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Developer Abuse? City Reviews Tax Incentive Program

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The city launched a tax incentive program in 1979 to encourage homeowners to fix up rundown buildings in blighted neighborhoods.

But in recent years it's become a favorite of the city's biggest developers, who can incorporate small structures that qualify for the program into new, much larger construction projects while reaping millions of dollars in tax breaks.

That may change soon. After Style Weekly revealed in May how developers were using the tax abatement for rehabilitated real estate program to get breaks on massive new developments, City Councilman Parker Agelasto asked the assessor's office to launch a review of all structures currently receiving abatements under the program.

He and Councilwoman Kathy Graziano also are pursuing long-term changes that would tighten the rules and eliminate what Agelasto says is viewed by some people as developer abuse.

"Since this story was done by Style," he says, "we've been working on a set of recommendations."

It's too soon to talk about specifics, Agelasto says, but City Assessor James Hester confirms that his office has launched a review of all 7,000 properties receiving tax abatements worth a total of about $22 million this year.

"We're establishing a priority list of rehab credits that we're going to take a second look at," Hester says. About 40 properties have made the list so far, he says.

Hester's office already revoked $2.4 million worth of abatements set to go to a 131-apartment complex under development by Louis H. Salomonsky at 18th and Cary streets. Salomonsky had qualified for the abatement by moving an 11-by-20-foot pump house onto the property and incorporating one of its walls into the side of the $24-million complex.

Other planned projects have been caught in limbo, including developer Ron Hunt's planned 151-unit Hatcher Tobacco Flats in Manchester, which initially qualified for the program because it incorporated a 4,000-square-foot sewage house for the complex's entrance. Hunt says he won't be able to build the project if it's excluded from the program.

Both Hunt and Salomonsky say it's a mistake to disqualify their projects. Salomonsky says in its current form, the abatement program is an "enormous stimulus to development."

Hunt says he can live with new rules once they're developed, but says for projects in the works, it's devastating. There's no question tightening access to the program will slow development, he says.

"You will not have new construction because the abatement makes a huge difference," Hunt says. "So there will be a lot of deals that won't be done because you can't use the tax abatement — no question."

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