GARDINER — A proposal to offer tax breaks to encourage major infrastructure improvements to downtown buildings found general support at the City Council meeting Wednesday night, but its departure from past practice led some councilors to question whether the proposed incentives are too high.

The proposed policy would set the tax breaks developers could expect to receive for upgrading second and third floor units, adding elevators or opening a hotel.

Businesses in the downtown tax-increment financing district can already seek credit enhancement agreements to receive part of the tax revenue from new development back. This policy would be different in that it sets specific percentages of tax breaks developers could receive for different types of investment.

The policy is part of a comprehensive business incentive program being developed by Gardiner Main Street in collaboration with the city, the Gardiner Board of Trade and the Bank of Maine. The program, which is expected to be finalized by Dec. 15 and in use by next May, will provide forms of funding to lower the cost for businesses looking to open locations downtown or for existing businesses to expand.

Gardiner Main Street Executive Director Patrick Wright gave an overview of the program, which will allow businesses to apply for incentives including forgivable loans for fixed capital, micro-grants for operating funds and six months of free rent. The idea is to attract a targeted mix of businesses that will complement each other and existing businesses.

The city’s contribution to the program would be the proposed credit enhancement policy that Gardiner Main Street and the city can use when marketing the program to developers.

Tax-increment financing, or TIFs, allow municipalities to freeze the value of properties on the tax rolls and give part of the tax revenues that would have been earned from future construction back to developers through credit enhancement agreements. The rest of the additional tax revenue is captured in the TIF district and can be used for economic development purposes.

The five current credit enhancement agreements between the city and private companies range from 25 to 50 percent, according to City Manager Scott Morelli, meaning the businesses get back those percentages of the tax revenue paid on new construction.

The new policy being proposed includes credit enhancement rates for the development of second and third floor residential units, second floor office space, hotels and elevators. It proposes to give 100 percent of new taxes for hotels and 75 to 100 percent for elevator construction, depending on the number of buildings served. The other uses would have agreements for 50 percent or less.

Both councilors Phil Hart and Richard Heath said they have concerns about the higher tax breaks — for hotels and elevators.

“A perception of the public now is all we do is cater to downtown Gardiner, all our money is spent in downtown Gardiner,” Hart said. “And to offer a 100-percent TIF is really a hard thing to sell to the public.”

Hart and Heath said it could lead to others who had requested TIFs, like at Libby Hill Business Park, to feel slighted.

Morelli said he’s only supporting it because the 75 percent and 100 percent credit enhancements would only be used for installing elevators or hotels — two major developments the city has long tried attracting.

“When I first read the proposal, Phil, I had the same reaction,” Morelli said.

He said without the larger incentives for elevators or hotels, “we just aren’t going to get those things to happen.”

Nate Rudy, director of economic and community development for the city, said installing an elevator would likely be part of a larger development, and only the new taxes from the elevator would go back to the developer. The rest of the new value from the construction would be provide the city tax revenue.

Representatives from the Gardiner Board of Trade also spoke at the meeting in favor of the new policy.

George Trask, of Libby Hill Road, was the one member of the public who spoke out against it.

Trask, a former city councilor, told council that he has seen other people in the past present ideas for economic development that didn’t pan out. He sharply criticized Libby Hill Business Park, which the city built in 2000 and expanded in 2008. Only seven of the 22 sites have been sold, according to the park’s website.

“When are you going to stop giving away the farm in the hope that it will bring more things to Gardiner?” Trask asked.

Terry Berry, the councilor-elect for District 1, Councilor Chris Leake’s seat, defended the proposed policy and compared adding an elevator to adding a new road for a development.

Mayor Thomas Harnett also seemed to support the policy, but he said it will be important for councilors to be able to explain to residents how the credit enhancement agreements would work.

“Developments that will be incentivized by programs like this is what creates a sense of place,” Harnett said. “Libby Hill doesn’t create a sense of place. It’s an economic driver but families are not going to move to Gardiner because of Libby Hill.”

Paul Koenig — 207-621-5663 [email protected] Twitter: @paul_koenig

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