Manchester OKs tax break to develop Dunlap Building

Apr. 17—Manchester aldermen have approved an application for a tax credit for a project involving property at 959 Elm St. — also known as the Dunlap Building — but not without concerns over a lack of a commitment by the developer to offer affordable housing at the site.

The RSA 79-E tax credit program lets developers who improve blighted properties in downtown areas delay paying property taxes on the value of the improvements.

To qualify, the applicant must meet several requirements under the statute, including that the rehabilitation of the structure must cost at least 15% of the pre-rehabilitation assessed valuation or at least $75,000.

North Street Properties LLC asked aldermen to approve five years of tax relief under RSA 79-E for the property. North Street agreed to purchase 959 Elm St. with the contingency that tax relief be granted.

The vote to approve the application was nearly unanimous, with only Alderman Christine Fajardo opposed.

North Street wants to change the property's listed use from commercial to mixed-use. Currently, 959 Elm St. is five floors of commercial space, but only the first floor is occupied. "Floors two to five are currently underutilized and unlikely to be rented as commercial space because of the decline in demand for office space," according to paperwork filed by North Street Properties.

The applicant plans to retain the existing commercial tenants and add an additional commercial tenant to occupy three commercial spaces on the first floor. The remainder of the building will feature 36 apartments — 30 one-bedroom units and six studio apartments.

Alderman Fajardo said she couldn't support the request because of the lack of a commitment to affordable housing.

Alderman Ross Terrio countered that "we're not actually giving them a tax break."

"We're keeping their taxes level where they are and not raising them on the improvements," Terrio said. "We're not actually cutting their taxes, we're not raising them for a set number of years. We're not giving them any money, they're actually still paying taxes — they're just not going to pay an increase in taxes."

Alderman Joe Kelly Levasseur said that by approving the North Street Properties application, board members are setting a precedent.

"We've approved something tonight that's different than what we usually do," Levasseur said. "We love the idea of buildings being rehabbed that are dilapidated. We set precedent tonight for any future builders that are thinking about coming into Manchester. When you're looking at a building, now it does not have to be a dilapidated building, it now needs to only meet the requirement of being underutilized — and I believe now that's going to provide some more opportunities."

According to paperwork filed with the city, the applicant will "update the existing building to meet the needs of residential tenants."

"This will include adding individual bathrooms, kitchens, and living spaces in each unit," according to North Street Properties' application. "The outside of the building will maintain its historic look, but the inside will be updated to ensure the comfort of future residents looking to live in Manchester's downtown."

According to a report submitted to city aldermen by city Economic Development Office Director Jodie Nazaka, the 2021 assessed valuation of the property is $2,960,800. The 15% threshold is $444,120, and the adjusted total estimated project construction cost is $6,967,163 — meaning the proposed project cost meets the Substantial Rehabilitation requirement for a 79-E request.

Nazaka said Bob Gagne, chairman of the city's Board of Assessors, estimates the property's assessed value after renovation will increase from $3 million to $5.7 million — increasing the annual property taxes by approximately $48,128.

The tax subsidy will save the owners an estimated $240,640 over five years, Nazaka wrote in a memo to aldermen.