BANGOR – The effort to turn the city’s historic but neglected waterworks complex into low-income housing took another step forward Monday, when city councilors authorized a development agreement with Shaw House Inc.

A nonprofit subsidiary of the city’s shelter for homeless teens, Shaw House Inc. is in the process of acquiring the property on State Street. The $6 million plan is to convert it to 35 rent-subsidized efficiency units for very low-income adults.

“We are, in fact, moving forward,” said Shaw House Inc.’s Doug Bouchard, who has been heading up the project. Although several hurdles remain before construction begins this spring, he said, “there are a lot of people champing at the bit to get this started.”

Bouchard said earlier that the units would be occupied by people 18 and older who are homeless or at risk of becoming homeless. Emancipated minors also will be eligible. Rent payments will amount to one-third of each renter’s income.

The project’s funding package comprises $3.6 million in low-income housing tax credits, a $600,000 Maine State Housing Authority grant, $350,000 from Shaw House Inc., a $313,000 grant from the Federal Home Loan Bank and up to $1 million from the city. The city’s contribution was needed to bridge the gap between the project’s total cost and other available funds.

Asked for a breakdown, City Manager Edward Barrett said the bulk of the city’s share, or $650,000 to $680,000, would come from the federal Community Development Block Grant program. The balance will come from the sale of the Sea Dog Brewing Co. to a new owner and a year-old reserve account earmarked for shoring up the decaying waterworks complex.

Despite the city’s repeated efforts to find a developer for the waterworks, the costs for renovating the buildings proved so prohibitive that tentative private interests – including a restaurant, high-end condominiums, a hydropower generation plant and office space for Eastern Maine Healthcare – have found the project financially overwhelming.

As city officials have come to see it, the project Shaw House proposes not only renovates and restores a historically significant city facility but fills a need for affordable housing. Simply put, their options boiled down to reuse or lose it.

Demolition and site cleanup, however, would have cost as much as $800,000 – all of which would have been borne by the city, according to Barrett.

Current plans call for razing the filter plant, the newest of the three structures on the site, to make space for parking.

The Deane pump, an enormous cast-iron structure in the main building, will be restored and showcased in a central common area. An opening will be left between levels so visitors can view it from the first and second floors.

The long, narrow gatehouse building is not part of the restoration project at this time, but may be developed later.

WBRC Architects-Engineers of Bangor has been handling planning and design work. The general contract for the project has been awarded to Nickerson and O’Day Inc. of Brewer.

The target date for starting construction is April 15.