Could a utility assistance program help Chelsea’s downtown attract new businesses and redevelopment?

That’s the proposal that was floated by newly elected Chelsea Downtown Development Authority President Pete Flintoft Thursday morning.

He said since the DDA’s purpose “by statute includes encouraging and assisting commercial redevelopment, the DDA is authorized by law to assist individual properties with connections to public utilities within the DDA district.”

When new business owners approach the city, one of the negatives they express is the price for utility hook-ups and service, several DDA members said.

Flintoft would like to see the DDA offer funds for utilities, similar to tax abatements, for upgrades in service from existing uses for new businesses or additions to buildings in the DDA district.

The cost of water and sewer is based on a formula called a residential equivalent user (REU) fee schedule that takes into account the amount of usage, the square footage, and the impact on the cost of operating and maintaining the city’s water and sewer systems.

Under this proposal, the DDA would pay the city based on an agreement between the owner of the property and the DDA that would “provide for periodic forgiveness of the installments of principal and interest,” as part of a special assessment district for the property, which would need City Council approval.

It would amount to 1/12th of the original amount of the special assessment plus interest. So, in essence, it’s a special assessment that’s forgiven over 12 years.

“The condition for forgiveness shall be the continued use of the property,” Flintoft said, in addition to “other conditions of usage agreed to by the owner and the DDA.”

Each year, the property owner “would certify to the DDA” that the property is still being used with the new and increased utilities. The DDA would then review and confirm the certificate of use of the property.

He cited the currently unoccupied post office space downtown as an example. As a retail space of about 4,000 square feet, it is charged 1.4 REUs or $9,590, according to the city’s formula.

If a new business, such as a full-service restaurant, took over the building, it would be charged for 4 REU’s per 1,000 square feet or 16 REUS. But with the DDA proposal, the increase in use would give credit to the new business for the 1.4 REU’s and it would be charged for 14.6 REU’s.

At a cost of $6,850 per REU, the water and sewer connection fees would be $110,010, and the DDA would provide assistance for this additional usage.

“Let’s keep Chelsea’s downtown,” said Mark Heydlauff, the DDA treasurer, “and remove this as a barrier.”

The DDA is proposing $300,000 to fund the program in 2011-2012, $350,000 in 2012-2013 and $150,000 in 2014-1015, and by a unanimous vote, the proposal will next go to the Chelsea City Council for input. The proposal is expected to be on the agenda for Tuesday night’s council meeting.

Lisa Allmendinger is a reporter with AnnArbor.com. She can be reached at lisaallmendinger@annarbor.com. For more Chelsea stories, visit our Chelsea page.