Workforce housing gets a boost with federal tax credits

ELLSWORTH — A planned “workforce housing” project to be built in the city received a key funding boost this month in Augusta.

Oriole Way GP LLC received permission from the city planning board earlier this year to build a 50-unit housing project off of Washington Street, behind Renys and Shaw’s.

Developers said making the project work also would require financial incentives from the city and the state, in addition to the approval of the Planning Board.

The incentive from the state came in mid-December, when the Maine State Housing Authority awarded tax credits to six housing projects around the state, including Oriole Way in Ellsworth.

According to the state housing agency’s website, the Low Income Housing Tax Credit “provides subsidy in the form of a federal tax credit to developers of affordable rental housing.”

Those developers then sell the tax credits to corporate investors, and “the money this raises is used as equity in the rental housing project.” Developers then have to “reserve a portion of the rental units for lower income renters.”

This fall, 14 different projects around the state applied for $6.6 million in tax credits. On Dec. 16, a list of six projects that were selected and will receive a total of almost $3.1 million in credits was published — and the Ellsworth project made the cut.

In fact, it tied for first place under the ranking system Maine State Housing uses (the other top projects were in Auburn and Westbrook). Oriole Way is set to receive $763,790 in tax credits, which represents the second-highest amount awarded (the highest was $795,262 to a project in Lewiston).

The tax credits from Maine State Housing come after the Ellsworth City Council approved a tax-increment financing (TIF) plan in August. That arrangement will return half of the property taxes generated by the new housing to the developer in the form of what is called a credit enhancement agreement.

That agreement will help “ensure affordable rents,” according to minutes of the City Council meeting where the TIF was approved by the City Council. The other half of the property taxes will be kept by the city and used specifically “to mitigate school operating expenses associated with the housing development.”

Families are the target demographic for the housing, and more kids will mean a need for more teachers and other services in the school system — those being the associated school operating expenses.

The TIF plan takes the total value of the new project (estimated at $4.6 million) and shields it from calculations used to determine state aid to local schools, county tax bills and how much municipal revenue sharing money a community will receive.

So while Ellsworth will see less direct property tax revenue as a result of its TIF agreement with the housing developers, it also will not see a reduction in school funding or revenue sharing or an increase in county tax that would occur if the new valuation of the project were not shielded.

The developers created a tax shift analysis prior to the council approving the TIF and determined that the money the city gives back to the developer through the TIF program “will virtually be offset by this tax shift” — that the financial trade-off is essentially a wash.

Steve Fuller

Steve Fuller

Reporter at The Ellsworth American,
Steve Fuller worked at The Ellsworth American from 2012 to early 2018. He covered the city of Ellsworth, including the Ellsworth School Department and the city police beat, as well as the towns of Amherst, Aurora, Eastbrook, Great Pond, Mariaville, Osborn, Otis and Waltham. A native of Waldo County, he served as editor of Belfast's Republican Journal prior to joining the American. He lives in Orland.

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