FARMINGTON – Proposed amendments to Franklin County’s tax increment financing agreement with TransCanada Maine Wind Development will be the focus of a public hearing Tuesday.
The proposed changes to the TIF aim to capture more tax money from the company’s Kibby Mountain wind turbine project and broaden the category of economic development programs and projects the county can use the captured tax revenue for.
But state officials on Monday raised concerns about the proposals. The Department of Financial and Administrative Services released a statement saying a proposed removal of a revenue cap for TransCanada would effectively be giving the company a multi-million-dollar handout without requiring any new investment in the county.
“With construction of the Kibby wind farm long since complete, there is no conceivable economic benefit to the county or the (unorganized territories) to provide TransCanada with more money than originally negotiated,” David Heidrich, spokesman for the Department of Financial and Administrative Services, said in the statement.
The public hearing will be held at 5:30 p.m. Tuesday in the Franklin County Superior courtroom. Following public comments at the hearing, county commissioners may vote on accepting the amendments or choose to vote at another time, according to John Cleveland, a consultant helping Franklin County with the amendment process.
The original 20-year agreement was established in 2008 when the county approved a TIF district on Kibby Mountain and Kibby Ridge in the northern part of the county near the Canadian border, where TransCanada developed a 44-turbine wind farm. The TIF district lets the county shelter the wind farm’s property tax revenue from state valuation and use it for several categories of county development projects as outlined in the TIF agreement. The TIF agreement also includes a credit enhancement agreement in which a percentage of tax revenue paid by TransCanada is reimbursed to the company.
The proposed amended agreement would extend the term of the TIF by 10 years, expiring in 2038, and would increase the percentage of tax revenue captured to 100 percent. The extension of the TIF would result in an additional $12.4 million in revenue for the county over the term of the agreement.
Under the current terms of the TIF agreement, 75 percent of tax revenue from the Kibby wind farm is captured. Of that 75 percent of captured revenue, 40 percent is kept by the county and 60 percent is reimbursed to TransCanada in accordance with the credit enhancement agreement.
The 60-40 split would stay the same under the amended agreement. However, caps on the amount of revenue each party can capture through the agreement have been removed. Under the current terms of the agreement the county’s share of the revenue was capped at $4 million, which they are expected to reach by the end of this year – 12 years before the TIF agreement was slated to end. Under the credit enhancement agreement, TransCanada’s share of the revenue was capped at $8.9 million, which Cleveland said they are likely to reach before the end of the agreement. Cleveland said that without a cap, TransCanada could earn up to $13.1 million in revenue before the credit enhancement agreement expires in 2028.
If the county were not to amend the agreement, the percentage of tax money captured in the district would drop down to 50 percent of revenue for the last 10 years of the agreement. The 50 percent not captured would go to the state Department of Administrative and Financial Services, which manages tax revenue captured within the state’s unorganized territories.
Cleveland said that outside of the credit enhancement agreement, TransCanada has agreed to give the county an additional $3 million over the term of the TIF to be used for economic development throughout the county.
Also included in the proposed amendments is broadening the category of projects that the TIF funds can be used for. Under state TIF regulations, there is a broad category of what funds can be used for. However, if a TIF’s development program does not have a program or project category listed in the agreement, the county cannot use it for that purpose.
New proposed amendments to the development program include being able to use TIF funding for telecommunications infrastructure for the Unorganized Territory, such as cellphone towers and high-speed internet; a portion of county staff salaries and professional services; media and advertising costs for tourism and marketing; environmental improvements; recreational trails and public safety costs.
The proposed amendments also include the establishment of a revolving loan fund that will stay in place even after the TIF agreement expires. The fund would be used to dispense grants or loans to businesses that are looking to move to, or expand within, the Unorganized Territory. As the loans are paid back, the money would be put back into the fund to ensure it can be used for future loans once the TIF expires.
If the TIF amendments are passed, a 1 cent increase in the county’s tax rate would occur because the TIF would shield an additional 25 percent of the project’s value from state valuation, taking that percentage of value out of the tax base, driving down the county’s valuation slightly and having the opposite effect on the tax rate.
If no changes are made to the TIF, the tax rate would go down about 2 cents, to $1.15 per $1,000 of assessed property, because under the present terms, beginning in 2009, the amount of revenue captured in the TIF decreases to 50 percent for the last 10 years with the remaining 50 percent going to the State of Maine Unorganized Territory account. Cleveland stressed that the 1 cent increase is based on the county continuing to operate at its current budget level with the same county assessment. Even if the county does not accept the terms of the amended TIF, there is no guarantee that the tax rate wouldn’t increase for other reasons.
If county commissioners vote to pass the amendments, the changes will go before the Maine Department of Economic and Community Development, which has final approval authority over county TIF agreements.