City throws weight behind shipyard's stalled Building 6

Council approves first reading of $400,000 loan guarantee
By Ethan Andrews | Nov 30, 2017
Source: File photo by Ethan Andrews Front Street Shipyard hopes to break ground on a new 21,000-square-foot workshop next spring, pending receipt of a $4 million loan.

Belfast — In a bid to help Front Street Shipyard get financing for a new 21,000-square-foot building, the City Council has taken preliminary steps to guarantee a $4 million bank loan for the project.

Under the terms tentatively approved by the council at a first reading Nov. 21, the city would put up $400,000 as a guarantee on the loan from Androscoggin Bank to Front Street Shipyard.

That amount, which City Manager Joe Slocum described as equivalent to roughly five years of the shipyard's tax value, would decrease over the term of the loan. Slocum called it a low-risk move considering the shipyard's growth and strong track record in working with the city.

"We're taking the tax money they're giving us and putting it in an escrow account for a few years," he said.

The agreement would be a variation of so-called credit enhancement tax increment financing, and the first such agreement the city has made with a taxpayer.

Belfast currently has two tax increment financing, or TIF, districts. Property taxes resulting from any increase in valuation in these zones is kept in a separate account for certain improvements that benefit the whole district. Perhaps most significantly, TIF shelters new property value from the state assessments used to calculate the local share of education funding.

Under a traditional TIF, the sheltered money is reserved for certain infrastructure projects. The more controversial credit enhancement TIF allows municipalities to return property tax money directly to property owners. Historically, this type of TIF has been used to attract large taxpayers by offering a form of discount.

City officials stressed that the agreement with the shipyard is not a typical credit enhancement TIF, because under the terms of the agreement, the city would keep all of the $400,000 guarantee.

Building 6 was first approved for construction in 2013. At that time, the council agreed to lease, and ultimately sell, a municipal parking lot on Front Street for $600,000 to the shipyard as a site for a new workshop that would be the largest on the property. It would stand next to, and 10 feet taller than, the existing Building 5 workshop on Front Street.

The new workshop was originally proposed as Front Street Shipyard was negotiating a contract to build carbon-fiber ferryboats in Belfast through a joint venture with Norwegian ferry builder Brødrene Aa, doing business under the name Arcadia Alliance.

Over the next three years, the Building 6 groundbreaking was delayed several times as the shipyard reorganized its finances and paid back early investors. Turner at one point described a kind of stalemate in which the ferry contract hinged on the existence of Building 6, while the financing for Building 6 depended on securing the boat-building contract.

Speaking to the City Council Nov. 21, Turner said ferryboats are still very much in the picture, but the shipyard additionally needs the space for larger vessels that increasingly have come to Belfast for service.

The shipyard has been able to accept many of those boats, he said, but getting them into the large Building 5 workshop requires moving them from the 485-ton travel lift to a trailer, which adds $36,000 to the bill. Building 6, by contrast, would be large enough that the travel lift could drive into the building, which would allow the shipyard to remain competitive, Turner said.

If the loan is approved, Turner said he hopes to break ground in April 2018.

As part of the terms of financing, the shipyard, which does business under the name DUBBA LLC, was required to create a new ownership entity for the Building 6 project, dubbed Building 6 LLC.

The council approved a first reading of the contract rezoning amendment that would authorize the loan guarantee. A second reading is scheduled for Dec. 19.

Comments (1)
Posted by: Kenneth W Hall | Nov 30, 2017 21:12

Perfect.....all the discussion on tax cuts and this is a perfect example of what Ron has been talking about!!!

 

Maybe every single citizen should get contract zoning and special tax cuts to make things equal??????????

 

How much of your tax dollars are part of that $400,000????   Equality????   Where is it?????



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