2018-03-09 / Front Page

Voters get a say on TIF dollars

By Duke Harrington Staff Writer

KENNEBUNK — For the first time, voters at this year’s annual town meeting in Kennebunk will get a chance to weigh in on the town’s $1.06 million tax increment financing (TIF) budget.

Kennebunk has TIF districts centered around its three villages — Main Street, Lower Village, and West Kennebunk — the most recent of which was created in 2010. The town also has a fourth TIF district focused on the Alfred Road utility corridor. The three village TIFs essentially freeze property values in the eyes of the Maine Revenue Service at the time they were created. An ancillary benefit of this is that it make the town’s total valuation look lower than it might otherwise be when calculating the Kennebunk’s state subsidy for public education.

The most overt benefit, however, is that the TIF allows the town to divert tax revenue from all new development, along with assessment increases based on market valuation, to a special fund.

The proceeds in that TIF pool are then targeted back to the three districts in limited uses allowed by the state Department of Economic and Community Development, primarily for infrastructure needs and economic development projects.

How to spend that money has always been under the unilateral purview of the board of selectmen. However, Finance Director Joel Downs said the town’s auditors have recently recommended that TIF appropriations be “part of the regular budget process.” The interpretation of that, he said, has been to include the town’s seven member volunteer budget board in the annual TIF vote, and to then send that recommendation to voters at the annual town meeting.

Voters should not expect to see an itemized list of TIF expenditures. As with most items on the budget warrant, the ballot will include the bottom line of total spending, along with the associated revenue.

“Those will essentially zero each other out, with no impact on the overall operational budget,” Downs said.

On Feb. 27, in their final joint meeting on the way to wrapping up the proposed $8.8 million net operating budget for the coming 2018-2019 fiscal year, selectmen and budget board members approved a TIF spending plan of $1,059,113.

Only Selectman Ed Karytko voted against the proposal, objecting to $34,000 paid to help support the trolley service operated by the York County Community Action Corp.

“I just question the idea of subsidizing,” he said. “If people are going to use the trolley, they should be paying the fares to be able to make it work.”

However, Rachel Phipps, a member of the town’s economic development committee and the RSU 21 board of education — although speaking personally and not in either official capacity — countered that notion.

“That’s what government funds are for, the public good,” she said, promoting the environmental benefits of mass transit. “User fees will never cover that. Public transportation is funded through government funds all over the world.”

Karytko also said it might be time to reconsider the position of economic development director. Jim Black has been serving as a part-time interim since the resignation last year of the town’s first dedicated economic development director, Mat Eddy.

“Do we really need to be spending that much on an economic development director?” Karytko asked, noting that Black’s $61,408 salary will “more than double” if and when the town restores the position to full time.

“I’ve been thinking about this and wondering what an economic development director has to do to justify that salary,” Karytko said.

“I think that for a town of this size to be competitive in retaining businesses and attracting businesses, it has to invest in economic development.” said Bob Georgitis, chairman of the town’s economic development committee.

Town Manager Mike Pardue acknowledged that Black, given his limited hours and cross duty as harbormaster, has been necessarily limited to prioritizing business retention over “attracting that big tech company.”

However, budget board vice-chairman John Costin appeared to take Karytko’s side, saying the economic development director post, created in 2009, is “the squishy-squashiest” part of the “entire town budget.”

“We’re nine years down the road and I think this (position) remains poorly defined,” he said.

The approved TIF budget includes $682,687 in debt service for bonds already or soon to be released, required payments on borrowing approved by voters at previous annual town meetings. Using TIF money for that purpose keeps those dollars off the regular budget, meaning the loans do not impact the municipal tax rate.

Black’s salary, as well as $20,200 paid to General Assistance Director Karen Whitten, for work she does to maintain Kennebunk’s social media presence — considered an economic development function — similarly has no direct impact on the tax rate, apart from the fact that new tax revenues in the TIF districts are not applied to the general fund.

Also shifted into the TIF budget this year is $30,000 of Pardue’s annual salary, as well as $22,500 paid to Town Engineer Chris Osterrieder. In each case, the shift is justified by an estimate that both men dedicated about 300 hours per year solely to the management of economic development projects in the three TIF zones. The move takes some of those salaries off the regular budget paid for by property taxes, leaving room for some of the other new increases in municipal spending this year, such as the anticipated hiring of new police officer in October and two new rescue paramedic per diems in July, along with two more in January 2019.

At an earlier meeting on Feb. 8, the budget board and selectmen agreed to fund five capital investment projects either all or in part through the TIFs, and all five were approved again at the Feb. 27 meeting. Those include the purchase of a three-quarter ton pickup truck for the public works department ($40,000), an engineering evaluation of the seawalls as Gooch’s, Mothers, and Middle beaches ($35,000), a land survey of Lower Village ($40,000), a pavement management service to assess town roads ($62,000), and new traffic signaling software at Route 1 intersections ($15,000).

Betsy Smith said she understood selectmen had placed Lower Village work recommended by a recent master planning process on “indefinite hold,” and recommended selectmen divert the $40,000 approved for property survey work to other purposes.

In a March 5 email, Pardue said he was not sure what Smith meant about the Lower Village project being taken off the table.

“Unfortunately, I can’t offer any insight on her statement,” he said. “ Chris Osterrieder has proposed a multi-step process to advance this project, starting with necessary survey work, which he explained at the most recent board of selectmen meeting. The board of selectmen have supported his multi-stepped process, similar to what I understand was used in the renovation of Main Street. Chris indicates that before redesign and reconstruction, survey work is required, survey work that differs from surveys apparently performed many years ago.”

The approved TIF spending plan also includes $50,248 returned to Maine Acquisition Partners, the South Carolina owners of 76-84 Main Street, formerly known as the Pythian Block. TIF districts can also include so-called credit enhancement deals, in which a portion of the new property tax revenue realized from redevelopment is returned to the property owner, to help fund the site improvements. In this case, the company gets back 25 percent of the new assessed value for the property. After the TIF deal was approved in 2011, Maine Acquisition Partners bought the property in 2013, for $2.4 million.

Selectmen and budget board members also approved $131,183 in additional discretionary funding from the TIF funds, as recommended by the economic development committee.

In addition to $34,000 for the trolley service, that funding includes a $5,000 donation to the Kennebunk-Kennebunkport Arundel Chamber of Commerce; $5,000 for the Kennebunk Development Corporation; $3,600 to pay for holiday wreaths and garlands hung downtown; $5,000 for MaineStage Shakespeare in the Park; and $48,200 to pay for flowers planted in downtown traffic islands and gateway entrances to the village districts, along with other village maintenance projects.

Pardue said his understanding is that, in the wake of the resignation of its new directors following a social media incident involving one, who was working as theater manager at Kennebunk High School, MaineStage may abandon the long-running Shakespeare in the Park project this summer.

Sharon Staz said she and other Maine- Stage board members were slated to take up the nonprofits issues in a meeting this past weekend. She could not be reached for comment and on Tuesday, March 6, Pardue said he still had no new information. Selectmen and budget board members left the $5,000 line item in the TIF budget, just in case, The budget also has an additional $5,000 contingency fund that can be tapped at the discretion of selectmen.

One new item in the TIF budget this year is $5,000 dedicated to sealing the brick paving stones that surround the Waterhouse Center.

Meanwhile, Georgitis said he understood his committee had been tasked with finding $10,000 in reductions. To that end, it started by cutting its own annual allocation in half, to $2,125. It also reduced town funding for downtown festivals from $15,000 to $13,000, and cut Kennebunk’s donation to the Biddeford/Saco Economic Development Corp. in half, to $2,629.

However, after Georgitis noted that the Biddeford group has given more than $1 million to Kennebunk businesses over the years — money he said has helped to leverage more than $11 million in state and federal grants — selectmen and budget board members voted unanimously to restore that line item to the full amount given last year, $5,258.

Given the $1.27 million generated by Kennebunk’s TIF districts this past year, the fund should have about $211,631 remaining after all the approved payouts. That will be enough to cover the $182,422 in annual debt service payments expected to come due, once $1.07 million in bonds for other approved borrowing are issued in 2020.

Finally, while selectmen and budget board members were largely united on the TIF spending plan following a 90-minute review, there was general dissatisfaction with the way in which the subject came to the table. Several members of the budget board, and in the audience, opined that should the annual allocation requests continue to be handled in the same way, all groups asking for money — or at the very least, outside agencies like the Chamber — should be made to present a formal request to the budget board. In this way, board members said, TIF spending should be handled in much the same manner as town funding for area social services agencies, made as part of the regular town budget.

“I’m going to vote in favor of this because I think we need to move it down the road to voters,” Costin said. “But I really think we need to not do it like this again.”

A selectmen’s workshop on the topic of how best to approve TIF allocations in the future was scheduled for Tuesday, March 6, after the Post’s deadline.

Meanwhile, the full municipal budget for the coming fiscal year, including the TIF spending plan, will be the subject of a public hearing at the March 27 selectmen’s meeting.

Duke Harrington can be reached at news@kennebunkpost.com.

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