The city is helping a Bangor nonprofit in its effort to build a 37-unit affordable housing project near Bangor High School.
The City Council on Monday passed a tax agreement that would allow Penquis to better compete for funding through a federal tax credit program to build the affordable housing complex behind shops at the corner of Grandview and Hillside avenues.
The agreement would only require Penquis to pay 30 percent of its property taxes for the first 15 years after the complex is built, but it would allow Bangor to continue collecting annual payments totaling 30 percent of the property’s valuation from the nonprofit in the years that follow when the development is no longer taxable.
Nonprofits such as Penquis normally are not required to pay property taxes. But because the organization is using private investors to fund the project, the housing complex will be considered a for-profit entity for up to 15 years after it is built — part of Internal Revenue Service’s rules surrounding low-income tax-credit projects, according to Penquis housing development director Jason Bird.
The Low Income Housing Tax Credit program allows companies with large tax liabilities, such as banks, to invest in affordable housing projects for tax breaks.
Bangor is agreeing to reduce the property taxes due those first 15 years, so the project will cost Penquis less. That also will allow Penquis to apply for fewer tax credits, making it more competitive in its application.
City Council Chairman Joe Baldacci said he supported the tax break because the deal would help alleviate Bangor’s affordable housing shortage, bring in young workers and allow the city to collect money from the property in the long term.
“It’s a net plus for us economically because we are building affordable housing, which there is a need for, and attracting workers, which there is a need for,” Baldacci said. “We are also collecting tax revenue.”
Penquis will gain control over the property following the 15 year period, when investors realize the full worth of the tax credits, so the property likely would no longer be considered taxable. Under the deal, however, Penquis will continue to make the same payments to the city in lieu of taxes.
Based on past Penquis developments, the scope of the project, and its more than 2.5-acre site, the project could be valued at $3 million — meaning the city would receive about $66,000 annually, city solicitor Norm Heitmann said during Monday’s meeting.
The Bangor nonprofit is still in the early stages in its efforts to build the 37 unit development, which calls for a mix of one-, two- or three-bedroom apartments that target seniors and low- to moderate-income professionals. The project still needs to secure zoning permits from the city and secure tax credits to move forward.
Bird hopes the project will break ground in the summer or fall of 2018 and be ready for occupancy a year later. If the land has wetland restrictions limiting the scope of the project, Bird said they may opt to build senior housing on the site instead.
Correction: A previous version of this story misstated the amount of money Bangor would receive.