AUGUSTA — A proposal to use city funds to help downtown building owners create high-end apartments prompted concern last week that the effort could eventually push low-income renters out of the downtown.

However, proponents said there already are low-income housing options downtown, but available housing for middle and high-income renters is in short supply and high demand.

City officials have proposed what they call the “Augusta Downtown Tipping Point Initiative,” a three-pronged proposal meant to spur revitalization. The initiative would provide incentives to downtown building owners to start businesses, renovate and repair buildings and convert vacant and under-used space into housing.

As part of that proposed new program, the city could offer grants of up to $2,000 per unit to building owners to create new apartments on the upper floors of downtown buildings.

Currently, multiple developers have projects underway downtown creating new, middle to high-end rental units.

One of those developers, Tobias Parkhurst, told the city council last week that the cost of converting old buildings from office space into apartments is more costly than can easily be recouped in revenues unless they are units that attract middle and high income tenants. He said converting space in an old building into a one-unit rental can start around $40,000, but some can cost twice that amount.

At-Large City Councilor Dale McCormick, after the proposal was presented to city councilors last week, expressed concern about spending city money on a program that could be used to create apartments likely to be rented to high-income tenants, potentially squeezing low-income renters out of downtown.

“The neighborhoods that work are a mixture of incomes, and I would really like to see affordable housing in this mix too somehow,” McCormick said. “My understanding is the apartments now being developed downtown are all really high end, high income apartments. And eventually we’re going to have high income downtown and medium income and affordable somewhere else and that is not the equation for a neighborhood. It’ll cause problems down the line. I’m just saying we should keep our eyes on that because this is the way gentrification happens.”

Parkhurst and others, however, said low-income housing already is available in the downtown area.

“We’re talking high-end housing because that’s what we’re missing. We’re not talking high-end housing because that’s the only thing we’re interested in,” said Parkhurst, chairman of the Augusta Downtown Alliance board of directors. “Our focus is on medium and high income because that is something our community has really lacked. We feel, within the downtown area, right now our low income folks are well-served, while our medium and higher income folks are dying for a place to live.”

At-Large Councilor Marci Alexander also said there are lots of housing options downtown for low to medium income renters. She said eventually having to worry about whether there is too much high-end housing downtown is a problem she looks forward to the city having.

“The point that we get to having so many high-end ones and not enough low-end ones, I can’t wait to get to that point. When is that going to be, 20 years?” she said. “So many buildings would have to be bought up and redone. I can’t wait for that.”

Ralph St. Pierre, finance director and assistant city manager, said the $2,000 incentive would not be given to building owners with existing apartments, just to building owners creating housing where it does not exist now. So, he said, the owner of a building with affordable — or any —apartments in it now could not obtain a grant, evict tenants, and then replace their units with more costly units.

Mayor David Rollins said the proposed program, along with the other incentives which could be offered by the Tipping Point Initiative, would help bring residents to the city’s downtown by encouraging the creation of more housing on upper floors. Those residents would, in turn, bring vitality to the downtown, and also, as potential shoppers and consumers of goods and services, demand for businesses to locate on the street-level of downtown buildings.

Parkhurst said it’s a move that could make the city’s downtown stand out in a competitive environment where it is competing with other downtowns for investors and businesses by having its upper floors filled with residents.

“This is something that is special and really important to what is making our downtown unique compared to other downtowns developing at the same time,” he said. “While a lot of communities are spending money looking nice, we are building a neighborhood. And we are introducing medium and high-end housing into the mix of our downtown. Now that is a permanent solution. We’re talking about, right now, incentivizing the first primary use change of our downtown since the 1800s. That is an absolutely enormously powerful thing to do to the heart of a community.”

The Tipping Point Initiative would be funded by $50,000 in city reserve money in an account originally established in 2001 to help retain and attract jobs in the city.

Councilors will likely consider approving the proposal and other aspects of the proposed Tipping Point Initiative at their meeting this Thursday.

Another aspect of the initiative would be waiving building permit and inspection fees citywide for improvements to multi-family housing units for one year to encourage the creation of new or improved housing.

And the initiative would also create a small business loan program in a partnership with Kennebec Savings Bank. The bank would provide up to $250,000 to provide loans of up to $50,000, not to exceed one-third of the total project cost, to small businesses to help pay for renovations and other costs of starting a business within the city’s downtown historic district.

The loans would be made by the bank at an interest rate of 2.5 percent. But, St. Pierre said, the city would reimburse the participating business for that interest, so the five-year loans would be interest free.

St. Pierre said the cost to the bank of making the loans is the equivalent of 5 percent interest. He said the bank agreed to cover the 2.5 percent cost that won’t be covered by the city’s reimbursement.

Andrew Silsby, president and CEO of Kennebec Savings, said the bank agreed to the partnership because it cares about downtowns in the Kennebec valley.

Keith Luke, the city’s deputy development director, said the loan program would be a way the city could help smaller businesses. He said the city has tax increment financing, or TIF, programs that assist larger businesses, but doesn’t currently offer many programs which help smaller business.

“The city uses TIFing very effectively, but that’s a big hammer tool, and the state has their programs, Pine Tree Zones, TIFs … but they all accrue to the benefit of very large businesses,” Luke said. “But we have very few small implements to work for micro enterprises and small businesses. I think as councilors you hear about that, and I know that I hear about that. When we get an entrepreneur interested in establishing himself downtown and wanting to know what programs we have to help a small business, the answer, too often, is very very few.”

Loan applicants would be reviewed by city staff and a committee to be appointed by the mayor. Kennebec Savings would also review the loans as it would before making any loan.

Keith Edwards — 621-5647

[email protected]

Twitter: @kedwardskj


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