Stone Place Tax Deferral Signed by Governor

One of the largest residential projects in recent Melrose history should break ground at the former industrial district on Washington Street in September, after Gov. Deval Patrick signed special legislation last week allowing the developer to defer a portion of its property taxes for five years.

Stone Place Limited Partnership, developer of the Stone Place Mill project, will pay the city a base tax rate each year that increases as the property gains value. Any taxes that exceed the base rate will be deferred for the first five years, with the company having to pay back those taxes to the city within 10 years at an annual 4.5 percent interest rate. The total amount of deferred taxes will likely exceed $1 million.

The tax deferment applies only to the first phase of the project, which includes creating 212 apartments within two renovated buildings, formerly part of the Boston Rubber Shoe Factory on Washington Street, and three new buildings including a clubhouse. The completed project will consist of 300 apartments — 273 at market rate and 23 designated affordable — spread throughout a total of four new buildings and the two renovated mill buildings.

The tax deferment will kick in after the city issues a final certificate of occupancy for the initial 212 units, which should be completed in 16-18 months according to Victor Sheen of OakGrove Residential, the development management group that will oversee the construction of Stone Place Mill.

Sheen said that the developer worked out the tax deferment agreement with city officials after officials from the U.S. Department of Housing and Urban Development (HUD), which is insuring the project's mortgage, told developers that they would only insure up to a $41 million loan, less than the developers previously expected. The lower figure led the developer to seek additional capital.

"We had to find additional equity to bridge the gap," Sheen said. "That's why we discussed it with the city and came up with a real estate tax deferment program that would allow us to go out to the marketplace to solicit for more investment."

In May, Mayor Rob Dolan brought the tax deferment plan to the Melrose Board of Aldermen, who subsequently approved the plan and sent it to Beacon Hill in the form of special legislation known as a home rule petition, requiring approval by the Legislature and the governor.

Sheen said the project developers now have all the equity needed to begin construction.

"This tax deferement agreement was a critical piece in securing the additional equity that was needed," he said.

Melrose attorney Bob Bell, who represents the developers, lauded city and state officials for working with Stone Place Limited Partnership to bring the project to fruition. Bell said that Stone Place Mill is one of the largest, if not the largest, residential complex that will begin construction this year in eastern Massachusetts.

"I think it (the tax deferment) is symbolic of a project that has been one of the best public-private partnerships that I've ever seen in my career," Bell said. "This is really something. Imagine getting the Massachusetts Legislature and governor on the same page on something that creates good housing, that has historic preservation aspects, that increases the tax yield to the city and that creates jobs. Everybody else is trying to create jobs and are spinning their wheels, and we're doing it right here in the most significant way in the state. I think Melrose has a lot to be proud of."

When the project is finally completed, it will fulfill a long-sought vision for the former industrial district on Washington Street that began three years ago with the city's Smart Growth Task Force, created by Dolan, devising plans to create an overlay-zoning district that would allow a mix of commercial and residential development of the property. That overlay zone, approved by the Aldermen in 2008, will allow current businesses on the property, such as Marty's Furniture, to continue to operate.