The lack of development on a weed-strewn lot in Portland has cost taxpayers nearly $180,000 in interest on millions of dollars in federal funds earmarked to build a parking garage there, and the amount is increasing each month that the project is delayed.

So far the Federated Cos., which paid $2.3 million last June to obtain the Bayside land from the city for its Midtown project, has not filed applications to begin building the garage, despite having site plan approvals for more than two years.

That has left taxpayers footing the interest on an $8.2 million loan that has been committed to the project by the U.S. Department of Housing and Urban Development. As of June, taxpayers have paid more than $177,000 in interest that city officials had hoped to repay with additional tax money from the new development.

The 3.25-acre lot on Somerset Street is the future home of the long-awaited project, which promised to bring hundreds of units of much-needed housing to the neighborhood between downtown and Interstate 295. The city began working with Federated in 2011.

Developer Jonathan Cox, founder and chairman of the Florida-based Federated Cos., said in an email there was “nothing to discuss” about the project, which was first proposed in 2011 and has since undergone several iterations and was the subject of a lawsuit.

Federated didn’t have to pay taxes last year, but will owe $49,752 a year beginning with the 2018 fiscal year.

Federated received site plan approvals on March 3, 2015, to build 445 apartments in three six-story buildings with first-floor retail, along with an 800-vehicle parking garage. That site plan approval, which has been extended twice, is set to expire for good on March 4, 2018, the city said.

Since those approvals were granted in 2015, Federated has expressed interest in converting some of the planned housing units into hotel rooms. And last fall, City Manager Jon Jennings told the Bayside Neighborhood Association that Federated was interested in building taller buildings with a more diverse range of uses, including hotel, office and housing.

That was surprising, because in January 2014 the project already had received approvals for four 165-foot towers with up to 800 housing units and a 705-vehicle parking garage. But Federated chose to scale back that development after a group of residents called Keep Portland Livable filed a lawsuit.

The city already has turned down one request to build a hotel on the site, prompting Federated to threaten to sue the city. After a three-month standoff, the city announced it had reached an agreement with the developer to move forward with only housing on the site, predicting the project would break ground by the end of 2015. But that did not occur.

The following year, Federated began marketing the residential portion of the project for sale to another development company. At the time, Cox said it was not unusual for that to occur with a sizable project like Midtown.

Greg Mitchell, the city’s economic development director, said Monday that city officials are essentially waiting for Federated to file its application to begin construction on the parking garage. Based on his conversations, Mitchell said the developer is continuing to evaluate market conditions as it decides whether to change any aspect of the project.

“Housing continues to be a priority for the city in terms of increasing the supply,” Mitchell said.

Any significant change in the building design or programming likely would require another Planning Board review, he said.

Neither Mitchell nor City Hall Communications Director Jessica Grondin could say for how long the federal grants are tied to the Midtown project, or what effect, if any, the expiration of the project’s site plan would have on the city’s commitment.

The delay comes as development unfolds all over the city. New housing has opened or is under construction across the peninsula, and a proposal to build 284 housing units with a 387-vehicle parking garage and retail space on the former Rufus Deering Lumber site on Commercial Street will be taken up by the Planning Board in a workshop session Tuesday.

Meanwhile, the city is evaluating proposals to redevelop 4.1 acres it owns in Bayside. Those properties were the site of the Public Works Department before it began moving to a new campus on Canco Road.

Despite the repeated delays, Mitchell said he is “hopeful” and “confident” that Federated will move forward with its plans to develop the Midtown site.

“I’m still very hopeful we can break ground this year,” Mitchell said. “Time is of the essence and we’re working diligently to make something happen.”

The original sales agreement included a time line for Federated to begin the project, but that was removed before the sale last year because officials believed the developer was fully invested in the project. Now Federated is only obligated to build the 840-vehicle parking garage, 180 housing units and 50,000 square feet of retail within three years of drawing down at least $1 million of the federal funding for the garage.

Randy Billings can be contacted at 791-6346 or at:

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