Neighbors supported a proposal last week to redevelop the Augusta Plaza at 60 Western Ave., shown Oct. 18, with the Maine State Capitol in the background. The project would turn the former Kmart site into a hotel, apartment building and commercial space. Joe Phelan/Kennebec Journal file

AUGUSTA — A proposed redevelopment of the former Kmart plaza site in Augusta would provide an attractive place for people to live and work, not just store their stuff, neighbors told the City Council last week.

Residents also said the project could be a catalyst to turn much-maligned Western Avenue into a greener, more pedestrian-friendly gateway into the state capital.

Those who have spoken against a previous proposal to redevelop the former Kmart plaza site at 60 Western Ave. as a self-storage business now say a new proposal to redevelop the prominent site with an apartment building and hotel is exactly what the city needs, and would provide temporary and longer-term housing for people doing business at the nearby Maine State Capitol complex.

A vote on a proposed $4.2 million tax break for the developers of the project, however, was delayed to allow city officials more time to work through the complicated matter.

City councilors met last week to discuss the tax break, a week after they unanimously approved a contract zone to allow taller buildings — up to 85 feet tall, compared to the 42 feet — and more dense development at the site.

Previously, the self-storage business proposed for the site was panned by residents, who said they would rather see housing or other development there to enhance quality of life in the city.

Some residents told city councilors at their meeting Thursday that the new proposal — dubbed Capital Heights — for a 120-room hotel, 50-unit apartment building and two small office or retail spots is exactly what should be built at the site.

“The project we’re discussing today is exactly the kind of development that myself and other Augusta residents fought for the opportunity to have when we opposed the self-storage,” Scott Mocha, who lives on Drew Street, near the plaza, said. “This project is consistent with the comprehensive plan by helping to revitalize the lower Western Avenue corridor. It adds housing stock, it creates long-term jobs in Augusta and it helps move forward the vision to connect downtown with the State House campus.

“Capitol Heights is a perfect example of what Augusta can look like if we have a vision for our city.”

Resident Sam Baker said the project would provide much-needed rental housing to people who cannot afford to buy their own home due to high real estate prices, including state workers.

After hearing from several residents who said they support the project, councilors unanimously voted Jan. 2 to approve changes to the site’s zoning to accommodate the ambitious plans.

Councilors had also been scheduled at that meeting to consider approving the tax break, which would return 75% of new property tax revenues generated by the site to the developers, projected to be $4.2 million over 30 years.

Councilors tabled that vote, however, to allow city administrators to present more information on details of the proposed tax break at their informational meeting Thursday.

City Manager Jared Mills said the extra time was requested because it is an “omnibus” tax increment financing, or TIF, proposal, meaning the district that would be subject to the tax break encompasses several parcels and may include more than one credit enhancement agreement to developers of the site.

At Thursday’s meeting, city staff members are expected to present information on how the TIF proposal would work, and how it differs from most others in the city.

Developer and Augusta resident George Campbell, a former state transportation commissioner, mayor of Portland and president of The Boulos Co., who now works as a consultant, has said he plans to work with other firms to develop the site, and that a tax break is necessary to make the financing work for the challenging project.

The sign for the Augusta Plaza at 60 Western Ave., shown in October. Joe Phelan/Kennebec Journal file

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.

Longtime local resident and businessman Roger Pomerleau said he worked with Campbell in 1990 on the development of the Marketplace at Augusta at 197 Civic Center Drive.

Pomerleau said he has no personal stake in redevelopment of the dilapidated Kmart site, but that it would be great for the city’s tax base and be a catalyst for beautifying the rest of Western Avenue.

Keith Luke, the city’s economic development director, said the delay on the TIF will allow time for any remaining issues to be discussed and resolved, with the proposal likely coming back to councilors for a vote later this month. He said the city’s share of tax revenues from the project could be used as a local match for a proposal to seek federal grant funds to revitalize the Western Avenue corridor.

At-Large Councilor Courtney Gary-Allen said she is thankful that area residents spoke out against the self-storage business proposal and made their wishes for the site known.

“You really organized and clearly said what you wanted for your neighborhood,” she said. “I don’t think we’d be here in this moment looking at such a wonderful project without your advocacy.”