Speakers labeled via automated voice-based diarization + AI name-matching against the city's official roster. Automated transcription can still mis-hear a name during fast speech (e.g. a rapid roll-call vote) -- clear near-misses are auto-corrected, but this is not manually verified line-by-line. Treat names as a strong best guess, not an official record.
[0:03] Select Board member (presiding): To get this meeting going, I will take a motion to go into executive session or. Is it an executive session if we're doing a workshop? That's right. So we will do the executive session after workshop.
[0:15] Alex (Town Manager/staff): Although we're not actually doing an executive session, we're just going to do this and then go straight to the meeting.
[0:19] Select Board member (presiding): Meeting the no executive we're not covering what's that yes public that yeah so this is just a public okay all right I thought there was another issue we were going to discuss next
[0:31] Speaker C (unidentified): Time yeah so
[0:36] Alex (Town Manager/staff): I'll jump in yeah go ahead hi everybody so this is a public workshop that we're holding to really do basically a tiff 101 presentation where this came about was a couple of months ago we were working through financing for an entirely different project and trying to figure out ways to get that thing financed and somebody sort of off the cuff mentioned what about using TIF districts to try to make this go ultimately that project it didn't really end up making sense to go with the TIF district but It sort of stuck in my head because I remember during my time at the town of Cumberland how we actually had pretty tremendous success And the person that I worked on it with then and would work on it with now is here to present to us, and that is Alyssa Tibbetts, who and I she and I work together at the town of Cumberland before she moved on to Jensen and Baird before hanging out her own shingle and over the years Alyssa has become one of the foremost experts on TIF districts in the state of Maine. Yes I know you'll say that's not true but and so she's going to give us a presentation on us. Please feel free to ask questions as we go or you know at the end diving into detail. She and I just did a quick look around town to where I explained that one of the things that is going to make us a little different than and other communities when we talk TIF districts is it's going to be all about housing and housing for us that there's a lot of good uses for TIF district but the real sweet spot for us is thinking about housing and so that's why I want to really just introduce this group and thank you all for showing up good crowd for this just to talk about them in concept and talk about ways we could possibly use this as an extra tool in our toolbox it's not going to save the town or anything like that but it's a tool that has a really great tendency to work well over time if districts require patience and planning but if you do it right they can work and every day when i would drive through and from work i would go past an affordable housing development in the western half of the town of cumberland that wouldn't have been there if we hadn't done a tiff district So I got to see that every day, like, okay, that worked. So without further ado, I'll turn it over to Alyssa to give a presentation on TIF 101, and off we go. Laura, is yours, Alyssa.
[3:04] TIF consultant/presenter: Can you all hear me, or should I stand here? I don't feel bad that I have my backs to you. I don't know if you can hear me if I'm facing the select board. Can you tell me what's easiest?
[3:12] Alex (Town Manager/staff): I think the camera will pick you up best that way. You can sit up here. Make sure everyone can hear, okay? Yeah. Okay. Thanks. Thanks.
[3:19] TIF consultant/presenter: Sorry, I just make myself at home here, I guess. Thank you. Chairs are better. Thank you. Well, thank you for having me. I appreciate this. Many people volunteer to come out on an evening to talk about TIF districts. It's not often that anyone but me finds this exciting, but I think it is, as Alex said, a really useful tool for communities throughout the state of Maine for a variety of different reasons. And, you know, it's often thought of as just an economic development, commercial development type of tool, but there are many other uses that the state of Maine has expanded the statute over the years to enable. And so what I thought I'd do with the presentation is just talk at a high level about what tax increment financing is and what the opportunities are under state law. Law. And then really, there are many directions that it can take. And I'm happy to answer questions and talk more specifically about any of those as we go along. But I'll cover the basics. And I'm happy to answer questions as we go. Please feel free to stop me. And then, you know, again, if there's time at the end, I'm happy to answer other questions that you may have. So I have a, you know, very sort of general slideshow here just to kind of cover the high level elements of what tax increment financing is. It's really a municipal program. It is authorized by state statute, and the statute has several legislative purposes, which are to provide new employment opportunities, improve and broaden the tax base, improve the general economy of the state. It also is for industrial, commercial, transit oriented, or arts district uses, and then lastly to provide public facilities that might be identified in a program which we'll talk about. So as you can see, it's pretty broad what this is. The type of program that the state has said, we are giving, expressly giving municipalities the authority to identify these types and designate these types of programs in their community to use as they say fit, as long as they fit within the parameters of the statute. So Kyle, I think I'm going forward. So as I said, the statute authorizes the municipality to develop a program. There are really two key terms. There's a development district, which really refers to the geographical boundaries of property that's included in a TIF district. And then what's referred to as a development program. And that's really the document that governs how the TIF district is utilized. What's, what's authorized to be captured for revenue, which we'll talk about how that revenue gets utilized in the community, and a number of other sort of purposes that a town would consider for using the program locally. Some of those are, you know, to increase commercial development. Some of those are to increase employment opportunities. Some of those are to fund public infrastructure projects. And a couple of key things that I often hear that I like to just address early on, that because the TIF districts are municipal programs that are authorized by state statute, the town gets to decide what property goes in the district and how revenue that's captured from the district gets utilized within the parameters of the statute. It doesn't require approval from a property owner within the district. We sometimes get that question at these meetings. The town just, it's sort of like an overlay district if you're familiar with that concept in zoning it also doesn't change the assessed value of property within a district it doesn't impact that in any way it continues to be assessed the same way all other property in the community is and it doesn't impact zoning or change zoning so those conditions on a property continue to exist the way that they would whether it was in a tiff district or not what it allows the municipality to do is simply to capture value and use it for specified Purposes and so we'll talk a little bit more about that next. So when the district is identified by a municipality and again that's sort of the geographical boundaries of lots that are included, The municipality has to develop what's known as a development program. As I said, that has to include a couple of elements, and we won't go over them in detail. But a financial plan which discusses how revenue from the district will be used. The types of facilities are improvements that will be funded through that revenue. And these are a couple of elements that may not apply, but are required to be addressed by statute. So relocation of displaced persons in certain circumstances where, you know, property is being utilized for another purpose and folks are relocated, which is not common in the state of Maine for this use. Transportation improvements that might be necessary in connection with development that's happening in the district. Environmental controls that might be required again due to development within the district. And then just generally how the district will be operated by the municipality. So there are different considerations depending on what's happening in the district or the type of development. But for the most part, the operation of the district is not significant. They're sort of the, you know, the administrative oversight at the local level. Once the district is designated, the assessor tends to have a very big role in that and making sure values are, you know, are tracked very closely in term. We'll talk about sort of the increment. But otherwise, once the district is in place, It's really tracking the values the new values the revenues and the use of those revenues that requires the most involvement on a day to day basis. And then there are a couple of conditions in the statute that I just like to cover again because I think it's important to always understand sort of the legislative purpose of these even though they're municipal programs. These are things that we may think about without really realizing we are but they are specific requirements of the statute, one of which is, will the district contribute to the economic growth or well being of the municipality, or the betterment of the health welfare and safety of its inhabitants. This is similar language to what you see is related to general home rule authority of a municipality in terms of are we making decisions for these purposes. And it's as you can tell a very broad consideration, but one that's important. The other is that when a TIF district is designated, it's designated by the legislative body of the municipality. So that would be town meeting. And what has to be put forward. There are public hearing requirements is a consideration of whether the proposed district results in any substantial detriment to any existing business owner or program and how that is going to be addressed. Again, that's not something we see commonly at this point. Typically, it's intended to help and not cause this type of adverse economic effect. But those are 2 requirements of the statute that the state requires us to consider before designating a district. And then you can go ahead, Kyle, the next one. The other conditions for approval are that for a municipality to adopt a district, at least 25% of the real property. So the parcels that are in the district have to be one of these three things, not all of them, but either blighted in need of rehabilitation, redevelopment or conservation or suitable for commercial or arts district use. The most common in the state tends to be suitable for arts or commercial district use. It doesn't often it's not right you know frequent in what I see that these are blighted districts but that is certainly an option if that there's an area that's been designated for that purpose there are also I'm sorry I'm sorry did you say either or both either or no so just one of those categories has to be met and it's only it's a 25 threshold so it just the entire district does not have to meet it there are also limitations on how much property in a municipality can be included in a TIF District and there are a couple of different tests that have to be met there. The total area of any one district cannot exceed 2% of the total acreage of the municipality. The total area of all districts combined, if you have more than one, can't exceed 5% of the total acreage of the municipality. And then what's known as the original assessed value, which we'll talk about, of a district can't exceed 5% of the total taxable value of the municipality of the prior April 1st. And that's a pretty significant number when we look at that. But essentially, what the state is trying to protect against here is that municipalities don't put everything in the TIF district because there's obviously a significant benefit and a significant impact to the state in doing that. So these are just conditions to think about at this point without having a TIF district. These are not a concern, obviously, but if you were to say we want to put a significant amount of acreage in there, we would want to make sure that we're meeting these conditions as you think about property that would go into a TIF district. Go ahead, Kyle. So when thinking about designating a TIF district, you know, there are, there is a process which we'll talk about, but just on the front end, I think it's important to ask some questions and we will talk about what these terms mean as we do that. But the first consideration is what property are we looking at? What are the boundaries? One thing to be mindful of is that a TIF district does not have to be contiguous. So you could have pockets of land throughout the community that could comprise a TIF district. Sometimes that makes sense, depending on proposed development or timing of projects or things that are going on. Other times it doesn't. Sometimes it makes more sense to have something in a sort of a contiguous district like a downtown or a village area, a main street area. So really thinking about what are the boundaries? Are we looking at one district? Are we looking at multiple districts? What are the timelines for anticipated investment or development in those areas and what seems to make sense? That's sort of a starting point. The other is a term called original assessed value, which, again, we'll go over in more detail. But the general concept there is when a TIF district is created, The value that exists, the assessed value that exists on the April 1st that district is created, is what we call the original assessed value and it functions as a base, a floor for that value. All of the property tax that gets paid up to that original assessed value continues to go to the town's general fund. All the property tax that gets paid on value above that original assessed value has the ability to be what we call captured or sheltered in the TIF district. the district. The town can decide whether it wants to capture 100% of that or some lower percentage of that. But that is really TIF revenue in a nutshell, the tax revenue that's paid on new assessed value in that district over that original assessed value. So the reason that's such a critical term is that if you've got property when you're thinking about what do we want to put in a TIF district, if there's property where you don't anticipate much investment or appreciation and value, it's probably not going to generate a lot of TIF revenue. And there's not a significant benefit to putting it in a TIF district for that reason. Most of the time we see TIF districts being considered when there's a development proposal or property that's in need of rehabilitation or reinvestment. Or sometimes a revaluation is a great opportunity to put property in a TIF district because we know that new value is coming and it's an opportunity to capture that value and to utilize the revenue that comes from the taxes on that value for dedicated purposes, which we'll cover. And so, thinking through what might be appropriate property to include, what your base value is, we also want to think about the estimates of increased value, of course. What's the projection of... I'm just taking over the table here. that's nice so we want to think about estimates of increased assessed value of course and we did no one has a crystal ball but we do like to think about what do we project in terms of is there an anticipated new value coming online to make the tiff district worthwhile and two other key things to think about are the capture rate and the term so as i said municipality can capture 100 of that or some lesser percentage of it and you can do so for a period of up to 30 years but it does not have to be the full term so there are you know a lot of variables and factors to consider in terms of how you want to use a tiff district and really what the benefit is you're trying to derive but all of those things are from my perspective the decisions that have to be made on the front end and really are the legislative decisions in terms of what do we want why do we want to use this what are we trying to achieve with it and how do we shape it and from there once those decisions are made we start to Draft the development program and really identify the documents and work through the process from there. So, Kyle, if you want to go to the next, that's the actual process. So once those key decisions have been made, and keeping in mind the considerations under the statute and sort of limitations that we talked about, one of the, you know, first things that we do is draft the development program. That's the governing document, and that really needs to be available before we have a public hearing before this goes to the voters, because that's what the public is going to review and see and be able to understand what has been put together in terms of the policy document for this TIF district. It's also going to serve as the application that goes to the state of Maine eventually for approval of these districts. So you locally will make all these key decisions. You would work with someone like me to help draft the development program. Once that's done, the statute requires a public hearing with at least 10 days notice. That's the minimum. You can certainly do more. A lot of communities do a lot of informational meetings throughout or have committees who work on these throughout. So there's a lot of public engagement around them. And then once that happens and your development program is final, it would move toward a town meeting vote. And then ultimately, assuming it is approved locally, it goes to the state of Maine and the Department of Economic and Community Development for approval. That process is, because it is a municipal program, DECD is really checking this for compliance with the statute. They are not making decisions for the community or inserting their judgment for your own. They're just making sure that the decisions that have been made in the development program locally are consistent with the statute and signing off on it. There are time frames for that, so just keeping in mind because assessment happens every April, in order to capture value and establish your original assessed value as of a certain date, an application has to be, all of that process has to occur, and an application has to be made to the state by March 1st of that year in order to establish an original assessed value for that April.
[17:53] Alex (Town Manager/staff): And I didn't realize this until Alyssa mentioned this earlier. So when we look at that timeline, this is why this has some urgency for us. Because if we were to get the TIF district created, get all this work done, get it in front of the town for a town meeting in May, there's a little bit of an unfortunate timing hitch that occurs there. Because we'll have to wait all the way until the following March to have DECD do it. Now that's okay because it'll still be before the actual reval kicks into place just a few months later, but we're kind of threading the needle here a little bit. So there's a real advantage to us getting this done now as opposed to waiting a
[18:39] Speaker E (unidentified): year or so. Is it realistic that it can be done by then, by what you want? I don't think we're
[18:44] Alex (Town Manager/staff): going to need to reinvent the wheel here. A lot of communities have done a lot of TIF districts. We can, we can use pretty similar stuff. But yes, it'll be a push just the same. Yeah. Yeah.
[18:56] TIF consultant/presenter: Yeah. Thank you, Alex. That's an important point. And the application can go in at any time as long as it's in before March. So we can, you know, the benefit of doing something, say you have your May town meeting, applications are ready. You can submit in May or June and then it's in place. It's just your effective date and your original assessed value. We're not going to, not going to kick in right away.
[19:15] Speaker C (unidentified): The increased value on the property would be the income to the program and that would continue for up to 30 years?
[19:28] TIF consultant/presenter: That's right. Yes. One of the things that could grow. Yes, it does. And you also have the ability to sort of reserve the discretion for yourselves locally to adjust your capture rate. It's a great problem to have, but some communities do have the problem where they're generating more income than they actually have for their program, to spend for their program. So I think it's important to reserve that flexibility. So as income grows or as value grows in your district and income comes in, if you can increase that or decrease that in any year, really it's important for it to become kind of part of your annual budgeting cycle. So you're looking at what value you have, we captured what revenues coming in associated with that value and what are we planning to spend it on and just continually reassess that. So it's, you know, you go up to 100 or you go down and adjust as you, as you see fit throughout the years and your program that specifies uses for
[20:26] Speaker C (unidentified): That income can that do you have to like if you have several different things do you have to pay them all every year can you do you can as long as they're one of those yes you can pick and choose.
[20:39] TIF consultant/presenter: So what the statute refers to those as project costs or authorized project costs the two considerations are that as long as the statute says these are eligible authorized project costs and as long as you've also included it in your development program then you have the ability to choose from those from those projects in any given year what most applications include are a table or a list of the projects that the municipality has said these are the things sort of pick from the statute this these. Are the things we want or think we will use tiff revenue on we will include an estimated cost what we'll do is come up with the projected increased success value and projected tax revenue from that and then we'll allocate it among the projects but there are as I as I said to Kyle a number of footnotes that make it very clear that those are all projections that nobody has held to but for the purpose of for the public to understand just generally what we're looking at for potential here for the. State to see that it's just an application requirement but what's really critical is are the categories of the costs not so much the amounts and the statutory references that we include to say this is what we are allowed to do with the TIF revenue and then on an annual basis you'll determine which of those you know are the priorities or where how much funding you have available for them.
[22:01] Speaker E (unidentified): What happens, like, 5 years down the road, and you want to do something that's not in this list that you have in that does happen.
[22:11] TIF consultant/presenter: The process is very similar to the original adoption. You just do an amendment and you can add to the list. We have communities who, for instance, haven't reserved the right to change it and they'll do an amendment to reserve to kind of add that flexibility. We also have the legislature over the last few years has added to that list under the statute. So some communities didn't even know that there was an option that didn't exist at the time that they adopted a program. And that could very well happen over 30 years. So you go through the same, you know, we do an amendment to the development program. You'd have a public hearing. We would do the same process to have that amendment approved and submit it to the state. And so that for the rest of the district, you'd have you'd have that, you know, that flexibility.
[22:51] Speaker E (unidentified): And what happens after 30 years? Did you just start over again?
[22:56] TIF consultant/presenter: Well, often, if the district has been successful and there's a lot of new value, probably not. And the reason for that is that unless you're anticipating even more development, there's not much of a benefit in doing that because the base value starts over once the district expires. But there is a lot of planning involved in, you know, figuring out what people refer to as the Tifcliffe. You know if it's a very successful program and you get a lot of new development or a lot of new value and a lot of new revenue that's being sheltered and then suddenly it's not there can be a big impact locally to that so you know they're different ways to plan around how do you either you can you know sort of reduce the capture rate gradually over time to kind of ease the impact of that or you can think about shifting funding or you know different ways to just kind of adjust as you as it comes To the end thank you yeah, absolutely. So in terms of that, sort of on the topic of the, you know, the benefit of having a TIF district and this idea of TIF revenue and sheltering value, I just wanted to go over quickly a couple of the key terms that we talk about a lot. The shelter, and there's not a great term for this. I hear this a lot in the presentations I do is, you know, capture or shelter. I never use the word hide, although I've heard people say that. That is not what we're trying to do here. You know, again, the state has said, we want municipalities to have an option to utilize tax revenue in a very dedicated way. And that's what this is. And but what sheltering means is that when you have that original assessed value that we talked about, and then you have new assessed value on top of it, what's happening is that anytime a municipality has new assessed value, there are three calculations that are significantly impacted by that growth in assessed value. And that's state revenue sharing, state aid to education, and county taxes. And the reason for that is that all three of those are based on a community's assessed valuation. So for state revenue sharing, the more the higher your assessed value is, the less you will receive as a percentage of the total state revenue sharing pie. The same is true for state aid to education. The higher your evaluation is, the less state aid to education you'll receive. And then conversely, for county taxes, the higher your valuation is, the more you will be paying in county taxes. So those three formulas are really what sheltering refers to. The benefit of the shelter is that you keep that assessed value from impacting those three formulas, and you're theoretically not losing. You're avoiding a loss of state revenue sharing, you're avoiding a loss of state aid to education, and you're avoiding an increase to county taxes, and you're keeping 100% of the tax revenue on that new value with the community to use for dedicated purposes that are authorized under the statute. So, you know, that's that is really the benefit of a TIF district in a nutshell, and obviously as they said their parameters as to how you do that and how you might what you might want to do with that. But that's a really key term in terms of what we talk about when we say shelter or capture. It's really the impact of that value on the community's funding as a whole.
[26:07] Alex (Town Manager/staff): Which is where she mentioned that you can't go to 100%, because how fun would it be if we went to 100% and watch all of Hancock County lose their minds? Yes.
[26:15] TIF consultant/presenter: You know, there are certainly considerations of the impact to other communities in the state, and we hear about that a lot. I mean, that's why there are limits under the statute, but very differing opinions in terms of how it might impact state education or revenue sharing. But there, as you saw, it's a very small percentage of what you're allowed to really include in the district. So overall, it's not having that kind of impact on the state. Yes.
[26:37] Speaker C (unidentified): I'm sure most people here are aware that for a very, long time, we've been just about a zero recipient of state education. Well, that factor is not. Yes, that's salient for us.
[26:48] TIF consultant/presenter: So as a minimum receiver to state aid to education, a TIF district does not have the same kind of benefit for a municipality that is not a minimum receiver because you are already receiving as little as possible. It's not going to decrease from that. So for that's absolutely true. That's true that state but state revenue sharing impact and county taxes impact is still a factor. Okay, so original test value we talked about a bit. The only thing I will just reference here is this actually goes back a year further than most people think so if we were to designate town were to designate a district. district this year, right now. What we're looking at for value is March 31st of this most recent year, which is actually April 1st of last year. And so there's a pretty good window of opportunity to capture an original assessed value, but that's why that March date is so critical, because March 31st of this year is actually sort of the designation date, but that relates to the April 1st of the prior year's original assessed value. And then just two other terms, just in terms of the capture that I think are key. Current assessed value refers to the assessed value of property in the district as of April 1st of each year. So we keep looking at this. As I said earlier, you know, the assessor has an important role in making sure that each year we understand, we know what the original assessed value is. That never changes over the course of the district, even if there's a revaluation that stays the way that it is. Current assessed value is April 1st of every year we're looking at what is the assessed value of the property in the district and what's the increment of between that original assessed value and the current assessed value and then the next slide is the increased assessed value that is really the critical amount that we're looking at in terms of the value that's exceeding the original assessed value and the revenue that's coming from that increased assessed value is what we refer to as TIF revenue. There's a slight difference between captured assessed value and increased assessed value that I just want to highlight. In communities where they elect not to capture 100% of the increased assessed value, captured assessed value is the actual amount that you are capturing or sheltering, which could be anything between, it's probably not going to be zero because there's no point of that, but something in 100% of your captured assessed value. And as I said, my recommendation is always to provide some flexibility to adjust that over the term of the TIF district as needed. So just as a function of sort of an annual, you know, assessing practice, on the next slide you'll just see that the current assessed value is what gets determined as of April 1st each year. We subtract the original assessed value of the district, and that results in the increased assessed value. The increased assessed value is then taxed the way that all, I mean, all of this value is taxed the way that all value is in the community but the tax revenue generated on the increased assessed value is what we have available for tiff revenue depending on how much you're capturing and that's what this slide shows here we talked about this a little bit earlier in terms of project cost account but what you can do with the tax revenue on the increased assessed value is really those project costs that we were just talking about there are a couple of different funds that this goes into one is a project cost account which is the most common which is just expenditures the municipality has determined that in terms of the authorized uses of tiff revenue there are also often however tiff revenue is used for funding debt service on bonds that are used for public infrastructure projects so in many cases if there's a new development and a significant public infrastructure project is needed the municipality might borrow for that and utilize tiff revenue to pay the debt service on it every year so we might put it into a sinking fund account for that and some programs also authorize revolving loan funds for certain economic development programs which is just another eligible use of tiff revenue so for instance if you had a downtown program where you had a revolving loan fund for businesses for revitalization efforts or you know storefront efforts that's an option for use of tiff revenue in a development program and then on the next slides i've just outlined in more detail we talked about this a little bit and i'll just highlight some specific uses of tiff revenue the categories of the statute that i talked about that has sort of the laundry list of what tiff revenue can be used for there are three major kind of buckets as we think about them of tiff revenue uses one is within the tiff district the other is outside of the tiff district and then there's kind of another catch-all category that is referred to as tier three that has some very specific uses and i'm going to just go through those but one point i want to make before we go to that is that and i have a slide on this at the end some of you may have heard of a term called credit enhancement agreement or cea which gets referenced in connection with tiff districts fairly regularly that is just a category of a use of tiff revenue it often is used with tiff districts but it is not an automatic and it is not you know a tax break which i hear frequently. What it does, and we'll talk about just sort of the function of it, is it is a separate agreement that might get negotiated with a developer of property or somebody who is investing in property to provide a reimbursement of a portion of property taxes paid so that they can reinvest that in the project or fund infrastructure necessary for the project. I call that out specifically because you won't see that term in the statute. It's not used anywhere in Maine law. It's really a banking document, and it's been utilized historically for financing purposes for projects, but it's security for somebody who is developing property and who is utilizing a reimbursement of tax revenue to help fund the property or the improvements in the property. But it is, again, just another use of TIF revenue. It's not required. It's totally at the option of the municipality. So examples of uses of TIF revenue within the district include, and there's a much longer list than this, but I've just sort of pulled out some of the more common ones that I see, things like acquisition of land or just the construction by the municipality of improvements and, you know, infrastructure including things like public ways, buildings or equipment, transit oriented development is a, is its own category, professional service costs, organizational costs, site preparation for municipalities who are trying to have sort of, you know, shovel ready sites, that's something that they use TIF revenue for. And affordable housing is, let's say relatively recent, but it's probably been about five years now of an eligible use of TIF revenue within a TIF district. It used to be that affordable housing TIF districts were their own type of TIF district, and they still are. Those are approved through Maine State Housing, but the type of commercial DECD-approved TIF districts that we're talking about here now also include, as an eligible use of TIF revenue, costs associated with affordable housing. The unique consideration for the category of use of TIF revenue within a TIF district related to affordable housing is that it also includes not just the construction, but the operation of affordable housing. And it references the affordable housing TIF statute, provides some flexibility for organizations that you know maybe a nonprofit who operates or runs and constructs affordable housing versus just a credit enhancement agreement. It provides some more flexibility for the use of the TIF revenue related to affordable housing. But again, it has to be within the TIF district. So that's an important one. And then secondly, examples outside the district. This gets a little bit broader, but the key here is that because the property is not in the TIF district, the use of TIF revenue needs to be directly related to or made necessary by development in the district. So we tend to see things like construction of infrastructure that's connecting. So sometimes that's road improvements or sewer and water infrastructure, public safety improvements that has become much more common for just, you know, general increase in development throughout a municipality that occurs in a TIF district, whether it's equipment, personnel, things that are needed to service the extra development. And then again, affordable housing is a newer category in this use of eligible use of TIF districts, TIF revenue as well. This one, though, is qualified by the language that it has to be in support of economic development. So this is a little bit different. Affordable housing is defined the same under both of these categories, which is housing that is affordable to those with an AMI that meets 120 percent of the median area income. But it has some qualifications, whether it's in the district, or whether it's outside of the district and outside of the district, the purpose of affordable housing is to support economic development activities within the community. And then, lastly, the sort of the other catch all category is really where we've seen the legislature expand eligible uses of TIFF revenue over the last couple of years. years. Economic development is the big category, as you can imagine, and a lot of communities fund economic development programs or directors or staff or others. But things like skills training, child care facilities, recreational trails that might promote economic development, transit service, broadband. They don't have to be in the district and they can be outside the district. So those are some broader categories that we see a lot of municipalities use, some for very specific purposes, and then some of the newer ones are municipal public safety facilities and other facilities owned by the municipality that provide municipal services related to economic development. And again, affordable housing that serves economic development or assist those experiencing homelessness so that's not they know those three slides are not the exhaustive list on the statute but that's a pretty good snapshot of what's there but that's really what you have to choose from when designing your development program to say this as a community these are the things we would like to utilize TIF revenue for and then you have from that menu the options each year as you as you decide and then I do want to just point out I think it's always helpful TIF revenue is specifically not authorized under the statute to be used for facilities or buildings used predominantly for the conduct of government or recreation they've sort of been chipping away at that with some of what you saw what you just saw in terms of like public safety facilities or things that are more related to economic development those are newer and there are still some limits on those but that has been the big prohibition for a number of years to not fund a town a new town hall with tiff revenue or you know at swimming pool or some of those some of those types of municipal activities a courthouse and any of those types of sort of government facilities because again the original purpose and intent was to try to promote development or commercial opportunities and employment opportunities. So they're trying to stay true to that but I have seen the statute really expand over the years and I think that there will continue to be some of those changes, as we, as we keep going. Okay, and then I think the last slide that I have is specific to credit enhancement agreements I just wanted to reiterate that, you know, these are, these have to be authorized in a development program so just like the use of TIF revenue. The community has to say this is something we want to do with our TIF revenue. You can do that without knowing who you might want to offer that to as a property owner. And that gets referred to as an omnibus program, which is just generally reserving the authority to enter into credit enhancement agreements with people or property owners in the district at the town's discretion. Usually we require, you know, some additional process like a public hearing for that. But that's not required. That's totally at the town's option as to whether you even want to reserve that right, or you can authorize just one specific agreement with a particular developer if there's a project that you're trying to sort of, you know, incentivize or are particularly interested in. But again, it's a separate document. It's an agreement between a property owner and the municipality. That property is still assessed the same manner as all other property in the district at full value. The property owner is required to pay taxes on that assessed value. And what the credit enhancement agreement does is provide a reimbursement of a portion of that payment for usually a dedicated purpose related to the project. if that is not subject to approval by dcd so that doesn't go a copy of that goes with the application but they're not reviewing that against the statute for requirements they consider that a separate agreement between the municipality and the developer as long as it's authorized in the development program that's an eligible use of tiff revenue so that is the high level overview i know i've sort of sped through that but i'm happy to answer other questions or talk anymore about any one of those things. So
[39:32] Alex (Town Manager/staff): On accredited enhancement agreements, it's does the town have to decide it might want to get into those at the time it creates a TIP district initially, or could it decide later on down the road on a project by project basis or
[39:47] TIF consultant/presenter: It's a little bit of both. It could be either. My recommendation usually is if there is any appetite to do that in the future to include it in the development program now and just reserve the authority, so the omnibus idea, and that way you just have a local process. You might have a you select board have a public hearing for a specific agreement and specific terms, but it doesn't have to go through the town meeting and the state approval every time that you're doing that. So we would just spell that out in the development program and say that the town anticipates that it might want to do that, and then this is the process to do so. Yes, let me see if I understand.
[40:20] Speaker C (unidentified): This, tell me where I'm wrong. So you set up a district, you set the value at the outset. The value increases, that increases that value, which gets taxed at the same rate, doesn't actually go into the town's general revenue. So the town loses that general revenue to use as it pleases. The benefit, and it's the only one I've heard so far, is that additional value will not ding your county tax assessment or cause revenue sharing harm to our community. Other than that, it sounds like a big, complicated earmark program that is designating a section of the town's revenue that the town can't use except in specific ways. What am I missing?
[41:21] Alex (Town Manager/staff): Yeah, I'll have a few thoughts on that. There is one key piece that I think really adds on to that, which is, and it sort of ties back to Sam's comment. To me the piece when it comes to credit enhancement agreements and the piece where I really think we want to be focused is housing and affordable housing, that if somebody's coming to us with something that really hits the mark and does anything it possibly could to improve that stock in this town, then that's a group the town could work with, and these districts do give us more flexibility to work with those groups to try to make those things happen. In terms of the earmark and the revenues, I'll speak to that specific to how I would personally envision it at the town of Mount Desert. I've seen TIF districts all around the state a lot of time. And for a lot of places when they are talking TIF districts, they are sort of looking at that revenue like, oh, we can get projects done with that revenue. And I don't see that one of us. I see that money that gets pushed off towards the revenue on there. A, it would simply go towards many of the existing infrastructure projects were already funding that would still be eligible uses. You know we've got C Street and Summit Road coming right up. Those C Street and Summit Road, which would also involve water and sewer lines, and would also be serving what I think, or would actually even pass through some of the district. You could use TIF revenue for that we'd use otherwise. So I don't, I would not see that within this town as some magical extra revenue stream because you are absolutely correct and it's a really key piece that I wanted to mention. There's no bonus money here. This is just taking a portion of our money and putting it into a slightly different budget, but there's no, there's no extra to it, which is why you want to be really careful with those. But to me those that tends to work and be more flexible even if it just gets us a few, you know, at one at a time, if we can get just a couple there and a couple of key areas, I don't know, to me that's a big deal. So that's just my response to that.
[43:28] TIF consultant/presenter: Just to add to that, the additional benefit, and it will be smaller in a community that's minimum receiver for school district, however the additional benefit is to retain more of that revenue. Although it's more dedicated or more the uses are more limited, you do have the ability to access more of it for those purposes. So if it were not sheltered and it were to go to the general fund, some of that is going to be impacted in a, you know, the general rule of thumb that I hear a lot is it's about 50. Cents on the dollar, that varies by community, you know, some for a community that's not a minimum receiver for school aid it does tend to be about, you know, 40 to 60 percent in terms of every tax dollar that's generated on new value. The impact of those three formulas can be anything from 40 to 60 percent to the community in terms of the net revenue that a community actually gets to keep in the general fund to spend. So you know if it here if it were say more of a 30 to 70 swing because of the of. The school aid and we'll certainly do those calculations if you were to move forward, that's part of the application process, but the benefit is having a hundred percent of that tax revenue on that portion of value for those dedicated purposes. Obviously that's a, it's a policy and a legislative decision in terms of whether the town feels that is a benefit, but that is a primary consideration for a lot of municipalities in considering these districts. Yes, I have a million questions, but luckily I.
[45:04] Select Board member (presiding): Forget most of them, but I'd like to go back to the beginning because I'm so the district is simply an overlay over some piece or pieces of the town and it changes nothing within in within the overlay, nothing changes. So if I'm a homeowner in a district that's in it part of the.
[45:29] TIF consultant/presenter: District, I don't have anything to fear. That's correct. It does not, it does not impact the assessed value, it does not impact the zoning or the ability to use the land. The only thing that district is doing on that property is allowing the municipality to capture a certain portion of that value and to utilize the revenue from that value for a specific purpose. And is the
[45:50] Select Board member (presiding): assumption that the increased value is a hundred percent due to what is happening in the district? In other words, do you tie it back to the activities that are going on in the district, or is it just this is increased from X to Y, therefore Y minus X is all it can be either
[46:12] TIF consultant/presenter: Yeah, really. So if a, you know, if a property is in a district, and it's just appreciating with the market, and no new investment or development has occurred, that new value is going to be as the ability to be captured in the district. The same is true for a property that's in a district where, you know, we've leveled the building and built a new one and there's $2 million worth of new investment. In both of those scenarios, any new value that's over that base that we've established will be captured or eligible to be captured in the district. So theoretically you could create
[46:46] Select Board member (presiding): a district and do nothing and take the slope, yeah.
[46:52] Public commenter: I know it seems incredibly unlikely, but
[46:55] Select Board member (presiding): what if the assessed value went down? What if there was catastrophic fire, yeah, and nobody rebuilt that first year, or suddenly your assessed value is less than it was at the base level? What
[47:05] TIF consultant/presenter: happens there? It's just everything is zero. This is zero. There's no, there's no increment to capture. So again, you continue to assess value, you know, based on the actual property value of that year, and if it is not as high as the original assessed value, then there's just no capture in that year. But does it get reset at the lower rate? It's not, no, so you would just wait for it to catch up over time.
[47:30] Speaker E (unidentified): the you were talking about the general fund or capture you have a choice i mean can still if you want it can go into the general fund right that's right so with the flexibility
[47:43] TIF consultant/presenter: That we were talking about earlier in terms of the percentage of capture in any given year. If you reserve that flexibility, you might say we're only going to capture 50 of new value in this year, and which means that 50 of the of the revenue on the increased success value continues to go to the general fund. And again the rev the tax revenue on everything up to that base value always goes to the general fund. So you really get to determine each year, provided we draft the development program that way, how much of that new assessed value and tax revenue on that new assessed value you actually want to capture. And if there's a year for some reason that you would rather that it go to the general fund, you have the ability to decide to do that. So the original
[48:26] Speaker E (unidentified): value goes to the general fund anyway. Yes, so if it's if the value is a hundred dollars, then it go to two hundred dollars. Yeah, you're only talking about that hundred dollars.
[48:35] Select Board member (presiding): Yes, if you created a district that was aimed at commercial development, you could take the increased values and apply it to affordable housing that's fixed somewhere else in the town.
[48:52] TIF consultant/presenter: Yes, so the options for if you're generating value in a district and you're using the revenue from that new value in that district, you can apply it to affordable housing either in the district with the flexibility to use it for operation and some expanded costs, or outside of the district. It's a little bit more limited, which has to be connected to some kind of economic development tool. So if it's you know Workforce housing or it's housing that supports you know people who are needed for jobs in a particular area, that's an op that's an option. Yes, I would
[49:24] Speaker C (unidentified): think that if you're going to designate a particular part of town a district, there would be a common assumption that you have made a judgment that district needs some work, needs some help. And if you lived in that district, you might want to know because this doesn't change anything, but it would seem to me that at the time you want to be thinking about what sort of zoning changes that you want to make and what sort of economic development priorities would you have that might be different than what your house is in that community so it would require quite a bit of in-depth work and understanding about why a particular area is a district and what would you like to see there and that 's outside of that but it seems to me that's going to be a necessary should be a necessary companion again unless i'm not getting it i mean i think that's
[50:19] Alex (Town Manager/staff): Absolutely correct. It's if for no other reason then I'm fairly confident that the kind of things that we'll be pushing for are exactly the kind of things that the people in those district would expect of that area. I don't think business owners on Main Street Northeast Harbor would be wildly upset if we wanted to promote more business, right, like that wouldn't, no, but in terms of you know the housing needs, I think that's a key piece there that you know sort of coming back to some of our other higher density discussions we've had yeah when we designate those areas where we really want to put the housing we need to make sure everyone's on board with the fact that 's going to need more housing and more people and that's part of the community involvement piece of it but as we dig into it i think there's a few sort of key spots that we can think about for districts that i think would be pretty straightforward forward in terms of where we're thinking about them that you never know but i Don't think. Yeah, and then again there's lots and lots of people who end up with a place in a tiff district and never knew during the duration of the district if their house or business was actually part of the test district because nothing looks any different, you know, the a lot of sometimes
[51:35] TIF consultant/presenter: Sometimes the districts are reactive because, you know, suddenly there's a development proposal and a municipality sort of scrambling to capture that value because there are some uses that have been identified. Other times they're much more proactive, and that's how I sort of view this conversation, which is more in line with what you're suggesting is, you know, what are the areas that we'd like to see developed, you know, in certain ways, and how do we want them to be developed, and what else do we maybe need to do in order to enable that? This is just one of those, one of the tools, I would say, to enable that. But certainly, you know, land use regulations are a big part of that. Although the TIFF district doesn't change those, that doesn't mean that you can't, as a community, have that conversation in connection with it. Certainly, and that's, that absolutely happens. David, oh yes, David, you had a question. Yeah, thank you.
[52:25] Public commenter: I appreciate the presentation. It's very helpful. I think a lot of people talk about TIFFs, but they don't really know what they are, or they hear about them, so this is really good. I agree with Gail that the process of creating, defining a TIFF would have to be thoughtful in terms of land uses. I also agree that some landowners may not consider it, nothing like not affecting anything about their property, so there's, there's, you have to be thoughtful about that. But I think it's imp, I think it's what I like about it is it sends a signal that the town is interested and committed to trying to get creative and working on some of these issues like housing. And a lot of, you know, municipalities can only designate these things, other people can't, so this is something we can do as a municipality to help identify some new revenue to support housing and infrastructure for housing. So I, even though it may result in nothing right off the bat, it sends a signal, I believe, that we're serious about this. And we want to do what we can do to help. The one question I have for you is, what if you capture some value and you don't have a project to spend it on? Is, does it term out? Can you carry it forward for a few years? What are the rules around timing of the uses of the captured revenue? Yes, it
[53:51] TIF consultant/presenter: it continues. You would carry it forward in each year in a designated project cost account, or if, you know, I'm not suggesting you are, but if you were to have a, you know, a debt service fund, it would con, it would carry forward in a similar way to be appropriated in a future year when you have a use for it. The limitations under the statute are that it has to be utilized within two years of the termination of the district, and then up to three years if you actually have debt that you've issued. So There's a, there's a window after the district expires. If you've maxed that out at 30 years, then that would be your term, but you could do something shorter. Other than that, during the life of the district, you have the ability to carry it forward. You know, you just need to account for that in your fund, and then each budget year that would be available to be appropriated from sort of like a reserve account. And in a sense, that's great, thank
[54:39] Speaker E (unidentified): you. What if it wasn't used? Do you lose it, or does it just go into the general fund at the
[54:46] TIF consultant/presenter: end of the district, at the end of the 30 years? I will tell you, we don't ever want to have the scenario where it's not used, and the reason is, which is why I always encourage the flexibility to sort of ratchet back the capture rate, because what happens is if you have captured more than you can spend, this, the state main revenue services wants us to do a recalculation of what if the value had not been sheltered for those three calculations, yeah. And we don't want to have to do that. All right, so we try very hard to make sure as it's coming towards an end that we've, we've planned ahead, and which is that's why I say an annual review is always a really good practice. For communities that don't have town meeting, I get a little nervous, and I'm always encouraging, you know, councils to see, look at this even if you don't have to look at it, because you don't want to just let it build and then suddenly be in that position. And in terms
[55:37] Alex (Town Manager/staff): of spending it, I guess this is sort of my past history on this a little bit. Two things that tend to play rather nicely with each other are TIF revenues, which are sort of a long, slow amount of money coming in, and death service payments from infrastructure improvements. And this is why I keep coming back to one that's right in our engineering phase right now, which is Summit Road and C Street. Those would most likely be located within one of the first TIF districts we would create. It would be an infrastructure improvement directly related to that. And so all or some portion of simply the debt service on that work that we would have done otherwise and paid for otherwise could be used for that. You find uses fast. You find ways, and you can find ways where you're really using TIF revenues for something that you'd have generated the money for otherwise anyways. But you can get there pretty fast because the language on what you can do, it's open enough that you can always find ways, especially for a town like ours where we spend on our infrastructure. We don't ignore our infrastructure, and therefore there's money to be put in towards that. The other piece I wanted to mention sort of was going back to Gail and Jamie a little bit. About six, nine months ago, we let the Economic Development Committee go on hiatus because one of their primary complaints was they didn't have anything meaty to sink their teeth into. We got something meaty now, and I think that would be the perfect group to really be talking through setting up these parameters that Alyssa's talking through. And I have a third thing, but I've forgotten it. Do you, when you're setting this
[57:20] Speaker C (unidentified): up in the beginning, do you have to say we're going to go for 30 years, or you can just do it as you
[57:26] TIF consultant/presenter: decide as you go? So you'll have to determine a term when you make the application. If you choose not to do the 30 years initially, you can always extend it through an amendment process. You can also do 30 years and then reserve the right to terminate it sooner, so
[57:40] Speaker C (unidentified): whether you build, it's again building in the flex. Yeah, thank you. Is there anything that could happen
[57:48] Speaker E (unidentified): that could get a town in hot water because they missed something? Yeah, that's a long list. Real
[57:58] TIF consultant/presenter: list yeah just district specific using the revenue for things that are not authorized is a big one and you know the other because you asked about it earlier is you know sort of building up this fund without a plan to utilize it that becomes really problematic especially as you're facing the end of a district for the most part you know it 's hard it's hard to manipulate it you know the value is the value the tax rates the tax rate you know what the tiff revenue is you know how much you're capturing, and you know what your list of projects are. So you know, following those guardrails, it's, it's hard to go wrong unless, you know, unless again you're just ignoring them, and that's, that's where it becomes problematic. But it's happened, that's happened, I think
[58:48] Alex (Town Manager/staff): we're at the six o'clock mark so we nailed that perfectly so this has been fascinating thank Very good presentation. Thank you for coming.