How much did the redevelopment of the old employment building cost the city?
After more asbestos was discovered this spring in the former Department of Employment Security building at 32-24 South Main Street, the closing date for the sale to the John J. Flatley Company has been pushed back through March, which will mark more than seven years since the city bought the building from the state for $ 1.575 million.
A series of clean-up and site improvements have taken the city’s investment over the years to over $ 2.5 million.
Flatley plans to purchase the building for $ 350,000 and build 64 residential units representing 80,000 square feet by the summer of 2023, which would create much-needed downtown housing while putting the plot back on the role of taxation.
Earlier this year, the city of Concord lost the opportunity to redevelop another state-owned downtown property at 11 Stickney Ave. when the state sold the property to Manchester-based developer Brady Sullivan instead. Had the city gotten the former ownership from the Department of Transportation, the process might have followed a similar pattern – years of cleanup and investment in order to attract the right developer ready to push the city’s vision forward.
As the city’s involvement with the former Ministry of Employment Security comes to an end, the road to get there has not been easy or cheap for the city. The city considered 17 redevelopment proposals, including a collapsed sale, and more recently, additional asbestos was discovered outside the building, which delayed the final closure.
So how much exactly has the city invested in this building to date?
The total amount spent will be $ 2.65 million, but not all of this comes from local tax money. After taking into account planned sales payments, fees and subsidies for environmental remediation, the city’s net investment will be approximately $ 1.6 million.
The spending began in 2014 when city council paid the state $ 1.575 million to purchase the property, which was originally listed for $ 1.75 million. Additional fees for the acquisition and weather protection of the building pushed up the city’s initial costs to $ 1.85 million.
Next, Concord hired NAI Norwood Group to market the site to potential developers and in 2017 signed a buy and sell agreement with Dol-Soul Properties to sell the building for $ 1.075 million.
However, after a period of due diligence, Dol-Soul said it was missing an additional $ 7 million to complete the project and asked Concord to contribute $ 3.5 million. The city council rejected this proposal in 2019 and started looking for new developers again. Concord redevelopment manager Matt Walsh said if the city had made the sale, the city’s net investment would have been around $ 4.63 million, almost three times the current amount.
To make the neighborhood more appealing, Concord also spent $ 1.52 million to bury power, telephone and cable lines on Main Street between the Bank of New Hampshire Stage and Thompson Street, a project that impacted six others. buildings.
Walsh said only about $ 253,300 of utility burial costs are expected to be allocated to the old Job Security building, a number calculated based on the building’s 125 feet of frontage on South Main Street. .
Finally, in the spring of 2021, city council approved a deal with Flatley Company to purchase the building for $ 350,000, which required the city to spend $ 400,000 on asbestos removal. This cost would be offset by a grant of $ 172,500 from the New Hampshire Department of Environmental Services Brownfields.
When new asbestos was discovered outside the building in May, Nobis Engineering, which conducted the initial environmental study in 2014, agreed to pay the city $ 150,000 to cover the costs of the remediation. Concord also received an additional $ 27,500 from the state’s Brownfields program.
Adding up the money the city has already spent or plans to spend, including the utility line project, the cost of the project stands at $ 2.653 million.
However, with the sale price of $ 350,000 for Flatley, a project of $ 333,740 in construction and other costs paid to the city, and funds from the State and Nobis Engineering for asbestos removal, the revenues of the project amount to $ 1,033,740 for a net investment of $ 1.619 million. .
The city estimates that the estimated value of the redeveloped site will be between $ 8 million and $ 10.24 million, or approximately $ 125,000 to $ 160,000 per residential unit. This places the annual property taxes that accrue to the city between approximately $ 215,000 and $ 275,000, using the 2020 tax rate.
Using city estimates and assuming property taxes stay close to their current rate of $ 26.76 per $ 1,000 of assessment, it would take between 6 and 7.5 years for the city to recoup the amount invested. in the property.
This property tax revenue will be captured by the financial district from the Sears Block tax increase and used to pay down debt before that money goes into the general fund. Some of this income could eventually be released from the TIF district, lowering tax rates.
A TIF neighborhood is a tool used to generate economic development which involves a municipality paying the infrastructure costs so that private companies are incentivized to invest in a particular area. The taxes generated by the development are used to pay off debt and operating costs like paving streets in the neighborhood before these revenues flow back into the rest of the city budget.
Flatley plans to begin construction in April and the project is expected to be completed by June 2023.