BEVERLY — Windover Construction has withdrawn its pursuit of a tax break from the city, saying the perception that the company was getting a special deal threatened to derail the larger plan to improve the area.
Windover was in line to receive a tax break under a state program that would create an “urban center” on Rantoul Street where developers would be offered tax incentives. The City Council is considering the proposal and is scheduled to resume its public hearing on the matter on Tuesday.
Windover President Lee Dellicker said the company was concerned that the council would reject the program due to a public perception that Windover was getting special treatment.
“We recognize that this has a far-reaching economic development impact, and we really didn’t want this to fail as a result of people being focused on this project and Windover,” Dellicker said.
Dellicker said the company still plans to go ahead with its project without the tax break. The $8.5 million plan calls for a four-story building with 45 apartments at the site of the former Enterprise car rental business at 79 Rantoul St.
Mayor Bill Scanlon said he agrees with Windover’s decision to forgo the tax break. He said he did not want to be put in the position of negotiating a deal with Windover and being accused of favoritism.
Scanlon said he wants the City Council to create a formula that would establish the same tax break for any developer who chooses to build in that area of Rantoul Street.
“I don’t want to be playing God here and be accused of favoritism and offering different deals to different people,” Scanlon said. “I’d like there to be one arrangement.”
The program under consideration by the City Council is called the Urban Center Housing Tax Increment Financing Zone. It was created under a municipal relief bill signed into law by then-Gov. Mitt Romney in 2003. Its intent is to encourage residential development and affordable housing in distressed downtown areas by offering tax incentives to developers.
Beverly is seeking to become the third community in the state, after Easton and Quincy, to adopt the program. The proposal would create an “urban center” zone that includes 45 parcels over 24 acres along Rantoul Street from Edwards to Bow streets.
The state requires communities to include a specific project in their application to create an urban center. Beverly originally included Windover and its Enterprise apartment building project.
Windover’s inclusion raised questions of conflict of interest due to the involvement of Miranda Gooding, a lawyer who is representing Windover on the Enterprise project.
Gooding is also co-president of Beverly Main Streets, the nonprofit group that helped write the proposal for the Rantoul Street district and presented the plan to the City Council. Gooding is co-chairwoman of a Main Streets task force that studied the tax incentive program and recommended it to the organization’s board of directors. Dellicker, a Main Streets board member, also served on that task force.
In July, Gooding, a former city councilor, called City Council President Paul Guanci to urge the council to take up the proposal before it went on its summer break. Councilors voted 5-4 to start the public hearing but said they would not vote on the proposal until returning from the break.
Some residents who spoke at the public hearing in July criticized the idea of giving a tax break to Windover, which is owned by wealthy businessman Steven Dodge of Manchester-by-the-Sea and has built several projects in the city.
The proposal by Main Streets called for a 50 percent property tax exemption for developers over 20 years on improvements that would be made to the property. Dellicker said he could not say exactly how much the tax break would be worth over the life of the deal, but he said the company would have paid about $65,000 per year in property taxes in the first year, as opposed to about $100,000 without a tax break.
“There’s a misconception that this is a big tax break,” he said. “It’s not as big a windfall as some people may think.”
However, Dellicker did say that the money the company saved on taxes could have been used to undertake other projects on Rantoul Street, where the company has built the Depot Square condos and recently opened a new apartment building at the site of the former Kelly Infiniti dealership.
“The disappointing thing is that the equity that’s going to go into this (Enterprise) project could’ve gone into other projects,” he said.
Dellicker said Windover did not want to wait for the City Council’s decision on the tax zone and risk a downturn in the market for apartments.
“If I wait too long and the apartment market shifts, then the costs become that much greater,” he said.
Windover would have had to make 25 percent of the Enterprise apartments affordable under the state program. Now it will have to set aside only 12 percent as affordable, under city guidelines.
Scanlon said the City Council can still vote in favor of creating a tax-incentive zone on Rantoul Street even without the Windover project, but the state will not approve the zone until a specific project is included at some future point.
Scanlon said he expects other projects to come forward because of the advantages of developing on Rantoul Street near the train station with its easy access to Boston. The MBTA is planning to build a 500-vehicle garage next to the station this fall.
“I think that Beverly is well-poised at the moment for further development in the downtown that will help the stores and the restaurants,” he said.
Staff writer Paul Leighton can be reached at 978-338-2675 or email@example.com.