Municipal officials from a dozen central Maine communities are digging into a $70 million proposal for a natural gas pipeline, attempting to answer a big question.

Is the pipeline ultimately a good financial investment for each community?

It’s not a straightforward question to answer, they say. While officials acknowledge that the newfound availability of natural gas could be a boon for businesses and residents, they are less certain about the consequences of approving tax breaks requested by the developer, Kennebec Valley Gas Company.

“This is the big piece we’ll be looking at,” said Michelle Flewelling, the town manager of Norridgewock. “We need to be very cautious of that, going into this.”

Called a tax increment financing district, or TIF, the designation would “shelter” the value of the pipeline in each community, funneling its property tax revenue back to the company and the town. Each of the 12 communities would need to individually decide whether to approve a TIF for the pipeline project, either at special town meetings or by votes of their town or city councils.

Mark Isaacson, a founder of Portland-based Kennebec Valley Gas Company along with Richard Silkman, said last week that the project continues to move forward as they talk with local officials and sign up commercial customers.

Isaacson declined to say who those customers are, or how many have expressed interest in the 56-mile natural gas pipeline from Richmond to Madison.

In addition to seeking tax incentives from the 12 communities, the developer also needs approvals from the Public Utilities Commission, Department of Environmental Protection and Department of Transportation.

“It’s not a project that gets done overnight,” Isaacson said.

The gas company presented its proposal to local officials at a meeting last month hosted by the Kennebec Valley Council of Governments, which is facilitating TIF negotiations between the gas company and the communities.

Ken Young, executive director of the council, said they will attempt to help communities understand the impact of authorizing a TIF for the project, balancing economic investment and “how that affects the bottom line” of each area’s finances.

Young said he’s also searching for a consultant to help analyze the pipeline proposal.

There is a range of opinion among community representatives on whether a TIF is a good idea or not, Young said. “The developer says they have a short list of large clients they need to sign up and if they’re not able to, there won’t be a project. They also say a TIF is necessary to their financial structure,” he said.

Young thinks most of the municipal officials see the potential availability of natural gas as a helpful tool for economic development.

Several of the communities, however, have never created a TIF before.

Oakland Town Manager Peter Nielsen said it’s wise to consider the proposal as a way of widening their energy options. He said Oakland town councilors aren’t prepared to commit to a TIF yet.

“Our council felt it was worth pursuing, but it has to improve the outcome for the town,” Nielsen said. “We want to understand the proposal and make sure it’s fair to all. We understand the company wants to make some money and customers want to save money. There are a variety of interacting interests.”

Jonathan Whitcomb, a selectman from Sidney, said he’s interested to find out more about the financial impact of the pipeline. Whitcomb said Sidney has never authorized a TIF before.

“It’s a great possibility, depending on where it’s going and what it can do,” he said.

Fairfield Town Manager Joshua Reny thinks the arrangements with the communities will be tricky.

“A TIF is a municipal tax incentive program, so it’s interesting they’re proposing a project spanning 12 municipalities and each will have to individually approve or disapprove any type of tax incentive,” Reny said. “It’s a really complex project.”

Reny said he’d like to know more about the project’s proposed timeline, because the TIF proposal will need to be voted on at a town meeting in Fairfield, perhaps in the late summer or early fall.

“Should we be going down the road of creating these districts when there still isn’t a definitive answer if the project is moving forward?” Reny asked. “It seems the financing component is hinging on whether they’re getting this tax incentive. So, the question remains: Do they actually need the tax incentive, or would it just make the financing easier?

“So, there’s a little apprehension by the municipalities — how far should we go so early in creating these districts?”

Flewelling, the Norridgewock manager, also wonders about the pipeline’s proposed route within the town’s right of way and how it relates to existing utility lines.

“All 12 communities are impacted differently,” Flewelling said. “There’s a question of whether local residents would be able to tap in, and everybody has different lengths of pipe that carry different levels of value. When you look at it from a tax perspective, how does the pipe depreciate for tax value purposes? What is it worth when it’s in the ground?”

Flewelling estimates the pipeline would be worth more than $150,000 a year in a tax revenue to the town of Norridgewock.

Another challenge could be public participation. Norridgewock would need to schedule to a special town meeting to approve a TIF, Flewelling said, and their local rules require that at least 60 people attend the meeting to validate any decision.

“We all have a hard time getting people at town meetings,” she said.

Kennebec Valley Gas Company is looking for the council to agree by the end of June on a uniform TIF proposal that’s ready for a vote in each community, Young said.

By then, “I do think it’s possible to know whether or not the participants will be able to negotiate an agreement,” Young said. “The basic point is, the developers would like to know by the end of June if it’s possible to have a TIF with all 12 towns and the general shape of that agreement.”

If the needed approvals are in place, the project could begin in 2012 or 2013.

“I’m optimistic,” Isaacson said. “And the basic underlining drive for this project remains in place and is getting stronger with the price of oil.”

He estimates that the natural gas could translate into 25 to 40 percent in utility savings for customers currently relying on heating oil.

When the TIF agreements do eventually face votes in each community, Reny thinks it’s up to the developer to explain to citizens and municipal officials why they should participate.

“The onus is on the company to sell this project to the people,” Reny said.

Scott Monroe — 861-9239

[email protected]

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