Using carrots and sticks, city negotiators have forged a legal agreement with developer Sam Park to spur the rapid construction and opening of the city's largest shopping center.
The doors at Market Basket, Marshalls and Staples, the first and so far only three signed tenants for the planned Gloucester Crossing project, could open by the end of next year if the agreement is ratified by City Council.
Under the arrangement, which puts Park under a series of "drop-dead deadlines" with financial penalties, the city will forgive nearly half the new taxes for 12 years on Gloucester Crossing, an estimated $2.3 million to be assessed on the $60 million development.
Over that period, the city would collect $3.3 million, according to Councilor Jason Grow, who served on the negotiating committee comprised of the city's financial team and lawyers and assigned by Mayor Carolyn Kirk in September to find a formula to seal the deal.
Taxes on $3 million in land assessments are to be collected in full. The negotiators calculated that the $2.3 million tax forgiveness over 12 years equates to $1.2 million in "net present value."
Park initially asked for a tax relief agreement for 20 years. The negotiating committee introduced a 13-year plan Tuesday before cutting it back to 12 on Thursday.
Tax attorney Ray Miyares, a consultant to the negotiating committee, described the arrangement as enticing Park to produce the highest possible value project. "The higher the value, the higher the tax savings," said Miyares.
Kirk yesterday hailed the agreement.
"Gloucester needs the tax revenue, jobs, and consumer choices that Gloucester Crossing and DeMoulas will provide now more than ever," the mayor said in an e-mail to the Times.
But Valerie Nelson, an opponent of any tax relief for Park, said that "the city appears to have joined at the hip with a developer who chose an extraordinarily expensive site to develop, and now expects the citizens of Gloucester to pay for that choice."
The agreement was reached and announced Thursday, then immediately vetted and approved by Grow's Budget and Finance Committee. But the vote was not unanimous, leaving the fate or perhaps structure of the deal uncertain as it heads toward a showdown at a single-issue, special meeting of the council, set for Wednesday, Dec. 3.
Since Park came forward three years ago to offer a shopping center on property carrying state-mandated permits for a 240-unit, mixed-income Chapter 40B apartment complex, his ideas have generated an unprecedented volume and passion in written and oral arguments.
A group calling itself No Free Lunch for Gloucester Crossing continues to fight against the city giving Park financial help to pay for about $7 million in required infrastructure via tax relief.
No Free Lunch member Nelson argued the city needs the subsidy more than the developer.
"If Sam Park needs helping financing his expensive and difficult project," she said in an e-mail yesterday, "he should turn to the entity in the room with the biggest bucks, DeMoulas."
Last summer, the Tewksbury-based, family-owned supermarket chain agreed to become the anchor tenant, invest $10.5 million to build its own supermarket and finance the rest of the project.
Grow, however, insisted yesterday that the city's negotiators have given the TIF's opponents what they wanted, noting that the deal is, in fact, "no free lunch for Gloucester Crossing." Under the terms, by the end of 2009, Park must have an occupancy permit for the bulk of the project, a building permit for at least an 80-room hotel, and proof of $10.5 million spent building a Market Basket supermarket. Missing any of the deadlines sacrifices the year's tax rebate, or about $200,000.
"This has been picked apart, bisected, reconfigured, shredded and excoriated by others and sent through the mill," Grow said just before he and Councilor Steve Curcuru voted for the tax forgiveness plan.
Park complained to the council committee that "Ms. Nelson is trying to put a dagger" in Gloucester Crossing. He said the forgiven taxes "don't even make a dent in what we're spending on infrastructure."
But in addition to the promise to halve Park's taxes on the assessed value of the shopping center as it evolves, the project has also won a $2 million grant commitment from the state.
Councilor Joe Ciolino, a project supporter, voted against the tax-increment financing arrangement. "No for now," he said, calling the deal "cloudy" and "convoluted."
He told the negotiating and council committees, Park and officials from DeMoulas that he believes the TIF arrangement is not popular. "I have to convince a lot of people who are dead-set against this," he said.
Ciolino also complained that the six years given Park to sign an assisted living facility developer to the project was too liberal.
To qualify for the relief, Park must meet a series of hard deadlines, fulfill commitments to create jobs, finish the project with an assisted living facility and come through on a passel of wide-ranging promises.
The TIF agreement helps Park complete $7 million in infrastructure improvements — roads, water and sewer — needed allow the conversion of 30 vacant acres into 195,000 square feet of retail space and a hotel.
Park signed Staples and Marshalls this spring before the general economic decline gathered momentum.
He said conditions have required him to halt plans for 3 million square feet of retail space elsewhere in Massachusetts, but said Cape Ann was a rare market, where demand for goods outstripped their local availability.
Gloucester's 18th TIF financial arrangement — easily the most complex TIF ever negotiated since the program was created in the mid-1990s — caps a series of talks that began in September, a year after the previous City Council approved the use of the site adjacent to the Fuller School complex.
"This is a TIF with teeth," said Grow, lifting a phrase used in a letter to the Times by Daren Donovan.
In addition to the deadlines to get the shopping center open, Park also commits to a variety of financial contributions. These include reimbursing the city for the maintenance of Schoolhouse Road, the existing access road to the site. Park is also committed to refinishing the road before transferring it to city ownership in 15 years.
Park has agreed in writing to purchase a backup generator for the water pumps supplying the water tower in Blackburn Industrial Park, pay the city $16,667 a year for 15 years to help finance the acquisition of a new ambulance, and replace 275 feet of sewer main on Staten Street. The agreement also commits Park to providing a kiosk at Gloucester Crossing to promote the businesses of Main Street, featuring Main Street in advertising for the shopping center and contributing 25 percent as a match to annual appropriations for downtown development.
TIFs are a state program, requiring job creation in exchange for forgiven taxes over a period of 20 years or less. Because Park is developing the site and not creating permanent new jobs, the structure of the arrangement involves DeMoulas.
In constructing a Market Basket, the company is obligated to create 45 new, permanent, full-time jobs including 15 management and 30 skilled professional jobs at an average salary of $40,000 a year in 2010, and submit proof of the job creation to the city, which is empowered to monitor and enforce the arrangement. Failure to comply allows the city to negate the TIF.
Richard Gaines can be reached at rgaines@gloucestertimes.com.
