Authority approves private enterprise agreement to help Prestwick compete for LIHTC award for Florence On Main

The Development Authority voted to approve a private enterprise agreement with developer Prestwick to support the proposed Florence On Main low-income housing project, authority members said at a special meeting.

An authority representative explained the agreement is intended primarily to help Prestwick secure an extra scoring point in the Department of Community Affairs low-income housing tax credit (LIHTC) round. The representative said the authority reworked the standard private enterprise agreement language — which he said is, in his view and that of other attorneys, constitutionally suspect — into a document structured like an inducement resolution that would still provide tax-abatement benefits while avoiding the problematic statutory form.

Under the plan described to the board, the developer would complete the project and transfer title to the authority; the authority would issue revenue bonds to pay the developer, and the developer would lease the property back. Because the authority is a tax-exempt entity, the development itself would not be taxed on ad valorem property taxes; instead, the lease would be taxable. The presenter outlined a proposed 10-year lease schedule starting at roughly 50% of fair market value, increasing by about 5 percentage points annually and reaching near-full taxable value in year 10, when the developer could repurchase the project by redeeming the bonds.

The presenter said that, as structured, the arrangement would yield substantially larger tax savings for the developer over a 10-year period than a standard 10% abatement from the housing authority, but it would include an annual payment from the developer to the authority equal to 15% of what taxes would have been at full rate. The presenter estimated that the first-year payment would be about $7,531.78 and would ramp to about $15,000 by year 10; he offered a rough total over the 10-year term in the low six figures (he referenced both about $120,000 and about $150,000 in different exchanges, reflecting differing calculations discussed in the meeting).

Board members asked for clarity about the payment schedule, whether payments are annual and how the figures were calculated. The presenter confirmed payments would be annual and said the developer's anticipated project investment (land plus construction) was roughly $4 million to $5 million on the basis of certain deductions; another board member noted a higher $18 million figure when gross development value is considered before tax-credit adjustments. Board discussion also recorded that the land sale price to Prestwick had been renegotiated to about $350,000.

Members framed the project as a catalytic downtown Main Street development: "It's critical to our downtown," one member said, noting the proposal would add shops at street level and about 60 low- to moderate-income housing units above. The presenter and others confirmed rent restrictions tied to the LIHTC program would require rents to be set on an income-based sliding scale.

Chair (role) asked for a motion to approve the agreement. Daniel moved and Rhonda seconded. Several members voted "aye" and the meeting record shows one abstention by a member identified as Victoria; the chair then adjourned the special meeting.

The authority's immediate next steps, as described in the meeting, are to include a draft of the agreement and a supporting letter in the LIHTC application; any formal execution of documents would follow only if Prestwick receives the LIHTC award and the parties proceed to closing. The presenter said a memorandum of understanding would be prepared among the developer, the authority and the county tax assessor so the parties agree on valuation methodology for the lease term.

Details left unspecified in the recorded discussion include the final lease valuation schedule as adopted in any signed agreement, the exact total of payments over the lease term (the presenter offered two similar but not identical totals during the meeting), and whether any other local approvals beyond the authority's action will be required for the project to close.