Mainebiz

C O M M E N TA RY W W W. M A I N E B I Z . B I Z 13 A P R I L 6 , 2 0 1 5 W hile the availability of programs to promote economic develop- ment for municipalities are few and far between, Maine law provides one impor- tant tool — tax increment fi nancing. A municipality can designate a TIF district within its borders, and taxes paid on new property value in the district can be used for specifi c public and/or private economic development projects. Municipalities decide how to spend TIF revenues, so long as such expenditures meet the state TIF law's defi nition of economic development. As part of a TIF district, municipalities have the option to refund a portion of property taxes paid on a business' new development to the business through a credit enhancement agreement. Businesses request the agree- ments to close a gap in project funding and/or to convince other investors the development can succeed. In order for TIFs to eff ectively promote economic development, it is important to sort fact from fi ction. e most common misconception I hear about TIFs is that they only ben- efi t businesses, not communities. Not so, and here's why: Communities benefi t in a variety of ways when a business located there succeeds. When a new business suc- ceeds, it often creates new property tax revenue that would not otherwise exist (which can reduce the tax bur- den on residential taxpayers), it either creates or retains jobs and it often spawns additional development and growth nearby. " e TIF program has allowed Biddeford to begin a transformative revitalization of the city's downtown, in part by making investments in city infrastructure in its urban core, including buying out the former downtown trash incin- erator, MERC, and by partnering with businesses to encourage their investments," Daniel Stevenson, director of economic development for Biddeford, says. e city's use of the TIF program has encouraged two private projects, totaling an esti- mated $65 million of investment, to be developed in the coming months. Such investment will also create new jobs, new aff ordable housing and a revitalized downtown area. Approximately half of the existing TIF districts in the state have no payments going to private companies through credit enhancement agree- ments. Of the approximately 350 active TIF districts in the state, just under half include credit enhance- ment agreements, according to the Maine Department of Economic and Community Development database. Municipalities are utilizing new property tax revenue in TIF districts without credit enhancement agreements to invest in municipal economic development program- ming, public infrastructure, sidewalks along "Main Street," environmental improvement projects necessary for an area to accommodate develop- ment, municipal transit projects and much more. Municipalities with TIF districts enjoy a powerful fi nancial tool called the "tax shift" benefi t. For every new property tax dollar paid to a munici- pality, a percentage of that dollar (generally between 30% and 60%) is lost to decreases in state subsidies to the municipality and increases in county taxes the municipality must pay. e formulas calculating state subsidies and county taxes are based on the premise that as a municipal- ity's total property value increases, the municipality is better able to pay for expenditures on its own. TIF law, however, allows municipalities to enjoy the full dollar of benefi t from new property taxes paid on TIF district property. Jon Jennings, South Portland's economic development director, argues that South Portland invests in all sorts of important eco- nomic development-related projects, including storm water treatment, streets and sidewalks and transporta- tion improvements — all through its TIF districts. " is means," Jennings adds, " the city makes those invest- ments at a discount of approximately 50% because of the tax shift." In my work representing munici- palities and developers on TIF issues, I most enjoy the light bulb moment when municipal offi cials understand the tax shift concept — unleashing the full fi nancial power of TIFs. Shana CooK MUeller, a lawyer and shareholder at Bernstein S h u r i n Po r t l a n d , p ra c t i c e s municipal law. 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And, yeah, when you need some heavy lifting, we're there for you. your business banking team Left to right: Faye Allen, Steve Gurin, Greg Dalton, Wendy Luce, Adam Robertson, Tim Tunney, Sam McGee, Jim Lacasse, Chris Perry, Todd Starbird, Scott Shields, Leita Zeugner and Vicki Hall. www.bhbt.com • 888-853-7100 Local decisions, flexible solutions and personalized service, the way banking should be… since 1887. www.bhbt.com/business/business-loans TIFs benefit more than businesses B Y S H A N A C O O K M U E L L E R

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