A Hagerstown redevelopment initiative that began a few years ago as a way to help revamp the city’s struggling downtown is paying dividends for some property owners and developers, and tenants also can reap benefits by moving into their newly renovated buildings, a city official said.
Started in 2009, the Partners in Economic Progress, or PEP, program was established to support private-sector investments that contribute to the revitalization of downtown Hagerstown, said Christy Blake, the city’s downtown business recruitment and retention manager.
“The intent there is to provide incentives for property owners and developers to do renovations to their buildings,” Blake said.
Administered through the Hagerstown Department of Community and Economic Development, seven building renovation projects have been approved through the program since 2009. Three of them have been completed.
To date, the city has assisted in generating $20.2 million in building rehabilitation investments for six of its projects, and subsequently, the three completed projects have increased in collective property value by about $4.4 million, according to data provided by Blake to the Hagerstown City Council last week.
A total of 72,953 square feet of office space has been created as well as another 68,510 square feet of retail and restaurant space. It also has allowed businesses in PEP buildings to create 27 new jobs.
The three completed projects are located at 28, 34-36 and 38 S. Potomac St. in the heart of the city’s Arts and Entertainment District.
For upper-floor tenants in those PEP-approved buildings, a rent relief program is offered by the city that will pay 50 percent of rent, up to $12,000 per year or $1,000 per month, for two years, which can be a help for a new business or one relocating, Blake said.
Currently, six participating businesses take advantage of the program, including D’vinci Interactive, Leadership Washington County, Sentinel Capital Solutions, SGS Refrigeration, T.S. Leary and Associates and The Tipson Firm. A seventh business that was receiving benefits has since dissolved, Blake said.
Incentives for tenants are crucial in jump-starting Hagerstown’s downtown, according to one developer renovating a PEP-approved building at 22 N. Mulberry St.
“They should be aimed at the tenants, not the developers,” said John Laughlin, president of Ridgecrest Investments Inc. “The developers have plenty of money. We don’t have any problems getting money; what we have problems with is getting tenants.”
Laughlin gave a tour of one of his newly renovated spaces to members of the Washington County Arts Council on Thursday. He said there was a good chance they would make the move from West Washington Street to his large office and loft space geared toward the arts community.
“They can get twice the space here for the same price as they’re paying downtown because of the PEP program,” Laughlin said. “Very important to us, but also very important to them ... They need more space. Moving from 2,000 feet to 4,000 feet and having the city pick up 50 percent of the cost for two years is a key issue in their decision to move.”
Laughlin bought the building, now called Mulberry Lofts, with his business partner Frankie Corsi in 2005 from an owner-operator company that relocated to the Halfway area.
The large, U-shaped, three-story structure contains 78,000 square feet of space, all with 13-foot or higher ceilings, Laughlin said. The better part of the past year has been spent on renovating the exterior of the building, which recently had 600 brand-new windows installed.
Laughlin said he also recently purchased a parking lot to the rear of the building, which is a former Washington County Hospital property.
Developers renovating buildings must meet several requirements to gain PEP approval, including a minimum investment amount and ensuring compliance with all city codes.
Laughlin’s building is one of two others currently undergoing renovations. The others are located at 90-98 W. Washington St. and 138-140 W. Washington St.
Looking toward the future
Blake said the city is exploring ways to make more incentives available through the program, such as a recommendation to extend matching 50 percent rent-relief grants to first-floor tenants in addition to those already available for tenants on upper floors.
“I see a lot of potential in the downtown,” she said. “I think there’s a lot of opportunity for more development projects in the City Center, and for property owners and businesses to do renovations.”
When asked what he believes Hagerstown’s downtown could become in the future, Laughlin said people want what nearby Frederick, Md., has developed, but had strong feelings that a city-sponsored downtown stadium project could greatly hinder any progress toward that type of revitalization.
Laughlin called the proposed multiuse sports and events center project, which could cost in the neighborhood of $30 million, “a swing-for-the-fences, Hail-Mary pass that will be foolish.”
He said he thinks the city should use money toward several smaller revitalization projects rather than one big one.
“We need people who want to work and live downtown, and will be here during the day as well as during the night,” Laughlin said. “... We just need to focus on 10 or 15 other small projects, and it would be Frederick in five or six years.”
With the incentives currently available and more possible, Blake said the city constantly is promoting the PEP program to bring more life downtown.
“Overall, I would like to see the downtown be a hub of activity in an array of different ways — offices, cultural activities, nightlife, family events ... an all-inclusive City Center that we strive for it to be,” she said.
Laughlin acknowledged that there have been many failed projects around Hagerstown, but said many of those were the wrong projects, done at the wrong time, at the wrong price points.
But he said he hopes that once other developers, who might be skeptical about large-scale renovations, see tenants taking advantage of the program in his building, they will be encouraged to take on their own projects.
“This is not Montgomery County; this is not Frederick County,” Laughlin said. “People need to adjust their attitudes and their investment to Hagerstown and not try to make it something that it isn’t today.
“And in 10 years, it will be remarkable what we will do.”
Program requirements and incentives
Partners in Economic Progress (PEP) program eligibility requirements for property owners
- Minimum investment of $250,000 for a commercial project, $100,000 for a residential and $200,000 for a mixed-use project.
- Calculation shall not include property acquisition costs.
- Applicants cannot be delinquent on city or county taxes on the property, or any other financial obligations to the city.
- Building and core systems must meet all city of Hagerstown codes.
- Prior renovation projects are eligible for the program if the renovation activities were completed after Jan. 1, 2007.
Incentives offered through PEP program
- Economic Rehabilitation Incentive Grant — Equal to city property tax for five years (less any enterprise zone).
- Utility Benefit and Allocation Charge Assistance — Two free EDUs valued at $13,800.
- Parking Program Fee Reduction — One year free and 50 percent discount for four years (Five passes for commercial project; one per unit for residential project).
- Upper Floor Commercial Space Rent Relief — 50 percent rent paid by city for two years (up to $12,000 per year).
- Development Fee Free Zone — Waiver of development fees such as building permits, plan review fees, occupancy and zoning fees.
- Fast Track Construction Program — Expedited review through Planning and Coding Administration Division and Historic District Commission.
- Code Flexibility for Rehabilitation of Existing Buildings — Code administration staff will provide information and training for design professionals in the use of the existing building code.
- Professional Assistance with Historic Tax Credit Programs — Two hours of consultation on utilization of historic tax credits paid for by the city.