Mayor Carolyn Kirk's negotiating committee and developer Sam Park reached a tentative agreement yesterday on a tax financing and benchmark progress agreement that would spur the construction and opening of his Gloucester Crossing shopping center.

The central piece of the agreement is a tax increment financing formula that would, for 13 years, forgive 50 percent of the new taxes assessed to the 195,000 square foot project estimated to cost $60 million.

The project's uncertain value in the volatile economic climate was a major question mark.

"This is still in negotiation," said Park's lawyer, Michele Harrison.

Councilor Jason Grow said the agreement would be worth "roughly" $200,000 a year, an amount that Park, according to the agreement, would be required to service borrowing for financing nearly $7 million in infrastructure improvements outside the project site itself that the project makes necessary.

The agreement also contains multiple benchmarks. To maintain his TIF benefit, Park would agree to have the bulk of the project, 120,000 square feet of shops, constructed and ready for occupancy by the end of 2009.

DeMoulas Supermarkets, which has agreed to finance the project that will feature one of its Market Baskets as the anchor tenant, has said it wants to open by next fall.

Park is also required to have purchased the building permit for an 80-100 room hotel within a year. A building permit for an assisted living facility is required by 2014.

The agreement was reached during a congenial, hand calculator-dominated two-hour public meeting of the negotiating committee yesterday. The committee was assembled in September from multiple department heads and a councilor, Grow.

The committee had been meeting in executive session without Park or his representatives to find a concept that satisfied the mayor, who had said she favored an agreement but wanted it to forgive few taxes initially and work toward larger amounts of new taxes forgiven in the later years.

That "reverse" TIF concept was abandoned for the flat percentage concept as the basis of the agreement.

Yesterday's public meeting followed on the immediate heels of a two-hour executive session. Park and Harrison waited outside the City Hall hearing room for 20 minutes until the meeting was made public around noon.

Not a 'done deal'

Interviewed independently, Grow, Park and James Duggan, the mayor's chief administrative officer, all cautioned that the tentative agreement was not a "done deal." Assessor Gary Johnstone was assigned to do definitive calculations using multiple variables which could lead to a squeezing or extending of the duration of the agreement.

These include the uncertain assessed value of the project at different stages and the cost of borrowing to finance the infrastructure improvements.

Escalating material prices have pushed up the cost of the infrastructure and economic conditions have reduced the potential revenues and value of the project itself.

Park said the economic crisis and the collapse of consumer spending have eroded the value of leases by 20 percent or more.

He said he was fortunate to have completed contracts with DeMoulas, Staples and Marshall's before the onset of the general decline of the economy. Staples and Marshall's have walkaway trigger dates in their leases with Park, Harrison said.

The committee agreed to receive and review the proposal with the blanks filled in at 6 p.m. tomorrow. If approved then, Grow said he would bring the deal to the Budget and Finance Committee for its scheduled 7 p.m. meeting, with the hope of having a final package ready for a public hearing at the Dec. 2 City Council meeting.

Council approval of the TIF package is far from certain.

A group of hard-line opponents to the TIF, organized as the "No Free Lunch for Gloucester Crossing" committee earned a public council hearing last month with a petition of more than 200 signers. They argued that Park did not need or deserve the city's financial help to bring about Gloucester Crossing.

Having surveyed some but not all councilors for their requirements in the deal, Grow said he didn't know how they might react to the arrangement.

Incentive to build

The committee abandoned the mayor's idea of a "reverse" TIF.

Duggan said the committee's work led to the conclusion that allowing tax relief in an ascending pattern could become an incentive to slow the pace of construction and limit the expansion of the tax base. Grow said the "reverse" TIF might actually push some of Park's tax liability onto the rest of the base.

"Even if it were only pennies," he said that would be a bad precedent to set.

"This can't cost taxpayers one dime out of pocket," Duggan said in an interview after the meeting.

"If the (taxes forgiven) in the first two years are zero and then you jump to 50 percent," said tax attorney Ray Mirayes, who has been retained to advise the TIF Committee, "that creates negative new growth."

Mirayes also said the length of the TIF arrangement, 13 years, was on the far side of the informal limit councilors have told the committee they would be willing to vote for.

"I'm afraid this will turn out to be more than 12 years (long), and stretch what the City Council is willing to do," he said during the public meeting. "Twelve (years) feels like as long an agreement as is politically acceptable."

"Lost in translation," Park said in an interview, "this has been a very difficult negotiation."

Richard Gaines can be reached at rgaines@gloucestertimes.com.