February 20

Maine's TIF law lets businesses avoid paying for local services, schools

Under Tax Increment Financing, taxes paid by some businesses may be returned to help the bottom line or used for roads or sewer lines to the business.

By Naomi Schalit
Maine Center for Public Interest Reporting

Part one of a two-part series

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Maine cities that allow TIFs


Do you want to find out the details of a TIF in your town?

Are you interested in where those millions of dollars in Tax Increment Financing deals are going?

You won’t find that information readily available on your town’s website.

“I don’t think we have anything publicly posted that lists them,” said Bangor’s director of community and economic development, Tanya Emery.

In town after town, officials said the same thing.

Transparency about TIFs is not the norm in Maine, where details about the complex deals may be available at the time they’re considered by town government.

Then, TIFs recede from public view.

The millions of dollars spent over decades on a TIF “is typically far harder for residents to follow and monitor than ordinary spending,” write the authors of a 2011 report on TIFs by the U.S. Public Interest Research Group. “TIF district budgets are separate from general municipal budgets; they are ‘off-budget.’”

That report recommended a series of measures towns could take:

• Budget information about all TIF districts should be accessible online – how much the TIF is worth, how much has been expended to date.

• Officials should also post online the goals of the TIF district; the TIF value; the recipients of the TIF funds; specific benefits the TIF aims to produce; and current information on whether benefits have been produced.

There is one Maine city that does provide TIF information to the public.

Roland Miller, Auburn’s economic development director, wants city residents to be aware of all the TIFs the city has with private developers.

Roland Miller

So he posts it online. On pages 54 and 55 of the city’s 2012 financial statement, there’s a paragraph describing every current TIF deal in Auburn.

At the state level, despite the fact that the state must approve every TIF, the Department of Economic and Community Development (DECD) does not systematically collect data on them. That has created a roadblock to evaluating the TIF program for more than a decade.

DECD “does not have sufficient resources to monitor all of these municipal TIF development programs in a comprehensive and detailed manner,” wrote the state’s Economic Development Incentive Commission in its 2000 report to the legislature.

“The commission believes that additional data is necessary in order to fully evaluate the MTIF program and its impacts at the local, regional and state levels.”

DECD had collected a limited amount of information about TIFs after passage of a 1998 law requiring that the department annually report to the legislature about economic development incentives and their public benefit.

Likewise, businesses that got more than $10,000 a year in certain state and local economic incentives, including TIFs, were asked to report to DECD details such as type and wage levels of jobs and employment level changes.

But none of the DECD annual reports are available online, only two of them are in the collection of the legislature’s law library and the rest could not be found by DECD staff when asked for them in January. And the reporting requirements for both DECD and businesses getting incentives were repealed by the legislature in 2009.

-- By Naomi Schalit, Maine Center for Public Interest Reporting

Put an addition on your house, and the town assessor will come around, increase the value of your house and your property taxes will go up.

Put up a new store or factory, and the same thing will happen.

The greater the value of your property, the more you pay into the town coffers. That’s the money the town and school districts use to plow the streets, operate the police department and pay the teachers.

That’s how property taxes work for everyone – well, almost everyone. One select group gets a better deal because it has something called a TIF. And only a few select businesses have them in most towns.

Get a TIF, and you still have to pay taxes on that new warehouse or factory – but the taxes don’t help pay for the schools, plowing and police.

Instead, the property taxes paid by a company with a TIF might build a new road or sewer line to the business. The tax money sometimes is returned to the business to help its bottom line.

All this comes under a little-understood and highly technical program called Tax Increment Financing created by the state in 1977.

A Maine Center for Public Interest Reporting analysis determined that since 1985 – the year TIFs became popular – the program has earmarked almost $2.8 billion in property tax revenues for diversion over the lifetime of those TIFs, which can last up to 30 years. Of that amount, up to $1.2 billion is or will be rebated directly to business. (The actual dollars granted may be less because the state’s database includes revisions as well as the original TIFs, creating some double counting.)

Considering just the most recent 10 years, communities across the state have diverted $518 million in property taxes via TIFs, according to Maine Revenue Service records.

Documents and interviews with experts reveal that TIFs have evolved from a good government attempt to redevelop blighted areas to a tax loophole businesses can use to cut favorable deals with communities desperate for development, as well as a tax scheme towns use to maximize state aid.

Orlando Delogu, emeritus law professor at the University of Southern Maine, said the early TIFs performed an important function by encouraging redevelopment in Maine’s decaying mill towns and waterfronts.

“The debris of the past had to be cleared out of the way,” said Delogu.

“There’s nothing wrong with infrastructure improvements that enable you to attract an industry,” he said. “Those improvements benefit industry and society and the public will own it. It’s the sort of improvement that municipal government was created to put in place.”

But a second wave of TIFs granted in Maine allowed cities to give property tax payments directly back to developers, often with no specific public benefit in return. Almost $1.2 billion in property tax rebates have been granted under that part of the program, according to the Center’s analysis.

Those TIFs, Delogu said, amount to public money subsidizing private interests, with corporations “no longer having to bear the full cost of the capital investment they contemplate.”

A 2011 study on TIFs by the U.S. Public Interest Research Group stated that, “eagerness to bring in new development (or retain an existing business) ... may lead governments to be overly generous in providing subsidies that are not justified by the level of public benefits delivered.” The Ford Foundation funded the report.

Those TIFs are characterized not by investments that benefit the public, but rather by private developers’ demands for cash — or they’ll take their business elsewhere or shut down, said Delogu.

(Continued on page 2)

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