CHINA NEWS: TIF meeting brings explanation of changes

by Mary Grow

The March 20 public hearing on proposed amendments to China’s TIF (Tax Increment Financing) document brought both explanations of the changes and a more nuanced view of the whole TIF process.

Voters at the March 25 town meeting, scheduled for 9 a.m. at China Middle School, will accept or reject the proposed amendment, a three-page document with an addition and a map, when they act on Art. 5 in the 56-article warrant.

Assessor William Van Tuinen said four changes are proposed.

1) China’s TIF, initially created in 2015, would be extended from 20 years to 30 years.
2) The new Central Maine Power Company substation off Route 3 would become an additional revenue source. Taxes from the expanded CMP power line, the original TIF revenue source, bring in about $260,000 a year, according to Town Manager Daniel L’Heureux. He estimated earlier this month the substation would add about $60,000 annually.
3) Additional areas in town would be available for economic development, as shown on the map. They include an area on Route 3 around the former Fairpoint building; a small parcel on the northwest corner of the intersection of Routes 202, 9 and 137 north of China Village; the newly acquired town land on Lakeview Drive opposite the former Candlewood Camps; and an area around Branch Mills dam.
4) Selectmen would be authorized to enter into credit enhancement agreements, under which an entrepreneur is encouraged to open or expand a business in a TIF area by promising a partial or full rebate of the additional taxes generated by the project. Van Tuinen emphasized that such partial tax relief is not an entitlement; selectmen decide when it would be in the town’s interest.

The point of a TIF, Van Tuinen said, is to shelter the additional property valuation created by new development, making it not count toward the state’s valuation of the town. The advantage is that the higher a town’s valuation in the state’s eyes, the more it contributes to county taxes and the less it receives in state aid to schools and state revenue sharing.

Were China not to have a TIF, for the first two years the entire taxable value of a new development would go into the tax base, perhaps lowering taxes for everyone. However, when the state caught up with the new value in two years, higher county taxes and lower state aid would offset 65 to 70 percent of the gain.

South China resident Richard Morse argued that having the full value of the new taxes for two years and up to 35 percent afterward was useful, and China should not have a TIF. He called the program “a confusing bureaucratic mess that nobody can understand very well,” a characterization with which L’Heureux sympathized.

However, the manager said, the program is competitive. If other towns have TIFs and China does not, China’s valuation, in the state’s eyes, rises in comparison to theirs, and China pays more and gets less. For example, he said, Augusta has $149 million in valuation protected under the TIF program, shifting a larger share of the county tax burden to the other Kennebec County municipalities.

“If you don’t play the game, you’re on the losing end,” the manager concluded.

Morse, unconvinced, said he thinks lower taxes are more important than the projects on which voters will decide whether to spend TIF money, citing specifically the TIF Committee’s planned fishing platforms and other improvements near the boat landing at the head of China Lake’s east basin.

Articles 6 through 11 in the town meeting warrant ask voters to approve proposed expenditures from China’s TIF funds.