, in terms of making it a profitable operation, without a TIF.”

Multiple councilors expressed support for the TIF, and none spoke against it. It will go to them for a vote at their March 17 meeting, according to Ralph St. Pierre, finance director and assistant city manager.

Parkhurst said he looks at the investment in the building as an investment in the entire downtown.

He said he hopes to attract working couples and singles, 30 percent to 40 percent students, and some retired people to live in the building and, eventually, add to the population of the downtown area to allow businesses to succeed on the first floors of buildings there.

“The street right now, I think, needs a mixed population,” he said. “You need to get the population there up to about 500 people in order to drive the first-floor requirements. I’m really not doing this investment for profit on this building. I’m really hoping we can bring the whole street forward. It’s a big process, a big gamble. I think it will be thriving. I still say, 10 years from now, you won’t recongize Water Street if we do things like this.”

At-Large Councilor Marci Alexander said she applauds Parkhurst, and anybody else who invests in the city’s downtown. She said waterfront properties in Maine can do well. She noted the Old Port area of Portland, years ago, had many vacant buildings, and is thriving today.

Bilodeau noted the TIF agreement has a “claw back” provision, by which the TIF can be taken away if Parkhurst doesn’t develop the property as he proposes.

City Manager William Bridgeo said city officials learned that provision is necessary from a TIF agreement with the developer of the Kennebec Arsenal property, who has not made good on his plans to redevelop that historic, riverfront, formerly state-owned property.

TIFs allow municipalities to shelter property taxes generated by new development within designated districts. Sheltering money through a TIF means it would not be added to the city’s total property valuation for state tax calculation purposes. Without that, as a municipality’s total property valuation increases, its state-provided revenue — such as aid for education and revenue sharing — decreases, and its county tax liability increases. New value sheltered in a TIF doesn’t count toward a municipality’s property tax value.

Keith Edwards — 621-5647

[email protected]

Twitter: @kedwardskj