WATERVILLE — City councilors Tuesday voted 6-0 to create a tax district and development plan for a natural gas pipeline that officials say could reap the city $200,000 in the district’s first year.

The council must take two more votes on the proposal, which also must be approved by the state Department of Economic and Community Development, according to City Manager Michael Roy.

Roy said the city’s TIF (tax increment financing) Advisory Committee recommended a 30-year term for the proposal and a 100 percent capture of all new values created by the natural gas project.

Summit Natural Gas of Maine Inc. already has installed major pipelines throughout the city, as well as smaller pipes through neighborhoods, and is distributing natural gas to those areas.

Summit would realize no funding from creation of the tax district, according to Roy. He said that some TIFs, such as the one that encompasses Hathaway Creative Center, have a credit enhancement agreement attached where payment is made to a developer, but this one does not.

He said money realized from the district may be used only for eligible city projects including roads, sidewalks, public works equipment, firefighting apparatus, pay for salaries of city staff who work on TIFs and payment of the city’s economic development obligations.

“So, we can use TIF money as we do right now, to pay our dues with different economic development organizations,” he said.

Councilor Dana Bushee, D-Ward 6, was absent from the meeting. The unanimous vote Tuesday followed a public hearing that Roy said is required for any TIF proposals.

He said the city has talked about creating the TIF for a long time, and he noted that over time, the TIF will have to be amended to include any new areas where the gas company adds pipeline. He said that in the current TIF proposal, areas of the city are included that officials think Summit will get into in the next five years.

Roy and City Assessor Paul Castonguay said a TIF district can be as small as the district at Huhtamaki, which includes the area under which the machines sit, or as large as the downtown district, which includes everything from Railroad Square to Grove Street in the city’s South End.

Councilor John O’Donnell, D-Ward 5, noted that, by law, there is a limit to how much of the city’s total value of taxable property can be in the district.

Roy said the maximum amount is five percent and that is the same with acreage — the city can’t have more than five percent land area in a district.

The natural gas TIF district would bring the percentage of city area in TIFs to about three percent, Castonguay said.

“The object of this particular TIF project is to shelter the dollars that are received from the pipeline and use those dollars to rebuild our roads,” Castonguay said, adding that the city rebuilds its roads every five years.

“To not shelter it would be foolish,” he said.

Councilor Sydney Mayhew, R-Ward 4, agreed.

“It’s an economic no-brainer,” he said.

Castonguay said that five years from now when the city’s Public Works Department gives city officials a new list of roads to be worked on, city officials would amend the TIF to take out streets in the district and replace them with other streets.

“We’re extremely excited about what this can mean for road repair over the full term of the TIF,” Roy said.

Castonguay noted that large gas pipes are already installed under the Kennebec River, in the area of West River and Webb roads and in other areas, and they represent the largest values. Neighborhoods where the pipes are smaller represent smaller values.

“I think Waterville’s their place to saturate,” he said of Summit, adding that the city is dense and houses are close together.

He estimated the city will get $200,000 in TIF revenues in its first year.

“How much do you have budgeted for roads next year?” he asked Roy.

“Two hundred and fifty (thousand),” Roy replied.

Mayor Nick Isgro noted that that amount is about one-third of a mill.

The city’s tax, or mill rate, is currently $27.40 per $1,000 worth of assessed value.

Amy Calder — 861-9247

acalder@centralmaine.com

Twitter: @AmyCalder17