SKOWHEGAN — A proposed tax increment financing district for the Kennebec Valley Gas Co. pipeline in Skowhegan will be 4 feet wide and more than 8 miles long and would hold an estimated assessed value for taxation of $4.67 million.

However, the pipeline would not serve residential neighborhoods right away and would not be built north of Waterville without a commitment from the Sappi Fine Paper Co. mill on U.S. Route 201, Richard Silkman, a principal of KV Gas, said Tuesday night.

“If Sappi doesn’t want gas, we don’t go north,” Silkman said during a public hearing in advance of a Feb. 14 special town meeting when the TIF proposal will be decided. “But they’re very, very excited at the opportunity to get that gas.”

Silkman said despite recent upgrades at the mill and a measure of self-sufficiency, the mill still burns oil and would save money by converting to the use of natural gas.

KV Gas hopes to build an $86 million natural gas pipeline from Richmond to Madison by 2014. To do that, construction would need to be completed in 2013 because some equipment parts take up to a year to make and would have to be ordered this year.

Silkman said TIF deals in the communities where the pipeline is proposed are a big part of the company’s financing plan, and without them it could not build a pipeline.

The company could begin purchasing or construction until it receives final approval from the Maine Public Utilities Commission, and it wouldn’t receive that approval until it can present a financing plan, which has to include the proposed TIFs.

“The TIF district basically is 4 feet wide right over the pipeline, plus about one-half-acre pressure reducing station near Varney Road,” Skowhegan Economic and Community Development Director Jeff Hewett said Tuesday.

The total amount of taxation on the property would be about $72,380 per year.

If voters approve the TIF, 80 percent of new property taxes would return to the developer during the first 10 years of the 15-year agreement, with 20 percent to the town for economic development.

For the final five years of the agreement, 60 percent would return to the developer and 40 percent to the town. After that, the town would keep 100 percent of the tax revenue, throughout the useful life of the pipeline.

Hewett and Town Manager John Doucette Jr. said 80 percent of the taxes would amount to $57,900, which the company would use to offset the cost to build the pipeline. The 20 percent that goes back to the town would be about $14,477 annually, and that would be used to finance the town revolving loan fund and public safety programs.

None of the TIF money would go back into the town’s general fund.

In addition, $42,765 of the cost of the project would be sheltered keep the town’s state valuation lower. With that tax shelter, Skowhegan would pay less to School Administrative District 54 and Somerset County, and would receive more state funding through municipal revenue sharing, according to Doucette.

“The schools, for example, would still be paid the same, but Skowhegan’s share would be lower,” Doucette said.

Hewett said part of the existing downtown TIF district, which has been in place for about six years, will have to be shifted into the new KV Gas TIF district.

“You can’t have two TIFs in the same location,” he said. “We’re going to pull that 4-foot strip for the pipeline out of the downtown TIF and install it into the KV Gas TIF.”

Hewett said the move is technically a paper shift and would not affect downtown businesses. He said the KV Gas TIF wouldl not affect the existing Sappi Fine Paper Co. TIF, but a gas pipeline to the paper mill would lower costs and make the company’s paper products more valuable on the global market.

Silkman said the main pipeline would run from Augusta through Sidney into downtown Oakland. From there, the line would travel into Fairfield Center and down state Route 139 into Norridgewock, where it would cross the Kennebec River to Madison.

There are proposed spur lines that would feed Huhtamaki Packaging in Fairfield, MaineGeneral Medical Center in Waterville and Sappi Fine Paper and downtown Skowhegan, among other locations, if tax increment financing agreements are approved in each town.

In total, the pipeline would send an amount of natural gas per year into central Maine that would be the energy equivalent of 20 million barrels of oil. It would run through about 56 miles of 8-inch-diameter pipe.

Doug Harlow — 612-2367

dharlow@centralmaine.com

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