HALLOWELL — The city is developing a plan that would allow it to use state and county tax savings to fund downtown improvements, which may include streetlights, permanent public restrooms or sidewalk extensions.

Hallowell is preparing to apply to start a 30-year downtown tax-increment financing district, which would require approval from the Maine Department of Economic and Community Development. The state could get the city’s application by March 2014, according to Michael Starn, the city manager.

Under state rules, cities and towns can designate an area and apply for state permission to freeze its property valuation, used to calculate public school spending and county taxes, for a maximum period of 30 years. However, the municipality must agree to spend the money it saves on state and county taxes to bolster development within that area.

In Hallowell, the proposed area is a 170-acre swath including land in the city’s core downtown, with land along Water Street stretching from near Greenville Street on the south side of town to the Augusta line in the north. The district encompasses less than 5 percent of the city’s acreage, but more than 13 percent, or $32 million, of the city’s $240 million valuation, Starn said.

The state-owned Stevens School complex, a 14-building, 63.5-acre property that is mostly vacant, is also included in the district, signaling the city’s hope that a developer will buy and improve the property. The site is several blocks up Winthrop Street from downtown and is separate from the rest of the district, connected only by Winthrop Street, which is included in the district, but the land on either side of the street isn’t.

In 2008, the state first tried to sell the property through a request for proposals. Then, it listed it for $1.1 million, but no takers emerged. Since then, the property has deteriorated somewhat, worrying city officials.

Inmates housed at the Central Maine Pre-Release Center on the complex there were moved to another facility earlier this year, but the Maine Department of Marine Resources and the Natural Resources Service Center still are there. Regional School Unit 2, the district Hallowell is a part of, has a central office there with a lease in hand until 2015.

“It’s hard to imagine exactly what could go on there, but we’ve got to come up with some list of possible projects or uses in that area,” Starn said.

Mayor-elect Mark Walker, a city councilor who takes the mayor’s office in January, said he supports the plan, but the city must iron out a list of proposed development projects before seeking state approval. Starn said in Novemeber, councilors authorized a $20,000 contract with consultant Noreen Norton of Bangor-based Starboard Leadership Consulting to develop the district plans.

Starn said those projects could include installing streetlights on the west side of the downtown area, which could cost $120,000. Now, there are streetlights on the eastern river side.

He also said the city may consider extending sidewalks to areas outside the core of downtown and installing permanent public restrooms, perhaps near Waterfront Park, which the City Council recently voted to rename Granite City Park effective in January. The city hasn’t had public restrooms in the past. Around the annual Old Hallowell Day each July, the city splits the cost of portable toilets with the Hallowell Area Board of Trade.

The city won’t be able to do all of this right away. Officials need the valuation of the district to improve so tax savings accumulates. Under the city’s current property-tax rate, it will get $17,100 for every $1 million in improvements made. But Hallowell could borrow a larger sum of money for improvements and use the money the district accrues to pay off debt service.

Doug Ray, a spokesman for Maine’s economic development department, said 24 other cities and towns currently have a downtown TIF district. Farmington voters approved plans for one in October, and other communities, including Augusta and Richmond, have had districts for years.

In Richmond, with roughly 1,000 more residents than Hallowell, the town’s website says after the district was created in 2005, Richmond has improved historic buildings, created a more pedestrian-friendly downtown and bolstered Fort Richmond Park, on the Kennebec River.

“It’s got a lot of positives, we see a lot of neighboring communites doing it and it’s a good tool for us to do some much-needed capital improvements,” Walker said.

Michael Shepherd — 370-7652mshepherd@centralmaine.comTwitter: @mikeshepherdme