USING TIF’S IN RURAL COMMUNITIES A Case Study from Fort Kent, ME July 24, 2013 Community Development Society Conference Charleston, SC,

Tony Gauvin, Associate Professor of eCommerce, UMFK Town Councilor, Fort Kent, ME Don Guimond , Fort Kent Town Manager Allain Ouellette, Northern Maine Development Corporation Steve Pelletier, Director, Office of Planning and Economic Development

OVERVIEW o o o

Defining Tax Increment Financing and its Traditional Uses Fort Kent’s Recent Flood and Fires Fort Kent Downtown Revitalization Plan o o o o

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Create a Recovery TIF district (Novel Approach) USDA Rural Business Opportunity Grant Application Northern Border Regional Commission Grant Application America’s First Mile Committee

TIF Implications for local tax burdens and regional funding effort

WHAT IS A ‘TIF’? Tax Increment Financing o Defined by state statue and used by local municipalities o

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Captures property tax revenue generated by new development in a defined district to be used for specific (pre-defined ) purposes for up to 30 years Locks in the valuation of the district at predevelopment level o

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Available in every state except Wyoming and Arizona

Effects local subsidies and regionally shared expenses that are calculated using municipal valuations

TIFmanual01202011.doc

HOW A TIF WORKS IN MAINE o

Define a geographic district that o At least 25% of the District area must be: o o o

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Blighted; or In need of rehabilitation, redevelopment, or conservation; or Suitable for industrial and commercial sites.

Determine the value of all taxable property within the district o Becomes the Base value.. This is the ‘locked in’ value of the district going forward Determine a use for the property tax revenues of improvements (above base) within the district o Capture Value (TIF Value) @ local mil rate = TIF revenue File paperwork, hold public hearings, etc as defined by state statues TIF applications decided by Department of Economic and Community Development , Augusta, ME

OTHER IMPACTS OF INCREASED MUNICIPAL VALUATIONS o

A municipality’s total Equalized Assessed Value (as of April 1st) is used to compute: o o o o

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General Purpose Aid to Education (subsidy), State Revenue Sharing (subsidy), and County Taxes (expense) Consolidated School District Budgets (expense)

State subsidies change inversely to value; County taxes change directly. As total value increases (through inflationary growth and increased investment), the municipality will realize a decrease in Education and Revenue Sharing subsidies, and an increase in County tax obligations. Therefore new tax revenues resulting from a development project are reduced through loss of subsidies and increased county taxes. TIFs shelters the increased valuations (and revenues) causing o o

Increased subsidies Decreased expenses

TIF LIFE CYCLE

2006 EXAMPLE FROM FORT KENT, ME 

A local developer wanted to build an Assisted Living Center in a undeveloped lot that was not serviced by local water and sewer 

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Benefit to developer 

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Create a TIF district that encompassed the lot to be developed and public access routes to closest water and sewer mains Created a municipal bond and loan to pay for water and sewer extension to the developers lot Cost  $330,000 Used TIF revenues generated from the TIF capture value to pay down bond Able to purchase land at reduced rate since it was not on local water and sewer Cost of water and sewer extension borne by municipality

Benefit to Community  

65 new jobs Opened up new area for residential and commercial development 

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16 new homes (over 3 million in new valuations)

New development did not add to town valuations (positive impact on subsidies and regional expense sharing)

CROSSWINDS TIF 2006  2016 

The Math   

Base value $17,000 Today's Actual Value $3,032,500 TIFF (capture ) Value $3,015,500

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TIFF Tax revenue @ 17.25 mils $52,017.38

http://crosswindsresidentialcare.com/

APRIL 30, 2008

MARCH 25, 2012

OCT 3, 2012

WEST MAIN ST VACANT LOTS

VALLEY MOTORS IS COMING BACK

RECOVERY  

Valley Auto is rebuilding Of the five business affected by March fire, none rebuilt or relocated 

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Vacant lots

Developing a Fort Kent Downtown Revitalization Plan  

Create a new TIF District Formed Fort Kent Downtown Revitalization Committee 

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Retail district members including those impacted by fires and flood

Planning funds from USDA Rural Business Opportunity Grant Infrastructure funds from Northern Border Regional Commission Federal Grant Program America’s First Mile

THE NEW DOWNTOWN TIF 

Current Valuation  

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Anticipated Capture values (short term)    

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Post Flood and fires and pre redevelopment $23,591,500 (10.3% of total town valuation) Valley Auto (Valley Motors) rebuild $3-6 million Nadeau Furniture Lot development $3-4 million Old Hotel lot development $1-2 million (vacant before floods and fires) Estimated, by year 3, an increase of 10 million

Intent of TIF revenue 

$10,000, 000 @ 17.35 mils = $173,500 year for 27 years   

Infrastructure improvements Economic development Marketing

NEW TIF DISTRICT

Flood Impact

IMPACT ON REGIONAL FUNDING OF EDUCATION valuations with TIF

Current TIF capture

Anticipated TIF Capture

%share tif

%share w/o TIF

% Share w/o New TIF

Savings based on TIF

Savings Based on new TIF

Eagle Lake

$70,350,000

$0.00

$0.00

16.59%

16.43%

16.06%

-$6,945

-$22,710

Fort Kent

$217,000,000

$4,185,460.00

$14,000,000.00

51.17%

51.65%

52.73%

$20,440

$66,839

New Canada

$21,700,000

$0.00

$0.00

5.12%

5.07%

4.95%

-$2,142

-$7,005

St. Francis

$28,850,000

$0.00

$0.00

6.80%

6.74%

6.59%

-$2,848

-$9,313

St. John

$16,550,000

$0.00

$0.00

3.90%

3.86%

3.78%

-$1,634

-$5,343

Wallagrass

$35,700,000

$0.00

$0.00

8.42%

8.34%

8.15%

-$3,524

-$11,524

Winterville

$33,900,000

$0.00

$0.00

7.99%

7.92%

7.74%

-$3,347

-$10,943

$424,050,000

$4,185,460.00

$14,000,000.00

NEW TIF Revenue = $173,500 Savings on Education Funding as a result of TIFF = $46,399 Return on Investment is 26.8% from education savings ALONE

AMERICA’S FIRST MILE 

Mile 2390 on US Route 1

FORT KENT FLOOD IMPACT AREA BECOMES RIVERSIDE PARK

RIVERSIDE MURAL

RESOURCES Municipal Tax Increment Financing Manual, State of Maine Department of Economic and Community Development  Comprehensive Land Use Plan, Town of Fort Kent. ME  50th Annual Report for 2012-13, No. 95 St. John Valley AOS & M.S.A.D. 27  Town of Fort Kent Annual Report 2012  Pictures courtesy of Portland Press Herald, Bangor Daily News, Fiddle Head Focus and Fort Kent Historical Society 