PORTLAND — After about six months of talks, a City Council subcommittee voted Wednesday to tighten a policy that returns property taxes to developers.

The Housing and Community Development Committee recommended new limits on the city’s tax increment financing policy that would return no more than 65 percent of the property taxes from any development to a developer over 20 years.

The policy also would prioritize investment of new property taxes from some developments into neighborhoods, rather than paying down debt on the development.

The recommendations still require approval from the council.

The city’s current policy allows developers to receive as much as 75 percent of new property taxes from developments for as long as 30 years.

The new policy would put more emphasis on 13 priority areas for revitalization, to allow the city to dedicate property taxes from developments in those areas to public infrastructure improvements.

Businesses and developers have been lobbying the city to keep the policy as flexible as possible, advocating for no limits on tax money being returned to developers.

TIFs have been attacked as “corporate welfare,” but that’s not the case, said Chris O’Neil, the Portland Community Chamber’s liaison to City Hall.

“Tax increment financing is perhaps the most powerful and crucial economic development tool to Portland,” O’Neil wrote in a memo to the committee. “The maximum flexibility should be maintained.”

Councilor Kevin Donoghue, however, pushed for the city to limit payments to developers to 50 percent. That proposal lost in a 3-1 vote by the committee.

Joan Fortin, an attorney speaking for the Maine Real Estate Development Association, convinced the committee that the 20-year period shouldn’t start until “an agreed triggering event” occurs.

That would be when the development reaches a certain investment level, not when the agreement is approved by the city.

The policy also would seek to enhance economic diversity when subsidizing housing, to avoid clustering low-income developments.

A previous plan to charge developers a 1 percent annual administrative fee was struck from the policy, but the council would receive annual reports about TIF activity.

Also Wednesday, the committee voted to recommend a 20-year tax break for Avesta Housing for a 52-unit development at 409 Cumberland Ave.

The TIF agreement, which still needs City Council approval, is expected to return nearly $712,000 to Avesta, which plans an affordable-housing complex that includes 11 market-rate units.

The parcel at Cumberland and Forest avenues was previously permitted for a $34 million, 15-story condominium complex with 94 units. But the property was auctioned off in 2008, when the real estate market collapsed.

Councilor Edward Suslovic lamented that only 52 units would be built on a prime piece of real estate near downtown. “It just seems like we’re leaving a lot on the table,” he said. Councilor Nicholas Mavodones, who chairs the committee, said it would be nice to have more units on the property, but the committee had to consider the current proposal.

Avesta Development Officer Seth Parker said the agency expects to submit plans to the city next month. If the project receives approvals by spring, construction could begin this fall, he said.

Staff Writer Randy Billings can be contacted at 791-6346 or at:

rbillings@pressherald.com

Twitter: @randybillings