LEBANON — The City Council this week awarded 11 years of property tax abatement to a planned residential complex and a riverwalk at what is known as the Woolen Mill property off Mechanic Street. It is the longest duration of property tax relief the city has granted to a development project.
The council voted 5-3 on Thursday to support the multi-year property tax break for developer Jon Livadas, who is working with partners to build 183 apartments at the former Kleen laundromat facility, which went dormant in 2019.
The development will consist of three apartment buildings, two of which would be new construction, a two-story parking garage, a landscaped pedestrian plaza and a riverwalk along the Mascoma River that would be open to the public, according to Livadas.
State statute 79-E, a tax incentive law aimed to encourage revitalization in local communities, allows municipalities to tax a redeveloped property based on its assessed value prior to the improvements being made.
Projects eligible for tax relief consideration must enhance the economic vitality of a community’s downtown, either by redeveloping an underutilized property or rehabilitating an old or historic building.
“This (tax relief) will greatly help this project be financially feasible, and we are fully focused on finding a (financial) partner, starting construction and revitalizing property along the Mascoma River,” Livadas said in a phone interview on Friday.
The developer’s original plan was to build four residential buildings totaling 196 apartments. But an amended plan, approved on Monday by the Planning Board, eliminates construction of one apartment building and expands a parking lot to increase the development’s total spaces to 215.
Livadas said the previously proposed building would have required building into a ledge that would have driven up construction costs. The amended plan will instead convert an existing house on the lot into two apartments and an adjacent building into a small parking garage.
High interest rates, along with the escalation in construction costs due to shortages of materials and labor, have increased the cost to develop projects and to find financial partners who are willing to invest in real estate projects, Livadas said.
The tax relief allowed through 79-E is a tool to help attract investments in eligible projects. The state law allows eligible projects to receive up to five years of tax abatement.
In addition, the City of Lebanon provides “bonus” years of abatement to projects that meet goals prioritized in the city master plan — two years if a project provides residential housing, four years for a project that substantially rehabilitates a historic structure and four years if a project provides affordable housing.
The Woolen Mill, which will be rehabilitated and converted into one of the three residential buildings, was built in the 1880s and was a significant contributor to Lebanon’s economy before its closure in 1960.
Assistant Mayor Clifton Below and Councilors Karen Liot Hill, Douglas Whittlesey, Chris Simon and Erling Heistad voted in favor of granting 11 years of abatement.
“To me it would be difficult to find a project that is more suited for this (tax abatement) program than this one,” Hill said. “This is a bull’s-eye project and absolutely satisfies the requirement of the law.”
Hill noted the development will bring many economic benefits to the city, including housing that is within walking distance to the downtown, rehabilitation of a historic building and the reuse of existing building stock.
A condition was added that the developers will guarantee public access to the project’s riverwalk for outdoor recreation for a minimum of 22 years — or twice the duration of the total tax abatement.
Mayor Tim McNamara and Councilors George Sykes and Devin Wilkie voted against the motion.
McNamara, though supporting the project, expressed reservation about giving bonus years for rehabilitating a historic building when the majority of the property will be new construction.
“I certainly can’t debate that the project will have an important impact on downtown and meets the criteria of a 79-E application, (but) I don’t know from my standpoint that it warrants everything being asked for here — particularly when it’s relatively small portions of the project that are meeting the criteria,” McNamara said.
Wilkie and Sykes both indicated that they wanted the project to include affordable housing, which would have qualified the development for up to 15 years of abatement and addressed a major need in the city.
Livadas had proposed making 10% of the units, or 18 apartments, affordable to people earning between 60% and 100% of the area median income. In Grafton County, the median income for a family of four is $115,000.
But several city councilors expressed reluctance to award a bonus for affordable housing unless the rents would be affordable to a broader range of incomes.
“I don’t think ‘more affordable’ should be the criteria,” Whittlesey said. “I don’t want to have to explain to people that we made it more affordable but that they still can’t afford it.”
In addition, the City Council wanted a condition that would require those units to retain affordable rents for 30 years — or twice the duration of the total years of abatement.
City Councilors said they set this condition to ensure the owners do not abandon the agreement once the tax relief expires.
But Livadas said he worried that having a restriction on rents would make it difficult to sell the property in the future.
Livadas said he is still seeking investors to finance the project but hopes to begin construction next summer. The Woolen Mill restoration will be the first phase of construction.
“We are going to build the mill, and we’re going to get (the rest) done and moving in one fell swoop,” Livadas told the council. “We know that we have to do this as quickly and efficiently as possible, not only for cost but to keep subcontractors on site.”
Livadas gave a conservative estimation of four years to complete the project. Because it will include mitigating contamination, for example, there may be complications during the excavation that might cause delays.
Patrick Adrian may be reached at padrian@vnews.com or 603-727-3216.
