Providence City Council Meeting |May 15th 2024

Good evening. My name is Helen Anthony, the chair of the committee on finance, and I'm calling to order our public hearing on Wednesday, 05/15/2024 at 05:35. Madam clerk, I am recognizing that we have today with us. We have councilor Taylor. We have councilor Sanchez.

We have councilor Graves. We've got councilor Anderbaugh. All from the committee of finance. Thank you so much. We don't have any guests, any other councilors joining us.

We have Ken Cheeverini with us, and we have Erin Gardner with us. Thank you very much. So noted. And our wonderful clerks. So with that, madam clerk, would you please read item number one?

Item number one, an ordinance establishing a tax stabilization plan for the property located at 136 Westminster Street.

Wonderful. Do we have the presenter? Wonderful. Please come up and we'll swear you in. Are we swearing everyone in?

No, we're not swearing you in. We're just going to have you state your name and address for the record. Oh, hold on. I don't think you're you're live. Push the button.

Push the button. We go. There you go. Eric Edelman.

There.

One thirty six Westminster Street, Providence. We're just gonna pass

them can hand them to to the clerk and they can distribute it. Thank you.

Great.

Test, test.

Are there enough? Just hold on one minute until we get everything handed out. We have an extra? Okay. Oh, thank you.

That's alright. I have one and we're Thank all you.

Do another you one?

No, I think we're good. Okay. So please, please go right ahead.

Thank you so much. Today, thank you council members for hearing me. This is about a tax stabilization agreement for one hundred thirty six Westminster Street, which is downtown in the Financial District. Some of you may know it as the Lauderdale Building. It's right next to the arcade and across the street from the Superman Building.

Building was built in 1894, so it just turned 130 years old this year. And we're proposing to redevelop it into 24 units of large housing above three retail units. And I'll get more into detail about that shortly. First off, I don't need to tell you folks, but we all know that Providence has a housing crisis. Providence currently has the second lowest vacancy rate in the country at 3.4%, which is second only behind New York City.

And part of the reason for that is people love living here. You've seen population grow in Providence, and today, there's only 2,000 apartments that are vacant out of the 60,000 apartments in Greater Providence. And that problem is actually getting worse, that problem being vacancy, because the number of units in Providence fell over 83% from three forty units per quarter in 2022 to 59 units per quarter in 2023. So an 83% drop in the amount of apartments under construction. And with no new supply and strong demand to live in Providence, rents are going up quickly.

In September 2023, Providence was the fastest rent growth market in the country with 7.5 rent growth year over year. And one of the keys to limiting rent growth and helping bring down prices is increasing supply. There simply aren't enough apartments in Providence. Another factor that's hitting Providence right now is the slowdown in the office market. As many of you know, COVID dramatically impacted offices, leading many people to downsize, and that's particularly hit downtown.

In downtown, we've seen lots of offices consolidate and close, and as a result, office building assessed values have plummeted. And so our building's office, excuse me, assessed value is down 38% since 2019. And the reason for that is the building is now over 90% vacant and has structural issues, which I'll talk about later in the presentation. And I'm sure anyone walking downtown has seen that there are many other office buildings that are vacant. And with fewer people coming into Providence for work, businesses downtown are really struggling.

So in the last year alone, businesses that have closed due to lack of customers include Rory's Market, Yoleni's, Franklin Rogers, Tommy's, and many others. And so what we're proposing to do at 136 Westminster Street, which is a almost 34,000 square foot office building, is convert it into apartments. As I mentioned, the building was built in 1894, and is currently on the national register. At the time we closed, over 90% of the building was vacant, and that's crept up to over 95% today. One of the reasons the building has had its assessed value go down so much is that it's in need of over $200,000 of structural repairs.

As you can imagine, for a building built in 1894, some of the steel needs reinforcing, and additional structural columns are needed in the basement. I've submitted some photos showing how parts of the floor on the 1st Floor are starting to fall through into the basement. And because the building is on the National Register, the cost to repair this building and convert it to housing is quite significant, Over 9,000,000 in costs. And because the Superman Building is also vacant, this block is seeing a lot of vagrancy and distress with offices closing. And so there's a desperate need for revitalization and infusion of people and attention and activity to the block.

The apartments we'll be building will average nine eighty two square feet and are designed with young families and retirees in mind. So I'm sure many of you are aware that the trend in Providence has been towards smaller apartment buildings. These go against that trend, and they're great with the layouts we have for families to have a second room where they can put a nursery or for retirees to use the second room for a home office. And in addition to converting the vacant office floors, of which there are four, into residential. We'll also be rehabbing the two vacant retail spaces to bring new businesses to the building and bring more jobs downtown.

The cost to convert this building is considerable. It's over $9,000,000 And because the building is on the historic register, there are specific requirements that we have to follow in order to qualify for federal historic tax credits. One question we often get is will this building have affordable units? That's something that we looked at and we tried to make work. Because of the cost to preserve a historic building like this, it's quite considerable.

And some of you may know I built a calculator that shows the yield on cost. But if we were to do affordable apartments here, the yield wouldn't be sufficient enough to cover our construction debt. So we actually wouldn't be apartments. And so the choice that I'm coming to you today with is leaving the building vacant or being able to get a tax stabilization agreement, build 24 new units of housing, redevelop two vacant retail spaces. And if we do that, and we get a tax stabilization agreement, it would result in a two and a half x increase of the ten year taxes paid out by the building.

So today, as a decrepit office building, the building pays $65,000 a year in taxes. That number would likely go down as long as it stays vacant and has these structural issues. If we're able to convert the building into housing, it would average $165,000 in annual taxes per year, which would be a great boon to the city. And obviously, we'd also be able to add new supply. Some of you may know that affordable housing costs the state $163,000 a unit.

And so in this case, the benefit here is rather than no housing, 24 new units, and then an additional 90,093 thousand dollars a year in taxes. One thing to note is that our construction lender is only willing to lend on the project if there's a tax stabilization agreement. Given the cost of the structural repairs and the conversion to multi family, It only makes sense for the bank to lend if there is a TSA in place. And we're eager to get started to preserve this building. The structural risks pose, if unaddressed, pose a risk that eventually the building would need to be torn down or become obsolete.

And so, we invested in acquiring this building, and we're very eager to preserve it and turn it into housing, and quite frankly, scared that on a timeline that lapses too long, something outside of our control could happen. So if we get a TSA, we could start as soon as July to begin conversion to apartments. And on the final page of this packet that I handed out, you can see a table showing the tax benefit to the city with a tax stabilization agreement. So over ten years, as a vacant office building, the maximum you would expect the city to collect in taxes is 656,000. With a tax stabilization agreement, the city would collect approximately $1,650,000 in taxes over that period, which is a $993,000 increase.

Not to mention the extra tax dollars from the residents living there and the new businesses that we would bring to the building. So that concludes my presentation. Happy to answer questions, and happy to be available after for additional questions as well. Thank you so much for your time, everyone.

Thank you very much for the presentation. I just have a few quick questions that I wanted to ask. Have you started your construction or rehab at this point?

No, we have not.

Okay. And also I just wanted to ask, I know there are many requirements if you do receive the TSA. And I just want to make sure if you have you will be able to comply with those? Yes. Okay.

We certainly have an opportunity to discuss this in the finance committee, but if there are any questions that yes, Councilwoman Anderbaugh.

Yeah, just two quick ones. Thank you, Chair. And thank you for the presentation Eric. I also appreciate how transparent you've been with your calculator and opening up your books to us previously which is refreshing because that doesn't normally happen. Can you just answer two quick questions?

If you start in July, when would the property, when would the first apartments be available to rent? And I understand your rationale for no affordable units. What do you think the projected or potential rent would be for any one of the units?

Yeah. First question, we're projecting between a seven and ten month construction timeline. So at the earliest that would put us at delivery in March, late February but realistically March. That's an important time of year as many of you know. That spring leasing season when the market tends to jump the most because there's not enough supply as people look to move once spring is over.

So we're very eager to hit that timeline and bring new units to market. The rents for this will start in the high 19 hundred's and then go up to as high as 3,000 for the one bedroom plus den, two baths, which is effectively two bedroom, two bath units. And then there's one unit which is a three bedroom plus den, two bath duplex unit, which came from zoning necessity. And that unit we haven't priced yet, but will be more expensive just because it is a penthouse unit.

Other questions? Yes, Councilor Sanchez.

Thank you, Chairwoman. Thank you, Eric, for the presentation. My question, confirming, I think you just confirmed, you do intend to rent these units and not sell them?

That's correct. Correct.

That's my only question right now. Thank you.

Thank you.

Okay. I think that's all we have right now. Thank you for the presentation.

Thank you so much.

And I should also ask for the list. I don't know if there's anyone else that would like to test ify either for or against this project. Okay. I have Julissa. Is it ARC?

I hope I'm pronouncing that correctly. Hello. I waive my opportunity to speak, but I am in support of this TSA.

Thank you.

Can you just state your name and address? Yes. Julissa Arce, and the address stated is the address of the law firm that I am employed, 123 Dyer Street, Providence, Rhode Island. I am also a resident of Providence at 8 East Street Apartment 2 Providence, Rhode Island. And which law firm?

Conley Law and Associates. Thank you.