Sewer, water line discussed

  HOULTON, Maine — Is it possible to finance a $1.9 million water and sewer expansion/improvement plan without impacting local tax bills?
Apparently so, thanks to the town of Houlton’s Tax Increment Finance District (TIF). In June, voters will be asked if they agree to spend $1.6 million in TIF funds to extend water and sewer lines along the North Road. If approved by voters, it would mark the second time water and sewer has been extended on North Road.
    In March 2011, the Houlton Water Company funded the first phase of the North Road water sewer project, with town TIF funds placed into a reserve account. Much of that extension was to accommodate a parcel of land which turned into the Tractor Supply Company, but it also created additional retail expansion opportunities in that area.
At that time, then-Town Manager Doug Hazlett said the council had been weighing the extension of services on the North Road for at least five years. The town instituted a TIF program about six years ago, but has not had an opportunity to use the funds associated with that program until that project came about. There are several TIF districts within the town, including one at the Houlton International Airport and another located in the downtown region.
The proposed expansion will bring public water and sewer from the Tractor Supply Company Store north to just before the Currier Road. Undertaking such a major project has been on the town’s radar since at least 2007 when it crafted a comprehensive plan. That plan suggested expanding the water and sewer along the North Road, since that area was targeted as the spot most likely to expand in the future.
So what exactly is a TIF district?
A TIF district is a public financing method that is used for subsidizing redevelopment, infrastructure and other community improvement projects. It is a method of using future gains in taxes to subsidize current improvements, which are projected to create conditions for the future gains to take place.
“This district allows the town to hold some of the new taxes generated from new development projects in the district and use them for specific town uses,” said Interim Town Manager Cathy O’Leary. “One of (those uses) is infrastructure improvement. In other words, the new business expansion that has happened on North Road since 2005 is financing the cost of expanding the sewer and water.”
The town has been working in conjunction with the Southern Aroostook Development Corporation since the first phase began. Jon McLaughlin, executive director for SADC, said the biggest question people have is will spending this money affect the mill rate.
“The answer is ‘no,’ not because of this,” McLaughlin said. “The way a TIF district works is, you establish a baseline when the district is established.”
That baseline is calculated by adding the values of all the property contained within the district. The North Street district was valued at $11,382,325 based on 2004 assessments and includes both real estate and personal property. Any increases to the property valuations, after the baseline is established, become incremental new revenue for the town.
For example, the value of the same parcels of land in 2011 was $20,791,800, an increase of $9,409,475. Multiplying that figure by the town’s mill rate of $18.95 per thousand results in $178,000, which is placed into the TIF reserve account.
Therefore, the town will be placing at least $178,000 per year into the TIF account for as long as the TIF district remains. The estimated cost per year of Phase II of the water/sewer project is $103,000 for 20 years at 2.75 percent interest.
“The bond will be paid off from ongoing TIF account funds and no funds will have to come from the General Fund,” McLaughlin said.
O’Leary added that, by a ruling of the Public Utilities Commission, the Houlton Water Company is not allowed to pay for the new extension and cover that cost with revenue coming from its current customers.
The North Street district, created in 2005, is made up of 42 separate parcels of land; covers about 460 acres; is mostly undeveloped land at this point, according to McLaughlin. The North Street district has about $526,000 in its account, O’Leary added.
“The mill rate of the town will no doubt be going up over the years, but not as a result of sewer and water line extension project, which helps open up the property to better development over the years,” McLaughlin added. “It also, when completed, adds value to the property, which in turn, puts more money into the TIF account.”
Editor’s Note: Individuals who are opposed or in favor of the sewer line project are encouraged to write letters to the editor for consideration in future issues.