PROVINCETOWN — The town’s effort to get 40 condos — 30 of which would be sold to town residents at below-market prices — built at the site of the former police station on 26 Shank Painter Road hit a speed bump on April 28, when developers Christine Barker and M. Tatiana Eck told the select board that they needed $500,000 in “pre-development” funds for detailed architecture and engineering plans to get the project to its January closing date.
Voters had just approved a debt exclusion measure that would allow the town to borrow up to $4 million to support the affordable-ownership units, which would be sold at prices ranging from $200,000 to $675,000. The median price for a condo in Provincetown last year was $940,000, according to the Cape Cod and Islands Association of Realtors.
That $4 million had been described at town meeting as “the last money in” to the $19.8-million project — meaning it would be transferred to the developers only after a bank loan was secured and the project was fully underway.
The prospect of transferring half a million dollars before a bank had financed the project — and so soon after that town meeting vote on April 7 — did not appeal to the select board.
Town leaders described “one set of circumstances to the town, and in the very next meeting we’re supposed to double back on that,” said select board member Erik Borg. “It’s really unfortunate, because I think the town really is behind this project and wants to see it get done.”
“I don’t want to be considered someone who doesn’t tell the truth,” said select board member Leslie Sandberg. “We’re supposed to protect the money that the taxpayers have, and we have a huge responsibility that when we say, ‘It’s the last money in,’ it’s the last money in.”
“We’ve worked so hard since that damn police station to gain people’s trust with what we’re saying and doing,” said select board chair Dave Abramson. “That’s my concern.”
Sandberg and board member Austin Miller floated the idea of a loan to the project that would have to be repaid if the housing doesn’t get built. Town Manager Alex Morse said that was a workable plan.
“We don’t want to put ourselves in the position where the money is spent and there isn’t a project to show for it,” said Morse. In the case of a “forgivable loan,” the money “would come back to the town” if the housing were never built, he said.
“I apologize that we didn’t come to you before,” Barker told the board. “The Cooperative Bank of Cape Cod is quite bullish on this project, but we have to get to closing. This would be a bridge from here to there.”
It’s expensive to borrow money on the open market, Barker said, especially because many lenders don’t understand why the developers would include so many below-market units.
“What we’re doing is really innovative, and we’re proud of that,” Barker said.
Select board members have previously said that the mixed-income condo project, which Barker and Eck have named the Bellwether, would be the first of its kind on Cape Cod. The town’s contribution is large — 20 percent of the total cost, not counting the value of the town-owned land at 26 Shank Painter Road — partly because there is almost no state or federal financing available for “missing middle” — that is, above-median-income — housing developments.
Because no state money is involved, the 30 below-market units could all be reserved for town residents and town staff, with other qualifications decided by the select board.
A Below-Market Loan
The board asked town staff and town counsel to negotiate a forgivable loan from the town’s dedicated housing funds, which come from the rooms tax on stays in hotels and short-term rentals. The town’s $4-million contribution at the time of closing would be reduced by $500,000, since the developers would keep the money if the units are built and have to repay it only if they aren’t.
The Year-Round Market-Rate Rental Housing Trust and the Community Housing Council met jointly and approved that plan on May 15 — a decision that was made easier when Eck told the two boards that she and Barker had found a supporter who wished to remain anonymous who would put $500,000 in an escrow account that the town could claim if the project doesn’t end up being built.
With that backstop in place, town counsel wrote up a “grant and escrow” agreement that “is essentially a forgivable loan agreement,” Morse told the select board on May 27.
The town’s $500,000 grant would not require any interest payments — but could be repaid from the escrow funds dollar-for-dollar if the project fails. This minimizes risk to the town but gives the developers access to capital more quickly and cheaply than a lender could offer, Morse said.
“Based on the terms of the agreement, we’re confident we’ll have access to the funds in the event we need access to them,” Morse said. Members of the two housing boards had asked why the anonymous donor didn’t just loan the money to Barker and Eck directly, Morse said — “but this person supports the project, and they want to be helpful in this way.”
Select board members were happy about the anonymous supporter and the new plan — although they warned that the town’s remaining $3.5-million contribution should be mapped out well in advance.
“This agreement is making sure that if the project doesn’t happen — they change their mind, costs go up, they back off — that we get our money back,” said Morse. The town’s eventual $3.5-million agreement should have “similar language around what the town gets in return if there’s no project.”
The select board had asked town staff to develop language for a forgivable loan, “and now we have $500,000 in escrow in case something happens,” Sandberg said. “Well done.”
The board endorsed the “grant and escrow agreement” in a unanimous vote
