A tax break awarded by the Gorham Town Council to a local business has drawn some criticism from other businesses in town, saying the decision was unfair.

On June 6, the council awarded a tax break to Moody’s Collision Center on Narragansett Street to extend industrial electrical service to their site in connection with an expansion of the business.

The tax break drew praise from one businessman who said he might apply for a tax break for a project he’s considering, while two other Gorham businessmen said the decision showed signs of favoritism. “I know Phillips wouldn’t have gotten that. We would have been thrown out the door,” said Carl Phillips of Phillips & Sons Body Shop on Gray Road.

Town Manager David Cole said Moody’s is receiving a tax break through tax increment financing, also known as a TIF. Moody’s will get back about $47,000 in tax money over 15 years to help defer costs of extending three-phase electrical power to their center as part of a planned expansion of the business.

Cole said the town expects to save the tax money through state revenue sharing, education subsidy and county taxes. If other businesses hook on to the three-phase power there, Moody’s would be required to reimburse the town.

Shawn Moody of Moody’s Collision Center said last week that he has already sent a $54,000 check to Central Maine Power Company for the work. Moody’s presently has a three-phase power converter in their business. “They are very noisy and inefficient to run,” Moody told the council.

Moody’s will pay full taxes on all of its existing buildings. Moody said new taxes generated by their planned expansion would be an estimated $15,000 a year. The town, which will net $12,000 a year in increased tax revenue from Moody’s, will return a “whisker” over $3,000 to the business each year for 15 years, according to Moody.

Moody’s received planning board approval earlier this year for a 17,000-square-foot building and vehicle storage area. The company is located in the Narragansett Development District.

Moody said his initial request for an $88,000 TIF was modeled after the one the council approved last year for a VIP auto retail store on County Road. The town required VIP to make road improvements as part of the TIF agreement.

Since that TIF was awarded, the town has determined that it lost money for the town because of a change in the way the state calculates state revenue to municipalities.

The council didn’t approve Moody’s original application because councilors worried it also would lose money for the town. But the council forwarded the request to the Finance Committee to be reviewed.

In the June 6 meeting, the council approved Moody’s revamped proposal by a split vote, 4-3, with councilors Calvin Hamblen, Matt Robinson and Council Chairman Mike Phinney opposing the deal.

Robinson questioned the public value of the TIF for Moody’s. “Everything I see is a benefit to the applicant, not the town of Gorham,” Robinson said.

While he voted in favor of Moody’s proposal, Councilor Burleigh Loveitt said he did not like granting TIFs. He indicated the VIP TIF was a “net cost” to the town. Loveitt supported that proposal because of the “large” public improvement. “I don’t like TIFs at all. I never have. “They create a form of tax rate prostitution in this state,” Loveitt said.

Loveitt wanted the council to establish guidelines for granting future tax breaks. “I wish that the council would resolve not to accept any more TIF applications until the Finance Committee delivers the TIF policy,” Loveitt said.

Loveitt said that Tom Ellsworth, president of the Gorham Economic Development Corporation, had encouraged Moody’s to apply for the TIF. He said a policy would give Ellsworth guidelines whether to encourage or discourage a TIF application.

Councilor Norm Justice agreed that the town needed a policy. When he first saw Moody’s original request, Justice said he had “heartburn.”

But the call for a tax break policy drew some fire. Phillips said the perception is that Moody’s got a tax break, but now the council would stop it so no one else could have one. “It looks like favoritism,” Phillips said.

Phillips is requesting a building permit from the town for an additional building. He doesn’t plan to apply for a TIF and said he would generate three-phase power with a converter. He doesn’t believe the council would give him a tax break. “I’m not going to bother with them. I’d be turned down anyways,” Phillips said.

Gordon Reichert of Reichert’s Auto Body Shop on Shaws Mill Road agreed with Phillips about the perception of favoritism. “It isn’t right to grant it for one and change the rules for everybody else,” Reichert said. “It looks like there is a little bit of favoritism. The rest of us don’t get anything.”

Reichert, who said he had nothing against Moody’s, said he wouldn’t apply for a TIF either. “Not in this town. I’d be turned down flat,” Reichert said.

But Moody said the council’s decision was “good” governing. “We didn’t think it was right to construct a policy with us hanging in the wings,” Moody said.

Cole said the council wanted to step back and view TIFs. Cole thought the council was concerned it might treat people differently without a policy and wanted to “feel comfortable” that they are treating people consistently.

One local businessman said he agreed with the council granting the tax break to Moody’s. Hans Hansen, who recently received preliminary approval from the Planning Board for a development adjacent to his farm market on County Road, is considering applying for a TIF. The town wants Hansen to upgrade the traffic signal and highway at the intersection of County Road and South Street.

Hansen favored the TIFs for both VIP and Moody’s. “I think all businesses should be treated evenly regardless of where they come from,” Hansen said.

He said Moody deserved the TIF. “He’s done real well and we support him,” Hansen said. “I hope Gorham will introduce a TIF for us.”

Ellsworth didn’t believe that the extension of three-phase power would immediately draw more commercial business to the Narragansett Street area. “It won’t open the floodgates to that area,” Ellsworth said.

But Ellsworth thought the power upgrade combined with the intersection of the bypass with Narragansett Street could generate more business.

Councilor Jane Willett was happy that Moody’s returned with an adjusted request. Saying that the town should support its local businesses, Willett said the town would realize an increase in tax money from increased development in the area served by three-phase power. As an additional benefit, Willett thought improvements would enhance the appearance of Narragansett Street. “It’s an entrance to the town,” she said.

Phinney said that the council had looked at each request for a TIF on a “case by case” basis in the past. He heard the council say it wouldn’t let others apply unless the council had a policy. “That also bothers me because if you allow one group to come in and give them special treatment, then why shouldn’t we let the next person who has the exact same project, or very similar project, to get the same benefits from the town,” Phinney said.