AUGUSTA — Residents voted overwhelmingly to allow the city to borrow nearly $1.7 million for street and sidewalk improvements, money officials say will be paid back not with residents’ taxes, but with taxes to be paid on natural gas infrastructure.

Residents voted 1,708-524 to approve the local bond proposal.

The proposed 10-year bonds approved by voters in a referendum question Tuesday will be repaid from proceeds to be collected in taxes from natural gas pipelines and other taxable gas infrastructure installed in Augusta in recent years by Maine Natural Gas and Summit Natural Gas of Maine. The money will be collected in a tax increment financing, or TIF, account.

“I want to thank the citizens for getting behind it and understanding it,” Mayor David Rollins said of the bond proposal. “It will allow us to improve streets, on top of improvements we’ve already made and on top of what the state has been able to do.”

Ralph St. Pierre, finance director and assistant city manager, said the city set up the special tax account to collect proceeds from taxes on natural gas infrastructure a few years ago as the new fuel arrived in Augusta.

While sometimes the districts are used to return property taxes to private developers to help bring economic development to a municipality, the districts also can be set up to return all the tax proceeds to the city, not the developer. Augusta’s natural gas financing returns all the taxes generated to the city, not the two gas companies.

New property value sheltered in a tax increment financing agreement doesn’t count toward a municipality’s total property tax value used by the state. That benefits the municipality, because when a municipality’s property value increases, its amount of state aid for schools and other state revenue drops, and its share of county taxes increases.

By sheltering that money, the municipality — in this case, Augusta — can use it for specific projects allowed by state rules without its valuation increasing and without its share of state aid decreasing correspondingly.

St. Pierre said the gas accounts were set up, and approved by city councilors, with the intent of collecting money to pay for street improvements throughout the city.

Rollins said voters seemed to understand and appreciate that the street work will be done without increasing property taxes.

“I’m not sure people would have supported it if it would have been part of a tax increase,” he said.

Rollins, before the vote, urged support for the referendum question, noting the city has deferred some paving projects and allowed some streets to deteriorate because it just didn’t have money in the budget to fix them.

St. Pierre said major street work to be funded by the bonds is planned on Patterson Street, Leighton Road, Commercial Street downtown, Cross Hill Road, and Cony Street Extension between Haskell Street and Cony Road. Maintenance paving also will take place on other city streets and sidewalks.

If figured at an interest rate of 2.75 percent, interest on the $1.67 million in proposed bonding would come to an estimated $253,000. That would increase the total debt taken on to about $1.93 million.

The bond question was approved by voters in each of the city’s four wards. Ward 1 voted 304-85 in favor, Ward 2, 420-83, Ward 3, 332-111, and Ward 4, 397-108, in unofficial results.

Keith Edwards — 621-5647

[email protected]

Twitter: @kedwardskj