The Portland City Council will vote Monday night on whether to spend a total of $1.3 million over 30 years through tax-increment financing to help fund a $13 million housing development on Munjoy Hill.

The project will cost the city about $45,000 a year in tax revenues.

Tax-increment financing is a common funding source for affordable housing projects. Tax revenue from new development in specific parts of the city can be diverted back to developers or placed in special municipal development accounts to pay for projects outside of the city’s regular budget. This type of funding serves as an operating subsidy, offsetting expenses once the building is up and running, rather than financing the construction of the development.

“This very much ties in with goals that the city has with creating housing of any kind, and specifically affordable,” said Greg Watson, the city’s director of Housing and Economic Development.

The proposed development at 42 Atlantic St. was brought forth by LB Atlantic LLC, run by Daniel Black. This is Black’s first time serving as the lead developer on an affordable housing project. The proposed project would require the demolition of the former American Legion building to make way for a four-story building with 30 units for low-income households.

The new development would include 14 studio, eight two-bedroom and eight three-bedroom units. Twelve of those units would be reserved for households earning at or below 60% of the area median income – $61,200 for a two-person household. Eighteen units would be reserved for those earning at or below 50% of the area median income – $51,000. Three units would be reserved for those exiting homelessness and three would be reserved for people who have recently escaped domestic violence.

The project also would be funded in part through Section 8 project-based vouchers through MaineHousing. Although MaineHousing recently paused its issuance of Section 8 vouchers, that does not extend to those awarded to large scale projects like this one.

“My interest in affordable housing is because I see Portland changing, especially Munjoy Hill,” said Black, the developer. “I live three blocks away from the development. It’s important for me to have a mixed-income neighborhood where I’m hoping to raise my family.”

Black said the project was only made possible by the passage of L.D. 2003 last fall, specifically the affordable housing density bonus that increased the number of rental units that could be built on a property. He explained that allowing more units on a lot made it possible for him to access state funding assistance – developments have to meet a minimum size requirement to qualify.

The project was approved last month by the council’s Housing and Economic Development committee, which is chaired by Councilor Pious Ali. He plans to vote in favor of the project Monday.

“We are in the midst of a housing crisis, making it crucial to explore a variety of housing types, particularly those that serve the working class in our community,” wrote Ali in an email Friday.

Councilor Kate Sykes said that while she plans to vote in favor of the project, she thinks the city is relying too much on TIF funding to build more housing. She’d prefer to see the city invest in a public housing program.

“We are in a housing crisis right now but we are doubling down on a system that has produced the housing crisis. The answer is to start building social housing or we’re going to have more of the same problem,” Sykes said.

Sykes said that in her view, TIF “kicks the can down to the road to future generations of taxpayers in Portland and it undermines the tax base.”

The development is being pushed through as an emergency order, meaning it will require a quorum of seven votes to pass.

Another affordable housing project also will go to vote Monday night.

The Portland Housing Development Corporation, the development arm of the city’s housing authority, is planning to remove several old public housing buildings in the East Bayside neighborhood to make way for a new nonprofit development with a mix of housing types.

The project would demolish four existing buildings with 40 units on the lot between Cumberland Avenue, Oxford Street, Boyd Street and Mayo Street. One building on that lot was full of black mold this winter, which created hazardous living conditions for its residents.

At the council’s July meeting, Sykes voted against the project because she said the housing authority should be using housing bonds instead of TIFs to fund new projects.

The project will be up for its final vote on Monday.