TIF district weighed in Machias to help give economic boost

Machias residents were scheduled to decide on February 7 whether to approve a new economic tool that would generate revenue for the town by offering tax credits to businesses making new investments.
The vote is the second in a series of three steps required to create a tax increment financing (TIF) district. The first step was a public hearing held January 31. If the proposal is approved by voters, the third step is to make a formal application to the Maine Department of Economic and Community Development, which could take four to six months, says Jonathan Pottle of the law firm Eaton Peabody. Pottle said the town proposes establishing the TIF district April 1 for a term of 20 years.
Pottle explained the concept behind a TIF district at the hearing, saying it is an economic development tool that allows municipalities to offer tax credits in order to attract new business development. It is also sometimes called a credit enhancement agreement.
Kate Dufour, director of state and federal relations for the Maine Municipal Association, says a business investing in a site within a TIF district does not pay the full assessed value of the investment in real estate taxes. The money saved is split between the municipality and the business, which can use its share for start‑up capital or for additional project funding. Municipalities use their share for improvements designed to enhance the economy, such as curbing, sidewalks and lighting. "You have to use the money for certain things," Pottle says. "You can't spend TIF revenue for general conduct of government."
Machias Town Manager Christina Therrien says money generated by the TIF district "provides a direct funding source to address old issues downtown that we never have money for." Although residents complain about vacant buildings and issues with lighting and sidewalks, they don't want to pay for them through increased taxes. As a result, the repairs don't get done.
Therrien says the town would actually lose money on new business investment without the TIF district. This is because assessments on investments in TIF districts are not considered in calculations the state uses for revenue sharing or those used for county taxes and school subsidies. As a result, without a TIF district the town's anticipated revenue sharing would decrease while the tax burden to the county and schools would increase.
In order to qualify for the TIF program, a proposed business development or expansion must be located within the TIF district, which in Machias would be located along Main Street and out toward the Machias Valley Airport. All included properties are not contiguous because state law requires that a TIF district to comprise no more than 2% of the municipal acreage. "Think of it as the Hawaiian Islands," says Pottle. "It's all one state, but there are different islands."
A proposed development within the TIF district also must include an initial investment of at least $50,000 and must, in the opinion of the selectmen, have the potential to positively impact the economy of the town, according to documents outlining the proposal.
The town is anticipating an estimated $3.55 million in new business investments. Among them is a new building for Machias Savings Bank, which needs more space to accommodate growth, says bank President Larry Barker. "We would become the largest taxpayer in the Town of Machias," he says.
"There's other potential projects as well," says Pottle, and this makes now a "perfect time" to consider implementing a TIF district. Machias Town Manager Therrien says Machias Savings Bank is one of nine different entities either planning new projects or expressing interest in doing so. For example, West Falls Surveying purchased the building at the corner of Broadway and Court St. with plans for development. Attorney Mary Jane Good has also inquired about possible expansion.
In a letter handed out to hearing attendees, Therrien described the proposal as a partnership among the town, businesses and community organizations that must invest in their downtowns in order to grow their communities. "Towns throughout the U.S. have been struggling to preserve and promote their communities. This is especially true of historic Main Streets and downtown areas," Therrien says in the letter. "Small businesses have struggled to survive while funding dollars for facade improvements, sidewalk repairs, new lighting and infrastructure have continued to disappear. Empty buildings sit in a state of disrepair while the supporting infrastructure crumbles."
Dufour says municipalities all over the state have used TIFs to stimulate development, with varying levels of success. Pottle agrees. "For some communities it makes sense. For others it doesn't," he says, adding TIFs typically don't work well for rural communities.
In Washington County, Baileyville, Calais and Cutler are the only other municipalities with TIF districts. Machias already has one existing TIF district. The current proposal would create a second. Pottle says he expects the TIF to work well in Machias because it is a town with a vision. "I think the town has done a good job of being thoughtful in its approach," he says.