Skepticism meets plan to expand tax district

Monday, February 23, 2004

By TESS NACELEWICZ, Portland Press Herald Writer

A proposal to expand a tax-increment financing district on Route 1 in Freeport by adding three more properties and extending its life from 10 years to 20 years appears hard not to like.

Businesses in the district would get no tax breaks - an arrangement different from many TIFs. And the $180,330 average annual tax payments that it's estimated the businesses would generate during the life of the district would be allocated specifically to sidewalks and other improvements in the village that would benefit shoppers, retailers and town residents.

Freeport Town Manager Dale Olmstead says he strongly recommends that the Town Council approve the proposed amendments to the original TIF district, called the Destination Freeport Tax Increment Financing District. A public hearing and vote on the TIF proposal is set for 6 p.m. Tuesday at Town Hall. "It's a real winner for the town of Freeport," he said.

However, Rodney Regier, chairman of the Town Council, says councilors may have concerns about the proposal because "the TIF landscape really has changed" in Freeport since the district was first approved in 1999.

TIF districts usually help a community get more state aid for education, by exempting the value of the businesses in the district from the state's calculation of a municipality's total valuation. Under the state school funding formula, the higher a community's property value, the lower its share of state aid.

Freeport's total valuation has grown so much in recent years - the result of skyrocketing property values along its waterfront and the addition of new businesses - that its share of state education aid has dwindled, Regier says.

He says that sheltering the value of the businesses in the expanded TIF will not reap as much of a windfall for the town as it would have in the past.

The education benefits for Freeport from this TIF proposal are expected to be $18,736 annually. When the TIF was first approved in 1999, the education savings were expected to be $82,161 each year.

With the savings lower, Regier says, councilors may be reluctant to set aside tax revenues for capital improvements through a TIF when the town might need those monies in the operating budget.

In the past, Regier said, "state money for education made it fairly easy to vote for TIFs . . . Now that we're not getting so much state aid, there's not so much to be lost."

He declined to say how he might vote on the issue Tuesday night. "In general," Regier said, "I think that TIFs are not for everywhere. Where they are appropriate, they can be really valuable."

When it was approved five years ago, the idea behind the Destination TIF was that it would support Freeport's growing status as a destination center, where tourists and other visitors come not just to shop but also to stay overnight. Two new motels, under construction at that time and now completed, were put in the district: the Hampton Inn Hotel and the Comfort Suites. Also in the district was the Freeport Inn & Cafe, which was then expected to undergo a major expansion, and a vacant property at Pine and Main streets where a new chain restaurant was expected to be built.

Unlike TIFs in many communities, the plan was that the businesses would get no tax breaks. However, the tax money they were expected to generate - estimated at an average of $245,242 per year - would go toward infrastructure improvements in the village. The improvements would make Freeport more attractive and desirable as a destination, helping retail businesses to flourish.

Jim Nimon, a program manager with the Maine Department of Economic and Community Development, called Freeport's TIF arrangement "pretty interesting" and said it "benefits all the economic forces within that downtown area."

However, the Freeport Inn didn't expand as expected and the new restaurant wasn't built. Annual tax revenues from the TIF are only about $130,000.

Olmstead says the expansion of the TIF district from about 32 acres to just over 38 acres would add more taxable value to the district. Proposed for inclusion are the Gatehouse Conference Center, which was recently built near the Hampton Inn, and two undeveloped properties south of the Comfort Suites on Route 1, where it is believed a hotel and restaurant may be built. Development throughout the district is expected to total more than $12 million.

Staff Writer Tess Nacelewicz can be contacted at 791- 6367 or at: tnacelewicz@pressherald.com

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