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Extending tax shelter would benefit city, says developer



ELLSWORTH — The city could get affordable housing for seniors and help defray some costs to taxpayers by extending a tax shelter to a proposed senior housing project, said Kevin Bunker of Developers Collaborative at a council meeting on Monday evening.

“Generally when there’s development coming into an area you’re going to see an increase in the taxable value,” said Bunker, whose group, Developers Collaborative, built the roughly $4.6-million Oriole Way Apartments off Washington Street behind Renys. That’s usually good for city coffers, except that it also means a municipality’s valuation increases, which in turn means the local government gets less money from the state for education and that taxes paid to the county go up.

“Typically communities across Maine will lose 40 to 60 cents of that [increase in taxable value] in those impacts,” said Bunker, who was recently before the city’s Planning Board to discuss a new project, Foster Street Apartments, which includes both senior housing and market rate units.

Bunker plans to eventually ask the board to expand the Tax Increment Financing (TIF) district that encompasses Oriole Way Apartments to include the proposed senior housing complex (it would not extend to the market rate units).

“A TIF,” he explained, “basically shelters you against the loss of those impacts.”

Bunker made his case to councilors on Monday with some figures to explain how extending the TIF district that shelters those apartments to a proposed senior housing complex would benefit the city.

Including the senior housing in the TIF district, which requires approval from the council, would reduce the direct property tax revenue the city sees from the units but would shield their value from calculations used to determine state aid to local schools, county tax bills and how much municipal revenue sharing money a community will receive.

The proposed senior housing complex would have a valuation around $3.5 million, said Bunker, which would generate roughly $65,000 a year in taxes at the current rate. The City Council can decide how much (if any) of that valuation to shelter, but Bunker said he needs at least half of it to be encompassed in the TIF district to make the project financially feasible.

If councilors do approve a TIF, a percentage of that $65,000 would be returned to the developer, who would be required to keep rents at a certain fixed level for at least 30 years.

“It’s not a get rich quick scheme certainly for developers to run these things, but it is needed to make it work,” Bunker continued. “It does go directly to keep the rents affordable.”

“If I were a city councilor, I’d say that’s all well and good, but what happens to the money that gets sheltered?” said Bunker. “That’s really where the debate is a lot of the time.”

TIF districts, which are used frequently around the county, have not been without their critics over the years. Some worry about inflation — since tax revenues are frozen at a certain level, the value of that money collected by the city decreases over time. There may also be new costs that come with development, such as rising student populations at local schools or an increased burden on city services such as fire and police departments, without added tax revenue for those services. Some TIF districts do have provisions to mitigate those potential problems.

Under this particular arrangement, the city also would receive money that is allowed to be used for certain related projects. In this case, said Bunker, who has worked with city staff to look at the figures, “The best, most freest possible use of money would be things you’re spending money on anyway.”

For instance, the city is currently paying down its debts on the senior center, said Bunker, to the tune of roughly $284,000 a year. If councilors decide to shelter 100 percent of the proposed senior housing project’s valuation, the city would get roughly $31,000 that could be used to pay down the debt on the senior center. “That’s $31,000 less you’re going to have to ask the taxpayers for.”

Councilors did not take a vote on whether to extend the TIF district to the proposed project but plan to consider it at a future meeting.

“In my estimation, a favorable deal to the city, makes sense,” said City Manager David Cole, adding that it is consistent with other senior housing projects the city has done, such as Leonard Lake.

Kate Cough

Kate Cough

Digital Media Strategist
Kate is the paper's Digital Media Strategist, responsible for all things social, and the occasional story too! She's a former reporter for the paper and can be reached at: [email protected]
Kate Cough

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