PORTLAND, Maine — In the pursuit of economic development and greater housing stock, local governments across the state have increasingly relied on a powerful tool at their disposal: the tax increment financing, or TIF, district.
These physical areas, which could be anything from a couple small properties to a neighborhood, are marked by municipal governments for their potential to add property value. Once value is added to the TIF district, say an empty lot becomes a restaurant, the city or town can use a portion of the tax revenue—only from the increase in assessed value—to reinvest in local economic development or in the project itself.
This means the money earned from a TIF district is separate from the rest of the tax pool and doesn’t necessarily go into the general fund.
For some municipal leaders, this targeted use of property tax money helps to create a cycle of positive economic development.
“I think [TIFs] played a key role in the community transitioning from what was primarily a blue collar … community, into a very … economically diverse community,” Jerre Bryant, who has served as city administrator in Westbrook for nearly 22 years, said.
During his decades-long career in municipal government, Bryant said TIFs have become more widely used. There are 20 active TIF districts in Westbrook. Next door in Portland, there are about 25.
“I think they are essential,” Greg Watson, the director of Housing and Economic Development for the city of Portland, said.
Beyond allowing for the reinvestment of value gained back into the projects which, well, gained the value, Watson said TIFs have been instrumental in leveraging funding from other sources.
Most notably, funds generated through a TIF district on the Portland waterfront attracted larger government help for a $25 million dredging project, according to Watson.
“What those TIF funds that the city contributed accomplished was bringing in state and federal partners,” Watson explained.
The growth of TIF districts has drawn its share of criticism.
In a 2018 article in the Maine Law Review, author Michael Walker summed it up: “A criticism levied nearly constantly at TIF programs in Maine and other states is that such arrangements amount to little more than public subsidies of private businesses.”
Tax money gathered through TIFs is sheltered from the state’s funding formulas with municipalities, meaning the state’s assessment of how much money a town or city needs for things like schooling and other municipal services doesn’t include TIFs. Towns that have grown rich can appear poorer on paper, while developers in some cases earn back tax money they spent.
But to TIF supporters, the back end of sheltered funds is more support for local governments.
“We get more money [for] schools, we get more money for revenue, and we pay a little bit less in county tax,” Karen Martin, executive director of the Scarborough Economic Development Corporation, said.
As Bryant looks back on how Westbrook has changed since its mill town heyday, he credits TIFs with part of the city becoming a commercial and residential hub.
“I think from an economic standpoint we would not be in as strong a position today,” he said.