By Zack Anchors

Staff Writer

    The South Portland City Council is considering the
creation of three proposed tax increment financing districts (TIFs)
that would allow property taxes otherwise destined for Augusta to be
directed towards a wide range of projects throughout South Portland.
The creation of a Maine Mall TIF, a Rigby Railyard TIF and a
Knightville-Mill Creek TIF would be the crux of an ambitious economic
development program intended to eventually result in the creation of an
economic development committee and the funding of numerous projects
designed to address ongoing challenges facing the city.

    Although tax increment financing districts are not
new to South Portland, city officials say the three currently being
proposed are TIFs of a different breed. Over the last 13 years the city
has created seven of the special districts, most of which were designed
as incentives to lure large companies like National Semiconductor or
Durastone to build facilities in the city. A development that occurs
within that style of TIF can then have its property taxes partially
reimbursed or applied to projects that directly benefit the
development–an approach that some say gives such developments unfair
advantages. The three proposed TIFs that the City Council will consider
at their Feb. 5 meeting have an important difference: instead of
directing funds back to the developer, the revenues generated by the
TIFs will be directed to the city, providing funds for projects that
could include anything from hiring an economic developer to building
new sidewalks and bus stops.

    The proposed TIFs were presented to the council in a
report compiled by the 8-member TIF committee, a group that was formed
to study how TIFs could be used as an economic development tool for the
city. The project was initially limited in scope to the
Knightville-Mill Creek area, with a focus on finding funds for projects
that would enhance the downtown-like environment of the neighborhood.
But after concerns were raised that it would be unfair for funds
generated from a proposed TIF in the west end of the city to be
directed to the East end, the project was expanded.

    “It’s striking to me that what began as a downtown
development project has turned into a city-wide development project,”
said Chuck Lawton, a consultant from Planning Decisions who is working
with the committee. Lawton and Planning Director Tex Haeuser presented
the committee’s findings to the council at their Jan. 21 meeting and
answered councilor’s questions. Although councilors voiced unanimous
support for the proposed TIFs, some were concerned that the public
might have a negative impression of TIFs and that residents of the West
End might feel the project would not benefit them.

    In a position paper City Manager Ted Jankowski summarized how the TIF would generate revenues:

    “Unlike previous TIFs created in South Portland, the
proposed TIFs are not primarily intended to rebate taxes to individual
businesses but instead are designed to shelter valuation increases from
reductions in State payments to the City and from increases in the
County tax; and, to use the sheltered funds for municipal projects,
many of which are already programmed, that contribute to the economic
advancement of South Portland.”

    To help councilors understand how the new TIFs would
work Lawton offered a typical scenario as an example. The scenario
begins with the city outlining a certain geographic area—the Rigby
Railyard area--as targeted for economic development. A developer then
approaches the city with an interest in building a development in the
area—in Lawton’s example, “Mr. Jones” wants to build a biomedical
factory. If the city decides the factory is worthy of a TIF, the city
would then apply to the state to create a TIF district that would
surround the factory.

    One type of TIF—the credit enhancement TIF—would
allow Mr. Jones to receive back a portion of the property taxes he
pays, which serves as an incentive for him to bring his development to
the city. Another type of TIF would require that the tax revenues be
used to reimburse Mr. Jones for improvements he made to the TIF
district—the installation of new traffic lights or a new sewer line,
for example.

    The version of the TIF that the city is currently
considering is a third type. This TIF would allow the city to receive a
portion of the property taxes generated by Mr. Jones factory and to use
the funds with a fairly broad mandate—although there are restrictions.
The funds generated by the TIF could be used for such measures as
hiring a waterfront market director, Lawton said, or undertaking
historic preservation projects.

    The TIF Committee’s report included ideas for
specific projects areas that funds from each proposed TIF could be
directed to. Many of the projects are expected to be undertaken in the
future regardless of the TIFs, or are already in the works. The
committee identified four broad challenges facing South Portland that
the TIF funds could be used to address: the growing share of
residential property comprising the city’s tax base, the need for
improvements to the city’s transportation infrastructure, the desire to
vitalize the city’s downtown areas and other areas of potential growth,
and the impact of the Maine Mall on the city as a whole.

    Lawton said that transportation issues clearly made
up the largest challenge facing the city, and he pointed out that about
15 percent of the city’s land base consists of roads, compared with
around five percent in neighboring communities like Portland and
Westbrook.  The report calls for using TIF revenues to “redesign
and rebuild transportation infrastructure.”

    Lawton described the Maine Mall area as a mixed
blessing for the city. Although the commercial area only makes up 17
percent of the land base, it provides 25 percent of the tax base. But
it also contributes greatly to “traffic congestion, water runoff, noise
and competitive impact on the traditional downtown,” according to the
report.  To deal with those issues the report calls for creating a
“Maine Mall Improvement District.”

    Another aim of creating the TIFs is to mitigate the
“Robinhood effect”—the manner in which most of the revenues generated
within the city are ultimately directed to the state, often to be used
for projects in other regions. City Manager Ted Jankowski joked that
the Rigby Railyard TIF should be renamed the “Sherwood Forest TIF,” but
also explained that the TIFs would serve to lessen the city’s
dependence on revenues from its residential tax base, which as a share
of total taxable property has increased from 34 percent to 50 percent
since 2001.      Lawton said another component of
the overall economic development project involved attracting biomedical
research to the city, promoting a creative economy and forging links
between the city’s semiconductor industry and other commercial
enterprises in the area.

    The report recommends that an economic development
committee eventually be established that would be responsible for
managing the funds generated by the TIFs. The possibility of hiring an
economic developer for the city was also discussed, though was not
directly recommended in the report.

    The council will hold a first reading and public
hearing of the TIF proposals at their Feb. 5 meeting. If the plan is
adopted the TIF committee will then draft TIF applications to be
submitted to the state and bring them to the City Council for approval
in either February or March.