Development Agreements

By: Rudman Winchell Attorney Erik Stumpfel

In 25 years as a municipal attorney, I have had the opportunity to work on dozens of TIF (“tax increment financing”) projects for new or expanded manufacturing and commercial facilities, as well as a smaller number of projects to redevelop existing properties.

Among the redevelopment projects, a handful particularly stand out:

Freese’s Building: Redevelopment of a Bangor landmark former department store property into senior housing apartments and the Maine Discovery Museum.

Bangor Gasworks / Shaw’s Supermarket: Redevelopment of the former Bangor Gasworks brownfields site into an in-town supermarket plaza.

Bangor Furniture Company: Mixed-use redevelopment of a former retail furniture store.

Sea Dog Restaurant: Redevelopment of the former Viner Shoe Company factory building into a waterfront restaurant and microbrewery.

Eastern Fine Paper Company: Conversion of the former Eastern Fine Paper Company mill and site in Brewer into Cianbro Corp.’s module construction facility, complete with a deepwater barge terminal to move the finished modules.

On August 1st, I had an opportunity to tour the recently-redeveloped former Moosehead Furniture Company mill in Dover-Foxcroft, for which I had written the project development agreement as Dover-Foxcroft’s (then) town attorney, several years ago. This is another stand-out project. WABI’s news story gives a good overview:http://wabi.tv/2015/08/10/former-dover-foxcroft-mill-reopens-as-multi-purpose-complex/

Each of the projects listed above was done as a “public-private partnership”, with significant involvement by the host municipalities and in most cases by state and federal granting agencies. “Public-private partnership” is currently an often-maligned term, sometimes defined by detractors as public risk-taking for private profit. Criticisms of public sector involvement in projects of this type would not stick nearly as well, if the criticisms were not, too often, true.

But for each of the projects listed above, the private sector developers delivered exactly what was promised at the start of the project, and sometimes more. The Moosehead Mill project, for example, is remarkable not only for the 100% lease-up rate for its redeveloped apartment units, but also for the fact that the redeveloped mill actually looks like the artist’s renderings provided by Arnold Development, LLC to the Town of Dover-Foxcroft as part of Arnold’s initial proposal presentation.

In Maine, where $16 million of state new markets tax credits (our tax dollars) can disappear on a project that does not produce any substantial investment in the property concerned, positive results like the projects listed above are by no means automatic. Notwithstanding its occasional criticism of local development efforts, the State of Maine, over several administrations, has been notoriously inept at nailing down the deal and holding developers to their promises. Shuttered or demolished mills in Millinocket, East Millinocket and elsewhere bear silent witness to this fact.

Although many factors can influence the success or failure of a project, one important factor at the front end is a properly-drafted development agreement between the public and private sector entities involved in the project. On the public side, the agreement should protect the public entity’s proprietary and governmental interests relating to the project, with legally enforceable language. In addition, a well-drafted development agreement for a complex project should define the parties’ respective expectations in a way that minimizes the potential for future misunderstandings or disappointments, and should provide a roadmap for actual completion of the project, including performance milestones and timetables. If you actually want to get a project done, the development agreement should clearly state how and when the development will occur, while structuring in sufficient flexibility to address unanticipated events.

My personal model for drafting development agreements is based on the “critical path” method used by engineers to prepare construction documents for larger projects. Like a construction contract CPM schedule, the development agreement should identify each major task to be performed by each of the parties concerned – things such as title clearance; project design; permitting; financing; grant applications; environmental assessment and remediation; etc., and should state when, by whom and in what sequence (or concurrently) those tasks will be done.

At the opposite extreme, I have too often seen towns agree to transfer a town-acquired former mill property to a private individual or business, for nominal consideration, “to get it back on the tax rolls”, based on nothing more than vague verbal promises about future redevelopment, with no written agreement to assure that those promised are fulfilled.

A full outline of a “long-form” development agreement for a complex redevelopment project is beyond the scope of this short essay. But, as stewards of the public interest (and money), those officials with decision-making authority over local development and redevelopment issues will best serve their constituents by negotiating a complete agreement at the front end of a project, to avoid disappointments at a later date.