Tax-increment financing has benefits, drawbacks 

FARMINGTON – County commissioners agreed to work with TransCanada and a third-party consulting and law firm Tuesday to look into establishing a tax-break for a proposed commercial wind energy project.

Commissioners plan to look at the pros and cons of tax-increment financing and if it is in the public’s best interest.

TransCanada is interested in a 60-40 TIF district with 60 percent of the taxes generated from a wind farm going back to the developer to put into the project. The other 40 percent would be kept by the county for economic development in unorganized territories.

If there is no TIF, though, the unorganized territory’s share of county government costs would increase because of the additional value of the new project. Taxpayers in the unorganized territory and municipalities who pay a share of county government costs, however, would pay less for county services, said Bob Doiron, supervisor of unorganized territory in the Property Tax Division of the Maine Revenue Services.

“Every taxpayer in the unorganized territory would see a significant reduction of tax bill,” Doiron said, if there was no TIF.

Revenues collected from taxpayers in unorganized territories go into the UT educational and services fund, which is a dedicated fund, Doiron said.

Without a TIF agreement, taxes paid by property owners in the unorganized territory are used to pay for the services necessary within the UT, stated David Ledew, director of Property Tax Division of the Maine State Revenue Services, in an e-mail.

These services are the same as are typically provided by a municipality and paid for through the municipal property tax: roads, schools, planning, administrative services, among others, he said.

Tax-increment financing is a way of creating additional funding – taxes that can be dedicated to an economic development program, in this case for the unorganized territory residents, Ledew said.

TIFs have been widely used by municipalities because the new value of the project is “captured” and can be “sheltered” from state valuation. State valuations are used in state formulas for education subsidies, revenue sharing and also for computing county taxes, Ledew said.

Because the UT receives no state education subsidy, sheltering TIF value in the UT will not translate to additional education subsidies for unorganized territory residents.

Additionally, the state revenue sharing law is structured so that a municipality, or the UT, will not benefit from the TIF sheltered value, he said.

For unorganized territory residents, this leaves only the county tax as being impacted by sheltering the TIF value within the UT.

The TIF effect on the county is that the UT county taxes would be reduced by sheltering the captured value from state valuation. If the project goes forward, and if not for the TIF, the UT would be required to pay a larger portion of the county taxes, thereby reducing the county tax for every other municipality in that county.

If the TIF is approved, then the municipalities in the county most likely won’t see a decrease in the county tax rate, Doiron said.

By Donna M. Perry
Staff Writer

Lewiston Sun Journal

20 February 2008