February 4, 2009

Maximizing Revenue Benefits Through Municipal Tax Increment

Financing (“TIF”)

City of Gardiner, MaineJoan M. Fortin, Esq.

Charles Lawton, Ph.D. – Planning Decisions, Inc.

Legislative Findings

• Provide new employment opportunities

• Improve and broaden the tax base

• Improve the general economy of the state

Program Summary

• Allows municipality to “capture” new property tax value

• Property taxes on new value are “TIF Revenues”

• TIF Revenues can be used to fund a wide variety of authorized project costs

Benefits to Municipality

• Attract new investment (i.e., tax $$$)• Examples: City of Lewiston & Town of Lincoln

• Significant infrastructure projects• Example: Town of Edgecomb & City of Bangor

• Tax Shelter (i.e., the “tax shifts”)• Examples: City of South Portland, City of Bangor &

Town of Eliot

Tax Shelter Benefits

• TIFs shelter new value from a municipality’s “State Valuation.”

• A municipality’s State Valuation effects 4 important areas of municipal finance:

1. State Education Subsidy,2. County Taxes, 3. State Revenue Sharing Subsidy, and4. Local Education Allocation.

Types of Municipal TIFs(under Subchapter 1 of Chapter 206 of Title 30-A)

• Traditional Municipal TIF • Can be located anywhere in municipality

• Downtown Municipal TIF• Located in the traditional central business district • Must be described in a downtown redevelopment plan• Some statutory limits do not apply

Authorized Project Costs: 30-A M.R.S.A. Sec. 5225

• Project costs “inside” the TIF district

• Project costs outside the TIF district, but “directly related to or made necessary by” the TIF district

• Costs of economic development, environmental improvements or employment training within the municipality

Ineligible Project Costs

• Buildings or facilities used for the general conduct of government or for public recreational purposes• City halls

• Jails

• Recreation centers

• Athletic centers

• Swimming Pools

TIF Criteria & Program Limits

• 25% of area blighted; need of rehabilitation, redevelopment or conservation (N/A for downtown TIF)

• Acreage Cap (N/A for downtown TIF)

• Value Cap (N/A for downtown TIF)

• Municipal indebtedness ceiling (N/A for downtown TIF)

• Term limits

Procedure for Creating a TIF District

• Public notice

• Public hearing

• Vote by legislative body

• Designation of TIF District• Development Program for the District• Downtown TIF must also include downtown redevelopment plan

• Approval by Commissioner of DECD

Funding Project Costs

• Credit enhancement agreements

• Municipal bonds

• Setting aside TIF revenues

TIF Accounts & Accounting

• Development program fund

• Project cost account

• Development sinking fund account

Gardiner’s TIF History

• TIF Policy created in 1999 by Council• Amended 2003

• Downtown TIF (2003)

• Libby Hill TIFs• Harper’s (2000)• Pine State (2004)• EJ Prescott (2005)

• Associated Grocers TIF (2006)

Tax Shelter Benefits Downtown E.g..

Tax Year Beginning TIF Revenue

Intergovernmental Losses Avoided = State Contribution

to DT Development City

Contribution City Share

4/1/03 $29,396 $11,931 $17,465 59% 4/1/04 $106,635 $50,707 $55,928 54% 4/1/05 $127,120 $57,667 $69,454 54% 4/1/06 $124,989 $56,672 $68,317 54% 4/1/07 $127,380 $57,667 $69,713 54% 4/1/08 $296,906 $180,400 $116,506 49% 4/1/09 $317,974 $198,639 $119,334 46% 4/1/10 $339,123 $211,852 $127,271 44% 4/1/11 $360,907 $225,460 $135,447 43% 4/1/12 $383,345 $239,477 $143,868 42%

Tax Shelter Benefits Downtown E.g..

$2.2 million TIF revenue$1.3 million from state.

Libby Hill Area Wide TIF District

• 22 Lots in Libby Hill Area Wide Business Park• 10 Lots from Phase I of Business Park TIF• 12 New Lots• Dennison Lubricants has already located on Lots 10 & 11

• $1.5 million in new value• Additional $1.5 million development within 5 years

• 30-year TIF Term

• Streamlines the Incentive Process

• Incentive for Future Development

Financial Benefits to City of Gardiner

• TIF Revenue to Municipal Project Cost Account• Projected at $26.7 million over 30 years

• Tax Shift Benefits• Projected at $19 million over 30 years

Thank you.

Joan Fortin, Esq. • jfortin@bernsteinshur.com• (207) 228-7310

Charles Lawton, Ph.D. – Planning Decisions, Inc.• clawton@maine.rr.com• (207) 363-3541