On September 23, 2024, the Select Board directed the Town Manager to work with the Midcoast Council of Governments to draft a proposal for a defining a TIF district within St. George, and specify the purposes on which any tax funds raised using this finance mechanism could be spent.
Once a proposal has been reviewed and approved by the Select Board, it will be presented to the voters at a public hearing. A town meeting vote would be required for it to be adopted. The State Commissioner of Economic and Community Development must also approve a TIF program.
It is important to state up front that individual taxpayers will pay no more and no less if we adopt a TIF district.
What is TIF?
Tax increment financing (TIF) is a means of financing public improvements by fixing property values within the district to a particular point in time while continuing to collect the full value of the property from the taxpayer, and spending the difference on public improvements. The intent of a TIF program is to stimulate investment in an area that is in need of economic revitalization.
In our case, the devastating fire in Port Clyde presented an opportunity for the community to address long-needed infrastructure improvements there, as well as improvements needed to combat sea-level rise. These benefits will be enjoyed by every business and resident within the TIF district, as well as visitors.
Depending on the defined TIF district areas (which can comprise up to 2% of the town) and infrastructure needs, the proposed TIF district may also include areas near the Tenants Harbor landing. We are still in the process of defining the specific area which would be within the TIF district.
How does it work?
Once the TIF district boundaries are established (areas need not be contiguous) and a TIF is approved by the voters, the property values for the properties within the district are considered fixed for certain purposes. For example, if on the day the TIF district is created, a vacant parcel is assessed at $100,000, that value is fixed and real property taxes paid by St. George to the State and County would be calculated based on that value for the entire period of the TIF program (up to 30 years).
If through revaluation or improvements, the property is later worth $500,000, the amount St. George would owe the State and County would remain at the $100,000 valuation level even though the taxpayer would be paying taxes on the new assessed value of $500,000.
This difference between paying the State and County for a $100,000 assessed property and a $500,000 assessed property is the means by which the town “captures” the increased tax income which can be spent on purposes the community deems important, such as infrastructure improvements in Port Clyde. The funds raised through this tax mechanism must be maintained separately and can only be spent as specified. The funds in the program account must be spent within the life of the TIF program.
The taxpayer’s obligation is unaffected by a TIF district. The taxpayer must pay what is owed when the property is valued at $100,000 and later when it is valued at $500,000. The entire benefit of this tax mechanism and TIF designation is to allow the town to retain the difference and spend it on improvements the community wishes to make, such as septic issues, roads, utilities, sidewalks, in the designated area. State and Federal laws created this tax mechanism to support local development, and the town is therefore allowed to keep more of our tax dollars and spend them on the purposes specified in the TIF program.
If this does not affect individual taxpayers, why do it, and why now?
Clearly the value of the property on which the Port Clyde General Store and Dip Net were located is worth less today than it will be after it is rebuilt. By fixing the value of the property at its current assessed value, we lock in the value now, knowing that the assessed value will be higher after the rebuild.
Also, the State of Maine has mandated St. George to conduct a revaluation of all town properties because the State deems our current town-wide value at approximately 70% of fair market value. As a result, the town has contracted to undertake a revaluation between 2025 and 2027. (We will post a piece explaining that process and what to expect soon, as well as hold a public meeting where people can ask questions of the company conducting the revaluation. You should not assume that a higher assessed value = a higher tax bill.)
It is likely that when the revaluation is completed, the assessed values of properties on the water within the Port Clyde and Tenants Harbor TIF district will be greater than they are now. This is another reason that “freezing” the value at current assessed rates will benefit the community.
What would the money raised by the TIF program be spent on?
This is entirely up to the voters of St. George (within the limits of the laws governing TIFs). The proposal will specify the types of public improvements on which the money would be spent. Currently, the Select Board is contemplating specifying that funds would have to be spent on infrastructure improvements such as roads, sidewalks, utilities, retaining walls, and landing needs in the defined district, but we are early in the process and welcome community input.
What, if anything, would it cost the town to create a TIF program?
The State’s TIF program allows for us to pay our non-profit consultant, the Midcoast Council of Governments, out of funds raised through the TIF program once approved. So there is presently no cost to the town. If the voters do not approve the program, we would owe them the cost for putting the proposal together.
The only ongoing cost is the time the town staff would spend ensuring that funds were maintained in the proper account, documented appropriately, and spent appropriately (with oversight of the Town Manager and Select Board).
Stay tuned! All Select Board meetings are open to the public. If you have questions, feel free to contact Brandon Leppanen, our town manager, or Jane Conrad, Chair of the Select Board.