Tax break sought to turn historic 'castle of Augusta' into boutique hotel
Keith Edwards, Kennebec Journal, Augusta, Maine
6 min read
Oct. 25—AUGUSTA — The owners of downtown's castle-like Olde Federal Building want to turn it into a boutique, a 40-room hotel that would be a destination luring visitors with a first-floor cafe, rooftop bar, event and meeting space and, eventually, a bathhouse and spa looking over the Kennebec River, all designed to highlight history by an award-winning designer.
But they need about $2.6 million worth of tax breaks, over 20 years, to do it.
Downtown Augusta resident Andrew LeBlanc and Nate DeLois have big plans to redevelop the building — known by some as the castle of Augusta due to its turreted stone exterior — into a hotel they say could draw people to the city. LeBlanc previously developed The Vickery property into 23 apartments downtown and DeLois co-owns, with his brother, Uncommon Hospitality, a Portland-based developer of hotels including Longfellow Hotel and The Francis Hotel in Portland.
Their plans include an initial phase of building a 40-room hotel in the granite-block building, with a cafe and lounge on the first floor, a rooftop bar looking down from the flat section of the building's roof onto the Kennebec River below, and small event and meeting spaces, DeLois said. The designs by the Post Company, an award-winning design firm, should draw attention not just to the hotel but also the surrounding downtown in an effort to accent the history of the building and city at the same time the building is modernized, DeLois added.
"The ability to rehabilitate this building which is underutilized now is very exciting and being able to convert it to a use that is very public-facing is very exciting," DeLois told city councilors Thursday. "All aspects of the hotel, the cafe, the meeting space, the bathhouse, the bar, everything is open to the public. It's almost like a living museum, people can walk through and see the history. The use, as a hotel, we think is the best use for this building. It's like a springboard for downtown. It's 40 rooms, not 200. But we have 40 to 80 guests every day, coming in, looking to spend money downtown, that can only mean good things for anybody around it."
The post office currently leasing space in the building would remain until 2027, DeLois said. When it moves out, they'd replace the post office with a bathhouse with steam rooms, hot tubs and other spa amenities which, according to renderings of the proposal, would include a deck with lounge chairs on the river side of the building.
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DeLois said the project would create a lot of jobs, about 30 full time and 20 part time, including housekeepers, restaurant and bar staff, and all levels of management, which he said would be good-paying jobs.
If everything comes together, they'd start construction next March or April and open toward the end of 2026, LeBlanc said.
But part of everything coming together for the project includes securing a tax increment financing, or TIF, tax break from the city. The developers said the costs of modernizing the 1890 structure built in a floodplain into a modern hotel are significant, and they wouldn't be able to do the project without the proposed tax break.
Keith Luke, the city's economic development director, worked with the developers on a proposal for a 30-year TIF agreement in which the developers would only recoup a portion of their property taxes for 20 years. The city would get the full amount for the final 10 years of the agreement.
Luke said the proposal was unanimously recommended by the city's Tax Increment Financing Committee. For the first 20 years, developers would get back 75% of the property taxes generated by the new valuation, estimated at just under $2.6 million over two decades. The city would retain 25% for the first 20 years, and 100% the final 10 years, for a total $2.5 million over the 30-year period.
Luke said over the 30-year agreement the TIF would return 52% of new tax revenue generated by the project to the developer, and 48% to the city, which is close to the city's TIF policy. Typically, no more than 50% of such revenues would go to the developer.
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TIFs allow municipalities to shelter property taxes generated by new development within designated districts. Sheltering money through a TIF means it would not be added to the city's total property valuation for state tax calculation purposes. Without that, as a municipality's total property valuation increases, its state-provided revenue — such as aid for education and revenue sharing — decreases, and its county tax liability increases. Since new value sheltered in a TIF does not count toward a municipality's property tax value, its state aid funding is not cut until the TIF expires.
Upon completion, the project would be expected to add just under $13 million in new taxable value to the city.
Luke said in order to make that TIF deal, the property would have to be removed from an existing downtown TIF district, which expires in seven years, so it could run the full 30 years needed to make the project feasible.
City councilors are expected to hold a public hearing on that aspect of the proposal at their Nov. 7 business meeting.
They expressed enthusiasm after hearing about it Thursday from Luke and the developers.
"This building is eye-catching, it's this amazing piece of architecture we have downtown. I know my kids aren't the only ones to call it the 'castle of Augusta,'" said At-Large Councilor Stephanie Sienkiewicz. "And having something with public access and as this economic driver seems to be a great idea for that spot. I love the terms of the TIF, to benefit the developer and also not have the city take a huge hit over time. Both those things, I think, keep it in balance and make it a really good idea for the city."
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The Olde Federal Building had been proposed for development as luxury apartments. DeLois said the building was fairly recently under contract to be purchased and developed by a residential developer but the developer dropped out due to the cost of modernizing and renovating the building. DeLois and LeBlanc acquired the building in March.
DeLois said his company, Uncommon Hospitality, with designer Post Company, built the Longfellow Hotel which was recognized in Architectural Digest magazine as one of the 20 best hotel designs in the world in 2024.
The proposal comes to councilors on the heels of another proposal for a development including a hotel, at the former Kmart plaza site.
Luke said, in announcing the downtown hotel proposal to councilors, the city's development office "had a very good week, and it's about to get even better."
