Legislative Changes to Maine’s TIF Statute Take Effect Oct. 9, 2013
What is Tax Increment Financing?
Maine’s municipal TIF statute is an economic development tool for municipalities. When a municipality designates a TIF district, the assessed value of property within the district from the prior tax year is set as the base value or “original assessed value.” During the term of the TIF district, property taxes (or a portion thereof) paid on the increase in assessed value over and above the original assessed value are put into a special TIF fund for economic development purposes (e.g. major municipal infrastructure projects, job training programs, credit enhancement agreements with individual developers). In addition, the portion of the increased assessed value that is captured in a TIF district is sheltered from the calculations of state subsidies and county taxes, resulting in substantial economic benefits.
Amendments to the TIF Statute Take Effect Oct. 9, 2013
In an effort to improve the functionality of the TIF program, practitioners active in creating and administering TIF districts drafted amendments to the state’s TIF statute earlier this year; the amendments and the new law go into effect on October 9, 2013. The new law addresses timing issues, the use of municipal bonds for municipal TIF projects and the types of projects for which municipalities can use TIF revenues.
TIF districts can run for a maximum term of 30 years. Currently, in a given tax year, a municipality may have already committed its taxes by the time a TIF district is approved, which means that the municipality can only realize benefit of the TIF district for 29 years. The new law addresses this timing issue and allows a municipality, upon designation of a TIF district, to elect whether to begin the term of years in the current tax year or the subsequent tax year. The new law also changes the timing of annual application deadlines at the local and the state levels.
The new law lifts certain restrictions relating to the use of municipal bonds to finance municipal TIF projects:
- It removes the requirement that municipal TIF projects, if funded with municipal bonds, have to be completed within eight years of the designation of the TIF district
- It extends the maximum term of the municipal bonds that can be issued to finance municipal TIF projects from 20 years to 30 years
- It removes the limitation on the total amount of bonded indebtedness within a county that can be used to finance municipal TIF projects
The new law confirms that grants that promote economic development are permitted TIF project costs and clarifies the allowable uses of TIF funds for job training and scholarships.
Shana Cook Mueller helped draft the recent amendments to the TIF statute. Please contact Shana at 207 228-7134 or email@example.com with any questions regarding the statutory changes or tax increment financing.