After more asbestos was discovered this spring at the former Department of Employment Security building at 32-24 South Main Street, the closing date on the sale to the John J. Flatley Company was pushed back to 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 efforts and improvements to the site has brought the city’s investment over the years to more than $2.5 million.
Flatley plans to buy the building for $350,000 and construct 64 residential units making up 80,000 square feet by summer 2023, which would create much-needed housing downtown while getting the parcel back on the tax rolls.
Earlier this year, the City of Concord lost the opportunity to redevelop another downtown state-owned property at 11 Stickney Ave. when the state sold the property to Manchester-based developer Brady Sullivan instead. If the city had gotten the old property from the Department of Transportation, the process may have followed a similar pattern – years of clean-up and investments in order to attract the right developer willing to advance the city’s vision.
While the city’s involvement with the former Department of Employment Security is nearing an end, the road to get here hasn’t been easy or cheap for the city. The city has considered 17 redevelopment proposals, including one sale that fell apart, and most recently, additional asbestos was discovered on the outside of the building that delayed the final closing.
So exactly how much has the city put into this building to date?
The total amount spent will add up to $2.65 million, but not all of that came from local tax dollars. After accounting for expected payments for the sale, fees and grants for environmental remediation, the city’s net investment will be about $1.6 million.
The spending began in 2014 when the City Council paid the state $1.575 million to purchase the property, which was originally listed for $1.75 million. Additional fees for acquiring and weather-proofing the building upped 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 purchase and sale agreement with Dol-Soul Properties to sell the building for $1.075 million.
However, after a due diligence period, 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 voted down that proposal in 2019 and began looking for new developers again. Concord Director of Redevelopment Matt Walsh said if the city had gone through with that sale, the city’s net investment would have been about $4.63 million – nearly three times the current amount.
To make the area more attractive, Concord also spent $1.52 million on burying electric, telephone and cable lines on Main Street between the Bank of New Hampshire Stage and Thompson Street, a project which impacted six other buildings.
Walsh said only about $253,300 of the utility burial cost should be assigned to the former Employment Security Building, a number calculated based on the building’s 125 feet of frontage on South Main Street.
Finally, in spring 2021, the City Council approved a deal with Flatley Company to buy the building for $350,000, which required the city to spend $400,000 on asbestos removal. That cost would be offset by a $172,500 New Hampshire Department of Environmental Services Brownfields grant.
When new asbestos was found on the building’s exterior in May, Nobis Engineering, which conducted the original environmental study in 2014, agreed to give the city $150,000 to cover remediation costs. Concord also received an additional $27,500 from the state Brownfields program.
Totaling up the money the city has already spent or plans to spend, including the utility line project, puts the project cost at $2.653 million.
However, with the $350,000 sale price for Flatley, a projected $333,740 in construction and other fees paid to the city, and funds from the state and Nobis Engineering for asbestos removal, revenues on the project come out to $1,033,740 for a net investment of $1.619 million.
The city estimates the assessed value of the redeveloped site will be between $8 million and $10.24 million, or about $125,000 to $160,000 per residential unit. That puts the annual property taxes coming back into the city between about $215,000 and $275,000, using the 2020 tax rate.
Using the city’s estimates and assuming that property taxes remain close to their current rate of $26.76 per $1,000 of assessed value, it would take the city between 6 and 7.5 years to earn back the amount invested in the property.
Those property tax revenues will be captured by the Sears Block Tax Increment Finance District and used to pay off debt before that money flows into the General Fund. Some of that revenue could eventually be released from the TIF district, lowering tax rates.
A TIF district is a tool used to generate economic development that involves a municipality paying for infrastructure costs so that private companies are enticed to invest in a particular area. The taxes that development produce are used to pay for debt and operating costs like street paving within the district before that revenue goes back into the rest of the city budget.
Flatley plans to begin construction in April, and the project is scheduled to be completed by June 2023.