BARRE — The final piece of a complex financing puzzle for the massive City Place downtown redevelopment project fell into place with almost no time to spare Monday.
It was anything but simple, but federal new markets tax credits that will generate an estimated $4.2 million of the $15.5 million needed for the project were sold to investors Monday — giving city officials and their chosen developer more than the new year to celebrate.
“City Place is a done deal,” Mayor Thomas Lauzon said after receiving word Monday afternoon that what was widely viewed as the last moving piece of the project had finally been nailed down.
“I can’t tell you how long I’ve waited to say that,” Lauzon said. “It’s a great way to end the year.”
He actually thought the tax credit sale went off as originally scheduled last week. However, given the number of players involved and the volume of information that needed to be reviewed, it slid from Thursday to Friday and then into this week, according to City Manager Steve Mackenzie.
Mackenzie said Monday he didn’t believe yet another postponement was an option.
“Today is the hard deadline,” he said Monday. “From my understanding, it has to be done this calendar year.”
By 3 p.m. Lauzon was breathing easier because the deed was done.
DEW has some experience with the tax credits, having used them to help finance the construction of a building for the Community College of Vermont that opened in downtown Rutland nearly a year ago.
Created by Congress more than a decade ago, the popular tax credit program is designed to generate private capital for economic development in both rural and urban low-income communities.
Under the program, individuals and corporations buying the credits receive a tax break on the purchase amount — money that is then channeled into certain low-income properties or businesses through a “community development entity,” as either a loan or equity investment. In this case that entity is Vermont Rural Ventures, an affiliate of Housing Vermont.
The federal tax credit is taken over seven years: 5 percent in each of the first three years, and 6 percent in each of the remaining four years.
The sale of the tax breaks creates the opportunity to offer flexible financing under favorable terms to developers like DEW. The Williston firm will partly rely on that financing to advance its plans to build a four-story, 80,000-square-foot building across North Main Street from Depot Square.
The structure will be built on a patchwork of city-owned properties, including one that is currently home to two vacant apartment buildings. The city recently acquired that Merchant Street property as part of a complex real estate transaction that was needed to pave the way for City Place. DEW has agreed to reimburse the city — with interest — for the cost of buying the property, and the city has agreed to transfer the balance of the property it owns — the vacant lot between Studio Place Arts and the Paramount Theatre — to DEW for $1.
DEW spokesman Steve Morton said a construction crew will begin to mobilize on the property next week. Removing asbestos from the two apartment buildings and then demolishing both of them will be the first order of business.
According to Morton, more extensive site work won’t be far behind.
“We’ll be doing foundations just as soon as we can,” he said. “Winter construction is a fact of life in Vermont, and we’re prepared to go forward as soon as possible.”
Though DEW had hoped to break ground Nov. 1, Morton said company officials are comfortable they can still complete construction and have the building ready for occupancy by February 2014.
Most of the building is already spoken for, and Morton said the state will be leasing just over half of it to consolidate the currently fragmented offices of the state Department of Education and provide some new office space for the state Agency of Human Services.
Lauzon said the state signed the lease for 42,000 square feet of City Place last week.
“That was huge,” he said.
With the top two and a half floors dedicated to the state and the balance of the second floor — about 10,000 square feet — expected to be leased by Central Vermont Medical Center, Morton said all that remains is to find a tenant or tenants for roughly 10,000 square feet of ground-floor retail space. ReHab GYM has already agreed to lease roughly 7,700 square feet in the rear of the building, leaving about 8,000 square feet of retail space on North Main Street and 2,000 square feet near the building’s main entrance facing Studio Place Arts.
Morton said the available space could be combined into a single storefront or further divided.
“We can be flexible,” he said, noting one potential tenant — the proposed Granite City Grocery — remains on the developer’s radar screen.
“We’d like to work with them,” he said of organizers of what would be a cooperatively owned grocery store.
Lauzon said he isn’t concerned about DEW’s ability to find a ground-floor tenant. “That’s not going to be a problem,” he said.
When it comes to City Place, Lauzon said everything that could go wrong didn’t, though there were more than a few close calls along the way.
“There were just so many moving parts to this project it is unreal,” he said, crediting everyone from Mackenzie and Mike Miller, the city’s director of planning and zoning, to DEW, Gov. Peter Shumlin and members of his administration.
“This was a total team effort... from the governor on down,” Lauzon said. “It was pretty amazing that we were able to pull it off.”
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