Tuttle Block renovation slated

Vermont Business Magazine, Dec 01, 2003 by Sternberg, Matthew T

On July 8, 2003, Governor Douglas announced a Vermont Community Development Program (VCDP) grant of $616,000 for the renovation of the Tuttle Block in downtown Rutland. The grant was the culmination of a three-year effort to devise a viable renovation plan and secure funding for the project.

The eventual financing package typifies the complexity of renovating historic downtown buildings.

The Tuttle Block is one of the most visible and striking buildings in Rutland. With a gross area of 19,480 square feet, it has served over the years as a printing plant warehouse, with limited office space and retail on the street level. By the 1990's, time had taken its toll. Wiring and plumbing systems were outmoded and the building didn't approach ADA compliance. If proper insulation was to be added for energy conservation, the roof trusses would not support the increased snow load. The facade was coming loose and was at risk for collapse. All told, it was your average obsolete downtown historic building.

Over the years, many local investors had investigated the building but chose not to take it on. In 2000, the Rutland Redevelopment Authority decided it was time for the public sector to take a roll. The Authority teamed up with a local

non-profit development group, the Rutland County Community Land Trust, to investigate possible strategies. Working through the Land Trust, RRA funded a full engineering and architectural analysis of the structure, defining a specific list of improvements required to get the building back on the market.

The results were sobering. Renovating the building for mixed retail and office use would cost almost $2 million, exclusive of site acquisition. While it was clear that public funding would be required, RRA and RCCLT wanted to find out how much private investment could be attracted. RRA issued a redevelopment proposal, seeking local developers interested in taking over the project. Interested parties were asked to propose the best package they could justify financially and define the level of public funding or incentives that would be needed to complete the project.

The financing gap was quite large. With an estimated cost of $2 million and a post-renovation fair market value estimate (based on prevailing rents) of only $600,000, there was clearly a big gap, even if RRA and RCCLT gave the building away. In the end, however, none of the private developers bit. As one explained, even if he was given the empty lot it was not of a configuration that would be profitable to develop. Despite the availability of grants and tax credits,

there simply wasn't enough value in the project for an independent developer to renovate it for market purposes.

The next idea was to find an institutional user, an organization that would be willing to make the extra investment for community purposes instead of an anticipated return. One such building in downtown Rutland is the Paramount Theatre, renovated in 2001. The $3.5 million cost will never be earned back but the project has been accepted because of its cultural value and the secondary economic development benefits generated by its audiences. No such users could be identified, however, so in the end the project fell to the Land Trust.

This project will be the Land Trust's first foray into commercial projects. Long established with housing projects, they were interested in taking part in downtown redevelopment. Since it was now clear that the private sector could not solve the Tuttle problem, it seemed an appropriate opportunity.

After two years of planning, a financial package was finally structured using eight different grant and tax credit programs as well as a commercial bank loan. Agencies tapped included VCDP, the Vermont Housing and Conservation Board, the HOME Program, a HUD special purpose grant, low income housing tax credits and rehab investment tax credits, a VHCB project-based capacity grant, a grant from the Preservation Trust of Vermont, loans from Housing Vermont and RCCLT and last, but not least, a commercial bank loan.

In order to qualify for many of these sources, the project needed to add a housing element. Instead of using the top two floors for offices, they will be developed as thirteen units of housing. While the high costs initially indicated that housing was not the best and highest use, the guidelines of the funding sources determined that housing was required if the project was to be funded. The additional requirements for housing drove the development budget even higher, resulting in a total package of $3.7 million. However, many of the most flexible sources of public funds may only be used for housing.

One potential stumbling block was the requirement for perpetual affordability attached to many of the housing programs. This was seen as inappropriate for a downtown commercial building, as the building's long term economic vitality will depend on its ability to adjust to the market. A permanent covenant would inevitably force the building back to public programs for the next generation of renovation.