Rhode Island Commerce authorizes $1M in tax incentives for Union Station food hall

Rhode Island’s economic development agency has agreed to sweeten the deal on plans to open a modern food hall in downtown Providence.

Rhode Island Commerce Corp.’s board of directors on Monday unanimously voted to authorize $1 million in redeemable tax credits to One Union Station LLC for its plans to redevelop the ground floor of the historic Union Station building as a market-style eatery.

The redeemable tax credits through the state’s Rebuild Rhode Island Tax Credit program aim to help Marsella Development Corp. serve up what the company touts as the state’s first food hall by offering a financial incentive equal to about 5% of the $20 million project cost.

Like construction and redevelopment projects across the state, including plans to revive the nearby “Superman” building across Kennedy Plaza, the food hall project has run up against economic headwinds that created complications and extra costs. 

“It’s a uniquely expensive project in the sense you are creating small kitchens for these individual businesses to operate,” Chris Marsella, president of Marsella Development Corp., said Monday. “And it’s a historic building so you have all the fun things that come along with that.” 

“Fun things” like electrical work, which the company had to update throughout the late 19th-century building, Marsella said. These unexpected complexities combined with supply chain slowdowns and inflationary price hikes could have turned the headline-grabbing project into little more than a flash in a pan.

But Marsella sought to reassure Rhode Island  Commerce members of his company’s commitment to seeing its vision through despite funding and logistical woes. 

“We have had financing in place, but this grant is filling a gap at a critical time,” Marsella said.  We’re grateful to Commerce for identifying this project as worthy of the investment.”

Marsella Development Corp. took a leading role in redeveloping the iconic former train station into office and commercial space in 1987 after it was damaged by a fire. The food hall project marks the latest reinvention that puts Rhode Island’s culinary prowess on display.

“Something very important to us is to help highlight and support local restaurateurs,” Marsella said.  

When first announced two years ago, the company planned to unveil its $13 million redevelopment project by the summer of 2022. Now, Marsella is targeting a spring 2024 opening for what has spiked to a $20 million project cost, including the $2 million purchase of the ground floor of the building from the Rhode Island Foundation. (Rhode Island Foundation will retain ownership of the two upper floors, with leases to The Public Radio and Rhode Island Kids Count.)

The seven vendors whose kitchen stalls will be featured in the updated version of the project represent about half of the number originally pitched. Developers have also shaved about 3,000 square feet off of the total project, from 30,000 to 27,000, which includes the indoor food hall and an outdoor pavilion, according to Kate Murphy, spokesperson for Marsella Development Corp.

“It’s important to note that the reduction in vendor space does not mean reduction in activity and will, in the end, benefit the merchants because there are fewer businesses with which to split the pie,” Murphy said in an email on Monday.

Six of the seven stall-style kitchen spaces have already been leased to a mix of acclaimed restaurateurs and “up and comers” in the Rhode Island food scene, Marsella said. The company will unveil the restaurants in the coming months. 

The project is projected to generate over $6.4 million in state tax revenue during the construction and for the first 12 years of operations, according to economic analysis submitted to Rhode Island Commerce. Construction would also inject a one-time, $9.2 million boost into the state’s gross domestic product, creating 104 jobs in construction and related industries.

The redeemable tax credits would be allotted in $200,000 chunks over five years, starting in fiscal 2024, according to a term sheet from the state budget office submitted to Rhode Island Commerce.

Rhode Island Commerce board member Michael Solomon recused himself from the vote.

Also on Monday, the board approved just under $200,000 in grants to four companies for research and product development. The grants through the Innovation Voucher program include $50,000 apiece to Desmark Industries, Inc., a Cranston manufacturer of custom keepsakes; goTeff Inc., a food product made using the Ethiopian grain teff; $50,000 to Guill Tool & Engineering Co., Inc., a West Warwick extrusion tool designer and manufacturer; and $49,996 to Lenoss Medical Inc., a Bristol medical device maker.