HALLOWELL — The city is on its way to approving a tax break for the construction of a $85 million natural gas pipeline in central Maine.

City councilors voted 4-3 Monday night in favor of the tax increment financing proposal, marking the first of three required votes.

Even as councilors narrowly approved the tax break, an official with the company proposing the pipeline told them that his firm will not build a distribution line down U.S. Route 201 in Farmingdale and is looking for a way to build its mainline around Farmingdale. Voters in that town rejected the proposed tax break at a special meeting Saturday.

“We can’t afford it without a TIF,” Kennebec Valley Gas partner Richard Silkman told the City Council. “We have taken it off our maps.”

That change in plans could make it difficult to get gas to a large potential customer, Hall-Dale High School, which is in Farmingdale next to the Hallowell city line and serves both communities.

“From our perspective, if we can get a pipe there and it pays us to do it, then we will do it,” Silkman said. “But if the pipe will be subject to property taxes in Farmingdale, we have to look carefully at it.”

Hallowell councilors Ed Cervone, Phillip Lindley, Pete Schumacher and Mark Walker voted yes on the tax break, while councilors Lisa Harvey-McPherson, Steve Vellani and Gail Wippelhauser voted no.

The company plans a high-pressure mainline through the western part of the city and a distribution line along Water Street that would allow downtown property owners to convert to natural gas heat.

Harvey-McPherson, who represents Ward 5 in western Hallowell, said her constituents would not be able to hook into the high-pressure line but would have to deal with construction, and their taxes would be affected by the TIF deal.

“No benefit accrues equitably to all the citizens of Hallowell,” she said.

Councilors who voted for the TIF said it would provide tax benefits for the city, and the pipeline would enhance economic development in central Maine because natural gas is cheaper than heating oil. Plans call for the pipeline to run from Richmond to Madison.

“I think this is a win-win for Hallowell and the region,” Walker said. “If you take a macroeconomic view, you could save $15 (million) to $20 million a year to the region. It would go back into the economy from residents who are not paying the higher costs.”

Walker said feedback he received from business owners and residents in Ward 2 was 10-to-one in favor of the pipeline.

City residents and oil company representatives who spoke in opposition to the TIF deal said they don’t oppose natural gas, but they think municipalities shouldn’t be subsidizing the pipeline with tax breaks.

Kennebec Valley Gas Co. officials say the project is not financially feasible without TIFs from all the communities along the route.

“I can’t believe that they won’t build it,” Second Street resident Joan Sturmthal said. “They can go to a bank — they can go anywhere businesses normally go to get money to build their projects.”

The company plans to build $4.8 million of pipeline in Hallowell.

Under the TIF deal, the city would reimburse the company 80 percent of its property tax payments for 10 years and 60 percent for five years, totaling about $800,000.

The TIF would exclude the pipeline’s value from Hallowell’s valuation for 30 years, reducing the amount of money the city owes for education funding, county taxes and state revenue-sharing. It is projected to save the city $1.3 million during 30 years.

Many Farmingdale residents, however, didn’t like the deal.

Farmingdale resident Bill Crowley said a distribution line would have had limited utility for his town — converting from oil to gas can be costly — but he views its elimination from the company’s plans as a punishment for Saturday’s vote.

“They are doing this to try to set an example for other towns, saying, ‘If you don’t approve this, we’re not going to do anything for you; we’re going to cut you out of this deal,'” Crowley said. “It’s a bully tactic.”

Hallowell’s distribution line would extend south from Augusta, which has approved its own TIF, so the city would not be affected by Farmingdale’s refusal, Silkman said.

Initially, properties within about 100 feet of a distribution line would be able to connect, Silkman said. If there’s enough interest, the company could build lines up Winthrop Street and into adjacent neighborhoods.

Kennebec Valley Gas will charge $2.30 to $2.40 for the equivalent of one gallon of heating oil, Silkman said.

Susan McMillan — 621-5645

smcmillan@mainetoday.com