MADISON — After nearly three hours of discussion, residents approved part of a plan set forth by the Board of Selectmen to mitigate the effect of a drop in valuation at Madison Paper Industries and a projected 30 percent tax increase.

About 250 people gathered on Tuesday night in the auditorium of Madison Junior High School for a special town meeting that resulted in the establishment of a $2.5 million line of credit, a loan that will allow selectmen and the town manager to spend, borrow and pay back money as needed to fund the town budget.

Residents also voted to approve the use of $800,000 from the town’s savings account but decided against using $500,000 from an economic development account to put towards lowering the tax rate, which was projected to increase roughly 30 percent because of the change in value at the mill.

“The intent is to spend down the checkbook and then borrow, only if we need to borrow, money to get us through the year,” Town Manager Dana Berry said.

On Aug.11 the Board of Selectmen learned that the value of Madison Paper Industries, the town’s largest property tax payer, dropped from $229.7 million in 2013 to $80 million. The change would produce a roughly 30 percent increase in the tax rate, but with the action taken Tuesday night, the tax rate is expected to increase by no more than $2.50 per $1,000 of assessed value. The tax rate in 2013-2014 was $17.53. A tax rate for 2014-2015 is expected to be finalized Monday at a meeting of the board of assessors.

Resident debated the fairness of the assessment and how the tax rate should be addressed.

“What made such a drastic drop? Why all of a sudden are we falling off a cliff?” asked another resident, Rick West, who called for the re-assessment of residential properties.

“We have property and equipment and buildings that need to be evaluated,” resident Cathy Thompson said. “I recognize that UPM is an important part of our local economy, and that we maybe could expect a drop in the value, but I can’t swallow a 60 percent drop.”

Bill VanTuinen, assistant to the board of assessors, stated that the reason for the large drop in the mill assessment was related to the state of the paper industry.

“The fact of the matter is that the paper industry is in decline,” VanTuinen said. “And year after year the demand for paper is expected to go down. The board of assessors looked at the income of the mill in the last several years and observed a substantial decline and a difficulty in doing anything that would reverse that trend. It’s a very realistic value given the state of the paper industry and the state of Madison Paper Industries.”

Around 10 p.m. and after nearly three hours of discussion, residents approved the first two items on the warrant but rejected using economic development, or TIF funds, to lower the tax rate.

There is a penalty associated with using the economic development funds for other purposes, and the town would have lost about $100,000 that it otherwise could collect from the state by moving the $500,000 in TIF, or tax-increment financing, funds to the general fund in 2015.

Rachel Ohm — 612-2368

rohm@centralmaine.com

Twitter: @rachel_ohm