The first phase of Stable Ridge Apartments on Court Street in Auburn is seen March 29. A second phase of 60 more apartments is planned. Russ Dillingham/Sun Journal file

AUBURN — The City Council voted down a proposed credit enhancement agreement with the developer of the Stable Ridge apartments on Court Street after officials said it could set a concerning new precedent for the city.

The proposed agreement with American Development Group would have returned a maximum of $500,000 to the developer, or 50% of new value generated for 10 years. The developer is readying for a second phase of construction, with plans to add another 60 units of market rate housing, for a total of 120.

However, city officials said they were concerned Monday for approving such an agreement with a private developer. City Manager Phil Crowell said the council would be “setting precedent for future market rate development projects” and the council could “have a line at the door” with other projects coming forward.

“I hope we don’t get a string of these because one developer got on our agenda,” Councilor Dana Staples said, adding that in the future, he’d like to see proposals like these demonstrate how it could benefit the public.

A number of residents said the tax revenue from the project should be going into public improvements, not back to the developer.

Glen Holmes, director of business and community development, said the agreement would return a maximum of $250,000 to the developer from each phase. He said it was requested by the developer due to unforeseen construction costs and a “dragged out” approval process, referring to the public opposition to the project.

While the council narrowly approved a tax-increment financing district for the development in March, officials opted to take up the credit enhancement details separately in order to conduct a more thorough process and address concerns from some councilors and the public.

Several neighbors of the development at 555 Court St. have opposed it since its inception.

The new apartments have filled up quickly due to the demand for housing. The second phase was approved this spring after it was initially rejected by the Planning Board in February.

A previous city memo estimated the property’s valuation would increase from the original assessment of $235,500 to more than $14 million over the next 20 years. With a credit enhancement agreement of 50% of TIF revenues over 10 years or up to $500,000, the city would see about $4.4 million total or an average of $220,000 per year.

Jessica Klimek, the developer behind Stable Ridge, told the Sun Journal previously that the new value going to the city would still reach roughly $4 million over the span of the agreement.