Monday, April 21, 2014
Click on map markers for details of TIFs.
PORTLAND — Some Portland officials want to tighten the rules of a city program that gives tax breaks to developers in order to spur development in blighted areas or create new jobs.
In addition to a number of individual tax increment financing agreements, Portland has three regional TIF districts, including the Arts District, above, which runs along Congress Street from State to Pearl streets; the Bayside neighborhood; and the waterfront.
Gregory Rec/Staff Photographer
AT A GLANCE: WHAT IS A TIF?
Maine's law allowing Tax Increment Financing, or TIF districts, dates back to 1977 and is modeled on similar programs in other states. California is credited with creating the TIF program in the 1950s, which is now used by almost every state.
TIF districts capture property tax revenue from new developments so it can either be reinvested in public infrastructure projects, such as roads, lighting, sewers, water lines and the like, or returned to a developer to help pay for a particular project.
TIF districts are intended to encourage economic development in rural areas that lack public infrastructure -- such as roads, lighting sewers and water lines -- and in blighted urban areas.
In a TIF district, new property value is shielded from the state's calculation of the town's tax base, a factor in county taxes and state funding for schools. The increased property tax revenue is instead directed into the fund for capital projects.
Early TIF agreements were riskier for cities because they had to borrow the money for the tax break, and use the new tax revenue to pay down the bond. If the project, or the company, went belly-up, the city was on the hook for the debt. That changed in the 1990s when the risk shifted to the developers: If they fail to execute on a project, they don't receive any tax return, because they have not created any new property values.
Statewide in 2010, 13 new TIF districts were created in 12 municipalities -- down from the 27 TIFs created in 2009 and 31 TIFs created in 2008, according to the Maine Department Economic and Community Development.
The DECD must approve all TIF districts, since each district reduces the amount of revenue for the state.
-- Staff Writer Randy Billings
Critics say the tax increment financing, or TIF, projects have evolved into corporate give-aways to companies that either don't face a financial hardship or would have developed the project with or without the incentive. Backers say they are a powerful economic development tool, and note that if an area isn't developed, it brings in little to no tax revenue at all.
"Right now, we just sort of hand out (tax breaks) to projects that ask for them," City Councilor John Anton said. "There's no framework for deciding which private business deserves a lower tax rate."
One of the largest TIFs was approved last year: a $31 million, 30-year property tax break for the $105 million Thompson's Point mixed- use project, which the developers indicated was needed for the financing package to work. Also last year, a $2.9 million tax break was awarded to the city's largest law firm, Pierce Atwood, for the firm to move a few blocks to a derelict waterfront building after the firm threatened to move to South Portland.
That sort of use has raised questions among some council members about whether the city needs to limit the kind of project that can apply for, and receive, a tax break under the TIF program. They are also considering a limit to how much property tax money is returned to developers, shortening the 30-year term, and discouraging TIFs on prime real estate.
"When we approve TIFs absent a policy context and the rationale is little more than cheerleading, then we're sending the message: You get a tax break, you get a tax break -- everybody gets a tax break," said Councilor Kevin Donoghue.
In addition to the two TIF proposals being voted on today by the council, there are two new TIF requests going before the Housing and Community Development Committee Wednesday during an executive session. No details about the two latest proposed TIFs are currently available.
In a typical TIF agreement, a percentage of property tax revenue from new development is returned to the developer to offset the costs of the project or for some agreed-upon purpose.
Portland also has three TIFs that cover entire neighborhoods -- Bayside, the waterfront and the Arts District -- where a portion of property taxes is set aside by the city to pay for improvements in that neighborhood.
The desire to sharpen TIF requirements was prompted largely by two TIF requests coming before the City Council on Monday, for major projects intended to spur development in the city's India Street neighborhood.
In both cases, the developer is seeking the tax break to offset the cost of a city requirement.
The Village at Oceangate first sought an exemption to build above the area's height restriction for its Bay House project, a 94-unit apartment complex on the former site of the Village Cafe just off India Street. The city agreed, on the condition the developer build some public infrastructure, such as contributing $200,000 to the city to extend Hancock Street. The company agreed -- and then turned around and requested a $648,000 TIF to pay for those improvements.
The other request, from Opechee Construction Corp., seeks up to $850,000 in tax breaks to cover the cost of meeting a city requirement to relocate an existing Middle Street utility line underground for a residential, office and retail development at the former Jordan's Meats site at the intersection of Fore, Middle and India streets.
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