By Seth Daniel
A clean-up that was supposed to cost about $1 million has ballooned to a $3 million project for the new Homewood Suites hotel going up across from Chelsea High School, prompting City Manager Tom Ambrosino to ask the Council to revise the terms of the existing tax break for the hotel.
Ambrosino proposed an enhanced Tax Incremental Financing (TIF) agreement for the hotel, and two smaller TIFs for a new hotel on Broadway and the move of Rosev Dairy to Griffin Way.
“Instead of it costing $1 million, the cost to clean it up was about $3 million,” Ambrosino told the Council on Monday. “There were certain assumptions about that made when the City sold the land to the developer and granted the original TIF about what that cost would be. The investment is significantly higher now. The total cost for them is actually $6 million. They’ve come back looking for an adjustment to the TIF we gave them.”
The hotel was once a heavy metals manufacturer, Lawrenceville Metals, and officials at the groundbreaking of the hotel said the heavy metal contamination was some of the worst they had seen in the Northeast region. However, it was believed that the costs could be contained at $1 million.
That has not panned out, leading to delays that were, until now, unexplained.
The new TIF agreement looks to move from five years to seven years with enhanced tax breaks on the new value.
Year one and two would go from 50 percent tax reduction to 60 percent.
Year three and four would go from 40 percent to 50 percent.
Year five would be at 35 percent.
The last two years would remain unchanged at 25 percent.
The overall investment into the property is pegged at $33.79 million.
“The developer would get an additional $500,000 in tax relief,” said Ambrosino. “They would get that additional relief to help them with the unexpected $2 million cost for cleaning up the property.”
He said there would still be significant new tax revenues brought in by the property even with the enhanced proposed TIF. He said new tax revenues would still exceed $1.5 million per year from the property.
Another hotel on Broadway, near the Revere line, was proposed to for a TIF as well.
The Broadway Hotel is expected to invest $29.56 million into the vacant property at 1012-1018 Broadway.
The TIF terms for that agreement are proposed to be five years, with 50 percent at year one, 40 percent at year two, 25 percent at year three through five.
Finally, it was announced that Rosev Dairy on Second Street has decided to relocate within Chelsea to a building they have purchased and will renovate on Griffin Way.
“This is really a token TIF to let the company know we are encouraging their investment,” he said.
That TIF agreement proposes five years with a 5 percent break.
TIF agreements have been routinely used in Chelsea to attract and retain businesses. It is important to note that businesses getting a TIF only get the percentage break on the new value they create. The existing value on the property is taxed at the regular rate.
The matters were sent to be scheduled for a public hearing.