07/18/2014

Officials to draft application for town center financing district; public hearing in September

The Town Council will hold a public hearing in September on establishing a municipal tax-increment financing (TIF) district for the town center.

Following a presentation from Town Manager Michael McGovern on July 14, 2014, councilors directed staff to prepare a TIF district application to the state, and to set a public hearing for Sept. 8.

Establishing a TIF district is a recommendation of the draft Town Center Plan update which the council will be discussing at their workshop Sept. 3. While the plan has yet to be approved, councilors are looking to draft an application to the state in time for an annual March 1 deadline for TIF district applications.

"My preference would be to have that TIF application ready for September so that the public actually knows what's in the application," McGovern said.

Officials are considering a TIF district as a way to funnel new tax revenue generated in the town center back into town-center infrastructure.

TIF presentation

A TIF district, McGovern explained, allows a municipality to set aside valuation from new development within an area to undertake improvements in that same area. The valuation is not included in the overall municipal valuation, so it would not figure in state formulas for school funding or revenue sharing. "Because higher state valuation reduces state school subsidy, reduces revenue sharing and increases the share of the county tax, sheltering of state valuation through a TIF enables 100 percent of the new taxes to stay in Cape Elizabeth," McGovern said.

Assuming $4 million in new value within the town center in 2015, a TIF district would shelter $67,200 in tax revenue, and $672,000 over 10 years if taxed at the same 2015 rate. "Without a TIF, estimates indicate that 30-70 percent of the added tax revenue is taken by the county tax and by subtraction of state funding," McGovern said. That comes to an estimated $201,600-$470,400 going to the state and county over 10 years.

A TIF district can be established for up to 30 years, must be based on a development plan and must be approved by the state. Not all of the new revenue needs to be dedicated to the TIF.

McGovern prepared the presentation in response to councilors' questions about the TIF district recommendation in the draft Town Center Plan, which the council received at their June meeting. Some members of the public said they wanted to know what, if any, negative impacts a TIF district might have, and McGovern himself said he wanted more information.

"I've always looked at this as sort of a pro-development thing, and I've just never got a strong feeling this community was pro-development," McGovern said on July 14. However, he said he respects the work of the muncipal committee. "I think as we've seen many communities use (TIF districts), it's well worth looking at," he said.

Proposal for Town Center Plan

The proposal for the Town Center Plan would not benefit a specific development and is intended to help fund recommended sidewalk and drainage improvements estimated to cost $1.7 million. "Numerous committees have focused on making the town center more pedestrian friendly," McGovern said in his presentation.

Councilor Caitlin Jordan said the only down side she could see was that new valuation would not go toward townwide revenue, "so taxes won't go down for other people based on the new valuation," she said. However, with a recent surge in town-center development, including the new Cumberland Farms and the C-Salt Gourmet Market, she said she sees this is a good time to look into a TIF district. "This one year we really have an opportunity to capture and do something with the money," she said.