Millyard hotel developer seeking help from cityBy PAUL FEELY
New Hampshire Union Leader
June 19. 2018 10:55PM
MANCHESTER — City aldermen voted Tuesday to table until next month discussion on a request from the developer behind a new Millyard hotel for help from the city with the project, to give both sides time to hammer out details of a deal to keep the project moving forward.
Peter Flotz, managing member of Bedford Lot Venture LLC and the developer behind plans to build a Tru by Hilton hotel, sent a letter to city officials earlier this month seeking help with the $23 million project. Plans call for a 116-room hotel and a parking garage for 254 vehicles to be built at the Bedford lot, near North Commercial and Spring streets. According to Flotz, the project is “burdened with significant unusual costs that are directly attributable to the site,” and is appraising at $18 million — despite the $23 million price tag.
Flotz said the costs are “directly attributable to the contamination in the soil, the difficult geotechnical conditions, and the structured parking required due to the constraint of the site geometry.”
Flotz had originally pitched an idea where his firm would relinquish ownership of the parking deck and air rights, allowing the city to earn all revenue, in exchange for a $5 million general revenue bond. In his June 6 letter to city officials Flotz also asked that the project be granted a five-year property tax hiatus under state statute 79E, beginning when construction gets underway, and that the “reverter clause” currently included as part of the development agreement be removed by amendment. The clause includes a Sept. 30, 2018 deadline for closing on a construction loan to avoid having the property revert back to the city, which previously owned it.
On Tuesday, Flotz quickly backed away from his proposal.
“Tear up that letter I sent you,” Flotz told members of the Aldermanic Committee on Lands and Buildings. “I think I have a more practical solution. We are as bullish as ever on Manchester, and we are here to try and get this project done.”
Flotz’s new proposal involves creating a tax increment finance district, or TIF, for the property, which he said is now allowed under state law. TIF districts allow for infrastructure and other improvements, and then pay off the borrowing through increased assessments.
TIF districts are a development tool authorized by the state Legislature (RSA-162K) to encourage development in an area of a community where development would present unusual challenges, such as a site with contaminated soil.
“If a TIF were adopted and approved, the owner would get a tax bill like any other taxpayer, the same rate based on the value for the property as assessed,” said city assessor Bob Gagne. “The difference is that revenue goes directly to improvements for that site.”
“It’s not a direct cost to the city,” said Flotz. “It’s taxes we are paying.”
Flotz told the aldermen he was made aware of contaminants in the soil at the site in November 2016, when he was given a memo by the city’s Brownfields consultant on the topic. He said his firm was pursuing funds to clean up the site through New Markets tax credits, a program in which developers sell tax credits allocated by the federal government for projects in low-income areas.
But when the U.S. Treasury on Feb. 13 allocated $3.5 billion in New Markets tax credits, New Hampshire was not one of the recipient states.
Flotz said Harvey Construction has solicited several bids to clean up the soil, which come in around $3.2 million.
Gagne said he estimates that, if a TIF were approved for the site, it could take about 10 years to pay off any bond used to fund cleanup efforts.
“I think it’s in the best interest of the city to try and work this out, so it just doesn’t go back to being a parking lot that we now know is contaminated,” said Alderman At Large Dan O’Neil.
Committee members voted to table the matter until July 17, to allow city staff and Flotz to work out the details of a possible TIF for the project. If approved at the committee level, the matter would then be sent to the full Board of Mayor and Aldermen that same day for a vote.
At that time, committee members will also discuss Flotz’ request to remove the reverter clause from the development agreement.