9th Square 2.0 Deal Sails Ahead

A deal to keep affordable housing in the Ninth Square received a needed preliminary approval Tuesday night amid discussion about why it needs a two-decade tax break.

Members of the Board of Alders Tax Abatement Committee and the Community Development Committee voted to approve a 20-year tax abatement for new owners of residential properties in the district southeast of the Green in return for a promise to preserve 189 affordable apartments.

The vote took place at the end of a committee hearing in the Aldermanic Chambers on the second floor of City Hall.

The 10 alders who showed up on behalf of the two committees voted unanimously in support of the proposed deal among the city, the Boston-based real estate company Beacon Communities, LLC, and the Ninth Square Limited Partnership. The deal relates to Beacon’s plans to purchase the Residences at Ninth Square from a tax-credit partnership that currently owns the 335-unit apartment complex on Orange Street.

At the center of the deal is a 20-year tax abatement that gives Beacon a nearly 50 percent property tax cut, amounting to more than $10 million over the next two decades, in exchange for Beacon’s commitment to preserve 189 rental units as affordable to tenants making 60 percent or less of the area median income (AMI).

Unlike at a recent Finance Committee meeting, where alders questioned the value of using hefty tax breaks to attract market-rate developers, the Tax Abatement and Community Development Committee alders on Tuesday night jumped at the opportunity to lock down an agreement that they see as furthering the board’s mission to secure more affordable housing in New Haven.

Wooster Square Alder Aaron Greenberg called the deal an opportunity for the alders to ​“put our money where our mouth is on affordable housing.”

“There is a real affordable housing crisis in this city,” he continued during Tuesday night’s hearing. ​“Any opportunity our board can take to encourage the maintenance and creation of high-quality affordable housing, I think we ought to do.”

After the vote, city Economic Development Administrator Matthew Nemerson said the aldermanic committee’s support for the deal demonstrates the city’s and the local legislature’s commitment to affordable housing.

“I think the unanimous affirmation of the Board of Alders says that, as a community, we’re willing to invest millions of dollars even in difficult times in the maintenance of this policy and this set of goals,” he said.

The Deal

The proposed deal now makes its way to the full Board of Alders for a final up-or-down vote.

The deal discussed on Tuesday night covers a complex of buildings along Orange Street from Center to George that over the past two-and-a-half decades has helped revitalize the Ninth Square as a vibrant mixed-use, mixed-income neighborhood.

Built in 1994 by a tax-credit partnership controlled by the developers McCormack Baron and the Related Companies, the complex consists of 335 rental units, 50,000 square feet of commercial space, and two parking garages. Back in 2013, the owners announced that they had failed to refinance tens of millions of dollars of existing debt on the property, and were looking to sell.

Earlier this year, Beacon Communities, which already runs the 339-unit Monterey Place in Newhallvile, beat out around 20 other competitors to purchase the building from the Ninth Square Partnership, and subsequently struck a deal with the city that would preserve the complex’s share of affordable units in exchange for a two-decade tax abatement.

Click here to read an earlier article that details all of the terms of the deal.

During Tuesday night’s hearing, the alders pieced through some of the proposed agreement’s key provisions, which include:

• Beacon will pay the city $660,000 per year in property taxes for for the next 20 years, with a slight increase kicking in every five years by a percentage equal to the increase in adjusted gross revenue over that five-year period.
• Beacon will reserve 56 percent of the housing units for tenants earning 60 percent or less of the AMI, which is around $52,860 per year out of an $88,100 annual benchmark for a family of four. The rest of the units will be available for rent at market rates.
• Beacon will pay the city $2 million in return for the forgiveness of over $5 million in debt that the Ninth Square Partnership owes the city.
• Beacon will convey the 290-space parking garage at 270 State St. to the city in exchange for $3.6 million paid out over 30 years.
• Beacon will deed the surface parking lots at 31 and 39 George St. to the city for $80,000.
• Beacon will retain the complex’s current staff for a minimum of one year.

The Best The City Could Get

Hill Alder Dolores Colon asked how Beacon will determine which employees can stay and which must go after its commitment to retain all current staff for at least one years is up.

“Do you plan to pay fair wages?” she asked. ​“Do you plan to give fair benefits? We don’t want them to have jobs just for the sake of having a job. We don’t want them to be exploited.”

“We pay good wages and we retain good people,” said Dara Kovel, Beacon’s president of development. ​“We will hold them to the same standards of performance that we hold all of our staff, and we will pay them as we pay all of our staff.”

She said that Beacon currently owns 18,000 apartments across around 100 different buildings in the Mid-Atlantic and New England, and employs 750 people, including 650 in property management.

“Our goal would be to retain anyone who brings a commitment to our mission,” she said, ​“and a quality of property management that we expect from all of our team members.”

Alder Greenberg asked how the city arrived at $660,000 as an appropriate annual tax payment for the new owners.

Serena Neal-Sanjurjo, the head of the city’s anti-blight Livable City Initiative (LCI) and one of the city’s chief negotiators on the Beacon deal, said that $660,000 is roughly half of the $1.2 million that the landlords would have to pay based on a recent assessment of the property’s fair market value.

“The numbers that we are working with are based on the number of units that are affordable,” she said, referring to the commitment that Beacon has made to retain 56 percent of the apartments, or 189 units, for tenants making 60 percent or less of the AMI.

Kovel noted that the 189 units currently restricted at that level of affordability are almost entirely serving people who have Section 8 housing vouchers. ​“So the actual income of the residents who live in those units,” she said, ​“is much, much lower than 60 percent, more likely to be closer to 20 percent” AMI.

Newhallville/Prospect Hill Alder Steve Winter asked how the city arrived at $2 million as an appropriate amount to get from Beacon in exchanging for the waiving of all city-owed debt on the property.

“Our goal was to make sure that we maintained our affordability components,” Neal-Sanjurjo said. ​“And so we were trying to get back as much of the funds as we could.” She said that the city has around $5 million in outstanding debt currently in the project, and that $2 million was the best that the city could get from Beacon during negotiations.

Winter asked city transit chief Doug Hausladen, who is also the executive director of the city Parking Authority, why the city thinks that $3.6 million is an appropriate amount to pay for control of the State Street parking garage.

“Similar conversations with respect to extracting as many funds as possible out of the project on behalf of the residents of New Haven,” Hausladen replied.

He said that the city received financial data on the 290-space garage from the Ninth Square Partnership, projected costs and revenues based on the Parking Authority’s current operation of the Temple Street Garage, and took into account the estimated cost of capital repairs in negotiating what ended up as $3.6 million to be paid by the city to Beacon over the next 30 years.

Fair Haven Alder Ernie Santiago asked about what would have happened if the current owners ditched the project and if the city failed to strike a deal with the new buyers.

“That would be absolutely devastating to the city,” Neal-Sanjurjo said.

She said the absence of a deal with the new owners could lose the nearly 200 affordable units, put the retail corridor in jeopardy, and would all but ensure that the city received none of the outstanding debt it is owed through the project. She said the city is currently fifth or sixth in line to get its money back from the current owners in the case of a default, standing behind such larger creditors as the Connecticut Housing Finance Authority (CHFA) and Yale.

“I think we should go with this because it’s a good deal,” Santiago said right before the committee’s vote to recommend approval. ​“The best deal that the city could get done at this moment.”

Kovel said that the outcome of tonight’s committee hearing all but ensures that Beacon will be able to raise the money necessary from CHFA and other investors to follow through on the purchase of the Residences at Ninth Square from the current owners.

“If they had voted against the whole proposal and specifically the tax abatement,” she said, ​“the project couldn’t have gone forward. We wouldn’t be able to buy it.”

She said that, if the full board approves the deal, Beacon will move to close on its purchase of the property in the first quarter of 2019, and will then embark on a 14-month renovation of the property. She said that the renovations will focus on building systems, windows, and common areas, and will not require the relocation of any tenants.

“I think this particular project, 25 years later, remains the premiere mixed-income, mixed-use development in New England,” Nemerson said after the vote. ​“When you think of how big it is compared to the size of New Haven’s downtown, and how it’s provided hundreds of families affordable housing within walking distance of the hospital, of Yale, and of other offices downtown, it’s precisely what people want a city to be doing.”