TIFs. Love them or hate them, the three letter acronym has gotten a lot of flack lately, especially in the Boothbay region.

More than 1,100 voters filed through the Boothbay Town Office last November to decide if the peninsula was ready for a new TIF district. It turned out that the majority of Boothbay residents were not.

TIF stands for tax increment financing; it is a public financing vehicle that is widely used but little understood.

Recently the Maine Center for Public Interest Reporting published two articles in Maine newspapers criticizing how TIFs are often mishandled by and abused in Maine municipalities.

According to the articles, since the TIF’s inception in 1977, TIFs have net Maine municipalities billions in property tax revenues by creating a tax shelter for new business development.

Creating a tax shelter means that a business can effectively hide the growth of their property value. During the lifetime of a TIF, which can last up to 30 years, the state treats the business and the town as if the area were not any richer prior to designation of the district.

For example, if a new business opens in Boothbay's hypothetical TIF district and the building is assessed at $100,000, that property value will remain at $100,000 for as long as there is a TIF. Any increase to the business's value over time is sheltered by the TIF. The money that the developer would normally pay in new taxes is collected in a TIF fund and used by the town to build infrastructure.

TIFs have become increasingly popular in Maine for funding public projects. According to the Maine Center for Public Interest Reporting, TIFs provide incentives for economic development, which can lead municipalities to be very generous with subsidies that benefit private developers.

“TIFs are easily mismanaged,” Boothbay Town Manager Jim Chaousis said. “There are a lot of municipal administrators that don't really understand the working components of TIFs. That's not the case in our town.”

Chaousis said having a tax shelter is the number one reason a TIF district is appropriate for Boothbay, particularly because one part of town is estimated to increase in value by $26 million — the Boothbay Harbor Country Club.

Boothbay voters rejected the proposed TIF district last November by 110 votes, so the Boothbay Board of Selectmen decided to pare down the plan and reintroduce it at the annual town meeting this May.

The new TIF district envelopes nearly the same land as the previously proposed TIF. The 272 acres comprises the golf course, the Boothbay Common and up the Route 27 corridor to the Industrial Park. But this TIF does not include the controversial village improvement plan, traffic roundabout or borrowing money to pay for a municipal bond.

Instead, if voters approve this TIF, the Boothbay Harbor Country Club will continue to increase in value and the town will shelter its growth, meaning Boothbay won't have to pay property taxes to Lincoln County for any of the new value the golf course or any other developer puts into the TIF district.

If the TIF is approved by voters, the golf course is estimated to net the town over $5.6 million dollars in tax savings over the next 30 years. Meanwhile the public would get to choose how and where to spend that money on public infrastructure within the district. And if the townspeople don't want to fund public infrastructure, and dislike what the TIF district is doing, they can vote to dissolve the TIF and the money gets deposited into the town's general fund.

Sounds peachy, right? Not according to Naomi Schalit of the Maine Center of Public Interest Reporting. Schalit reported that TIFs allow cities and towns “to hide new valuation from the county tax collector — meaning they won't have to pay taxes to the county for services such as jails .... The higher the town's valuation, the less state aid will be awarded and the more county taxes will be owed.” Additionally, the county's other towns would have to shoulder the gap in taxes.

Boothbay is currently the highest valuated town in Lincoln County, and pays about 13 percent of the county’s property taxes. So given the opportunities of this proposed TIF, voters would have two choices: Either the townspeople vote yes on the TIF and capture the new revenue for public infrastructure and economic development projects; or the townspeople forgo the TIF and the town adds the additional revenue into the general fund based on natural property growth over time, which gets taxed, but helps pay for schools, police and public works.

But according to the selectmen, the TIF will not only free up additional streams of revenue, but voters will be able to decide directly where the TIF money goes, just as long as it relates somehow to the TIF district.

For example, the town spends nearly a quarter million dollars per year on road improvements. Chaousis said road repair is one of the biggest expenses the town has constantly fallen behind on. Road repairs inside the proposed 272 acre TIF district could be paid for with the money in the TIF fund, even for the roads that feed into the TIF district indirectly, Chaousis said.

“Now we have a different pot to pull from. One that's tax protected so it's going to grow faster,” Chaousis said. “This could be a very nice tool for the town of Boothbay in the future, and we haven't put any restrictions on it. Because now voters get to decide what is the appropriate use of TIF funds. Is it water and sewer? I don't know; we'll ask them.”

It's no secret the Boothbay selectmen believe a third TIF district will benefit Boothbay. They said the TIF could attract businesses, bolster the local economy, bring new jobs to area and fund infrastructure projects vetted by the public. Building infrastructure could prevent businesses from leaving town.

In 2005, no public water lines existed in Boothbay's Industrial Park, so the town lost a business called Rynel. The manufacturing company relocated to Wiscasset after 32 years in the Boothbay region.

In January of this year, Wiscasset voters overwhelmingly approved a TIF district for Rynel with its parent company, Molnlycke. Rynel is now expected to add 10-30 new jobs to its 70 person workforce. Under the company's “original development program,” a tax rebate called a credit enhancement agreement was offered, allowing Rynel to collect 35 percent of the sheltered TIF revenue, while the town of Wiscasset keeps the remaning 65 percent. That rebate will be provided to Rynel until 2024.

Schalit's articles criticized credit enhancement agreements the generoisity of reinbursements given back to developers.

Credit enhancement agreements are not new to Boothbay, and they could be a big benefit if used correctly, Chaousis said. In the town's two existing TIF districts with Washburn & Doughty and Hodgdon Yachts, each company gets back 75 percent of its annual property taxes, and the town keeps 25 percent.

By the end of each TIF lifespan, Hodgdon Yachts’ TIF will have sheltered $74,799 in tax revenue and Washburn & Doughty's will have sheltered $277,360.

The money captured in each TIF fund helped build the East Boothbay sidewalks and School Street, and according to Chaousis, both TIFs have successfully retained jobs in the working waterfront. That's the most important factor, he said.

Retaining jobs and attracting business developers is why the Boothbay selectmen have kept credit enhancement agreements in the new TIF proposal. Credit enhancement agreements could provide a 75 percent tax return to a developer, but there are additional checks and balances that apply.

Boothbay's new TIF plan stipulates that if a developer fails to meet conditions such as not retaining jobs or wage requirements, the selectmen and the town manager have the right to pull the contract. Additionally, there is a precautionary clause that states a developer's credit enhancement agreement can not exceed 50 percent of the total value of the TIF, meaning that in the lifetime of the TIF, the town ends up with more share of the captured funds than the developer.

The selectmen have said there are no current negotiations to offer golf course owner Paul Coulombe a credit enhancement agreement. Coulombe is going to add improvements to the golf course, regardless if there is a TIF district or not.

The Boothbay selectmen are preparing to adopt the current TIF plan for the town warrant on March 12 at 7 p.m. at the Boothbay Town Office. A public hearing is scheduled for the same day, as well as on March 19, March 26, April 16, April 23 and April 30.