The tax breaks were intended to turn the historic Augusta Castle into a boutique hotel

AUGUSTA — Owners of a castle in the center of the city Olde Federal Building I want to turn it into a boutique, 40-room hotel that would entice visitors with a ground-floor café, a rooftop bar, event and meeting space, and eventually a bathhouse and spa overlooking the Kennebec River, all designed to highlight the history from an award-winning designer.

But to do that, they need $2.6 million in tax credits over 20 years.

Downtown Augusta resident Andrew LeBlancwho developed Vickery property for 23 apartments in the city centerand Nate DeLoyce, Ownerwith his brother, with Uncommon Hospitality, a hotel developer in Portland Hotel Longfellow and The Francis Hotel in Portlandhave big plans to convert the building, known to some for its stone turret as Augusta Castle, into a hotel they say could attract people to the city.

Their plans include the initial phase of a 40-room hotel in a granite block building, with a ground-floor cafe and lounge, a rooftop bar that overlooks the Kennebec River from the building’s flat roof, and small event and meeting space designed by the Post Company, an award-winning design firm, will draw attention not only to the hotel, but also to the surrounding downtown area, in a design that aims to highlight the history of the building and the city while modernizing the building, DeLoyce said.

“The opportunity to restore this building that is currently underutilized is very exciting, and the opportunity to convert it to a use that is very public is very exciting,” DeLoyce told city councilors. Thursday. “All aspects of the hotel, the cafe, the meeting rooms, 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. We think it is best to use this building as a hotel. It’s like a springboard for downtown. It’s 40 rooms, not 200. But we have 40 to 80 guests every day who come to spend money in the center, and that can only mean good things for everyone around.”

The post office, which currently leases space in the building, will operate through 2027, DeLois said. When it moves in, they will replace the post office with a bathhouse with steam rooms, hot tubs and other spa amenities that, according to interpretations of the proposal, will include a riverside deck with lounge chairs.

DeLoyce said the project will create many jobs, about 30 full-time and 20 part-time, including housekeepers, restaurant and bar staff and all levels of management, which he said will be well-paying jobs.

If everything comes together, construction would begin next March or April and open by the end of 2026, LeBlanc said.

But part of whatever is being raised for the project includes securing tax increment financing, or TIF, tax credits from the city. The developers said the cost of upgrading the 200-year-old floodplain building into a modern hotel is significant and they would not be able to do the project without the proposed tax breaks.

Keith Luke, the city’s director of economic development, worked with the developers on a proposal for a 30-year TIF deal in which the developers would only get a portion of their property taxes back for 20 years, with the city getting the full amount for the last 10 years of the deal.

The proposal, which Luke said was unanimously recommended by the city’s Tax Increment Financing Committee, would refund developers 75 percent of the property taxes generated by the new taxable value added to property by the project, or just under $2.6 million over 20- annual period The city will keep 25% for the first 20 years and 100% for the last 10 years, for a total of $2.5 million over the 30-year period.

Luke said that over the course of the 30-year agreement, the TIF will return 52 percent of new tax revenue generated by the project to the developer and 48 percent to the city, which is close to the city’s TIF policy, which typically sees no more than 50 percent of such revenue go to the developer.

TIFs allow municipalities to pay property taxes generated by new development in designated areas. Sheltering the money through TIF means it won’t be added to the city’s overall property valuation for state tax purposes. Without it, as a municipality’s overall property valuation rises, its public revenues — such as education and income-sharing aid — decrease and the county’s tax liability increases. The new value protected in the TIF does not count toward the municipality’s property tax value, so public aid funding is not reduced until the TIF expires.

Once complete, the project is expected to add just under $13 million in new taxable value to the city.

In order for that TIF deal to happen, Luke said, the property would have to be taken out of the existing downtown TIF district, which expires in seven years, so it could run for the full 30 years the project would take.

City councilors are expected to hold a public hearing on that aspect of the proposal at their Nov. 7 work meeting.

They expressed enthusiasm after hearing about it from Luke and the developers on Thursday.

“This building is an eye-catcher, it’s an amazing piece of architecture that we have downtown, I know it’s not just my kids who call it ‘Augusta Castle,'” said Councilor At-Large Stephanie. Sienkovych. “And having something with public access and as that economic engine seems like a great idea for this place. I like the terms of the TIF to benefit the developer and also not be a big hit to the city over time. Both of those things, I think, keep the balance and make it a really good idea for the city.”

The Olde Federal Building was offered for development as luxury apartments. DeLoyce said the building was recently under contract for a developer to buy and build, but the developer backed out because of the cost of upgrading and remodeling the building. Deloitte and LeBlanc purchased the building in March.

DeLoyce said his company, Uncommon Hospitality, worked with the Post Company designer to build the Longfellow Hotel, which was recognized in Architectural Digest magazine included it in the 20 best hotel projects in the world in 2024.

The proposal comes to the advisers one after another development proposal, including a hotel, on the former Kmart site site

Luke said in announcing the downtown hotel proposal to councilors that the city’s development office had “had a very good week and it’s about to get even better.”

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