WATERVILLE — A Tuesday vote by the City Council brings Kennebec Valley Gas Company one step closer to constructing a natural gas pipeline in central Maine.

Councilors in a 4-2 vote approved the first reading of an order to form a tax increment funding district, or TIF district, that will help fund the proposed gas pipeline.

Council Chairman Charles Stubbert Jr. and Councilor Erik Thomas voted against the order. Councilor Eliza Mathias was absent.

The TIF must be voted on three times for approval. The second vote will be held at the next council meeting.

Before the vote, the council hosted a public hearing on the issue. Nearly 30 business and community members attended. Four people spoke in support of the TIF, including Richard Silkman, a partner at Kennebec Valley Gas Company. One person spoke against the TIF — John Peters, president of Down East Energy, a regional supplier of heating oil.

The public hearing began with an overview of the pipeline project.

Silkman said the proposed pipeline will run through 12 Central Maine communities from Richmond to Madison. The project will cost about $85 million dollars, and would be completed by the end of 2013.

The pipeline would deliver 3 billion cubic feet of natural gas a year, the equivalent of 20 million gallons of heating oil, to industries, schools, hospitals and homes adjacent to the line. Silkman contends the project will save the region $25 million a year in energy costs.

In Waterville, 12.5 miles of pipeline would travel past Inland Hospital, Kennedy Memorial Drive, onto Silver Street, down Spring Street and up Main Street. It would connect to College Avenue and head to Fairfield. Other segments are proposed to extend to Waterville Senior High School, the Thayer Unit of MaineGeneral Medical Center, Thomas College and Colby College.

Most of the pipeline would be installed in narrow trenches dug under road surfaces. Thomas asked who would be responsible for repairing roads after installation.

Silkman said his company would.

“Our commitment is to return the road to the same condition it was in prior to digging,” he said.

During public comment, Huhtamaki Plant Manager Ray McMullen spoke in favor of the TIF. He said the annual cost savings form natural gas will help retain jobs and spur growth. Huhtamaki has signed a letter of intent to buy fuel from Kennebec Valley Gas if the pipeline comes to fruition.

“It’s a no-brainer for us,” he said.

Peters said natural gas has a rightful place in the energy market, but a TIF gives his competition an unfair advantage.

“We respectfully request these folks not be given special treatment,” he said.

Councilor George Meyers Jr. asked Silkman if a TIF was truly crucial to the project’s financing.

“We don’t believe we’ll be able to get financing without a TIF,” Silkman replied.

Peters asked if Silkman could provide pro forma documentation to that effect.

Silkman said documentation exists and has been shared with Augusta City Council, with the agreement that the details would be kept private. He said he would share the information with the Waterville councilors if asked and agreed to keep the details private.

Under the TIF agreement, 80 percent of pipeline’s property taxes during the first 10 years would return to the developer and 20 percent to the towns. In years 11 through 15, 60 percent would return to the developer and 40 percent to the towns.

In Waterville, the project requires a $4 million investment. The total diverted tax payments to the developer would be $1.06 million over 15 years. During the same period, tax payments to the town would be $386,400.

So far, Augusta is the only municipality to approve a TIF district for the project.

Fairfield, Farmingdale, Gardiner, Hallowell and Oakland will decide the matter later this month. Norridgewock, Richmond, Sidney and Skowhegan will decide next year.

One town, Madison, does not plan to approve the TIF district.

The TIF districts will allow municipalities to redirect a percentage of new property taxes generated by the pipeline back to the developer to help finance the project. The districts also act as tax shelters, so increased property values in a specified area don’t result in increased tax commitments. Communities can use the percentage of new property taxes they keep for economic development.

Ben McCanna — 861-9239

[email protected]