December 17, 2013

Gardiner council to vote on tax incentives

Policy aims to spur downtown upgrades on upper floors or possibly a hotel.

By Paul Koenig pkoenig@centralmaine.com
Staff Writer

GARDINER — The City Council will consider signing off Wednesday night on an aggressive tax incentive policy designed to entice significant upgrades to the historic buildings downtown.

The policy, first presented to the council in November, would set the percentage of new tax revenue developers could expect to get back for upgrading second and third floor units, adding elevators or opening a hotel.

The idea received mixed reactions from councilors in November, although all supported the plan’s goals. The sticking point for a couple of councilors was the credit enhancement rates, essentially tax rebates on new development, which are greater than what the city has given in the past.

The policy is part of a comprehensive business incentive program being developed by Gardiner Main Street in collaboration with the city, the Gardiner Board of Trade and the Bank of Maine. The program, which is expected to be launched next May, will provide forms of funding to lower the cost for businesses looking to open locations downtown.

It would allow businesses to apply for incentives including forgivable loans for fixed capital, micro-grants for operating funds and six months of free rent. The idea is to attract a targeted mix of businesses that would complement each other and existing businesses.

The city’s contribution to the program would be the proposed credit enhancement policy that Gardiner Main Street and the city can use when marketing the program to developers and businesses. Nate Rudy, the city’s economic and community development director, said the policy’s goal is to encourage strategic infrastructure improvements to downtown buildings that will benefit the city for years to come. He said at least half of the downtown buildings, most of which were built in the late 19th century or earlier, have unused or underutilized second and third floors.

Patrick Wright, executive director of Gardiner Main Street, said the ideal mix in the downtown is a combination of commercial storefronts and upper-floor residential and commercial units. The goal is to have more people working and living downtown to help support restaurants, retailers and other businesses.

City Manager Scott Morelli said at the City Council meeting in November that although he was reticent initially about the higher levels of tax incentives, he supports them because the greatest incentives would be only for elevators and hotels — both longstanding goals for the downtown.

The proposed policy would give back 100 percent of new taxes for hotels and 75 to 100 percent for elevator construction, depending on the number of buildings served. The development of second- and third-floor residential units or second-floor office space would receive 33 percent to 50 percent of the additional tax revenue back.

Businesses in the downtown tax-increment financing district already can seek credit enhancement agreements to defray the cost of development. The proposed new policy would be different in that it sets specific percentages of tax breaks developers could receive for different types of investment.

Rudy said he doesn’t know of any serious credit enhancement proposals submitted since the downtown TIF district was established in 2003.

Tax-increment financing, or TIFs, allow municipalities to freeze the value of properties on the tax rolls and give part of the tax revenue that would have been earned from future construction back to developers through credit enhancement agreements. The rest of the additional tax revenue is captured in the TIF district and can be used for economic development purposes. A benefit is the new revenue is sheltered from assessments for school and county taxes, meaning the city would pay less than it would if the value wasn’t sheltered.

The taxes from the value before the improvements, as in what’s paid to the city already, still would go to the city’s general fund.

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