Proposed “T.I.F.” for Kibby Windmill Project poor public tax policy 

This editorial is not in any way intended to express an opinion or to debate the merits of windmill farms and whether or not these will provide good or bad energy and economic benefits for the State of Maine and Franklin County. I believe however, that the latest Tax Increment Finance District (“TIF”) proposal being considered by the Franklin County Commissioners represents poor public tax policy and has serious flaws. By way of background… consultants Eaton Peabody Consulting Group working under the direction of the Commissioners (funded by TransCanada Energy Ltd.) are considering a TIF for the proposed TransCanada Energy Ltd, windmill farm project to be built in Kibby and Skinner Townships in Franklin County (north of Eustis).

The latest proposal is complicated and if we are to believe what is being reported, approximately 50% of all property taxes generated by this project (“captured revenue”) over a twenty-year period would flow into this TIF. This “captured revenue” is essentially, new property tax revenue generated from this project that would otherwise be used to reduce property taxes throughout all of the towns and unorganized territories (UT’s) in Franklin County and the UT’s throughout the State. As reported, $8,841,780 ($442,089 a year for the next twenty years) of this “captured revenue” would revert back to this company to help them build the windmills. The proposal also calls for $4,000,000 to go to a Franklin County Investment Plan to provide certain services almost exclusively to the UT’s in Franklin County. These services spread out over twenty years represent the so-called “public good” involved in this TIF. They consist of: scenic by-way improvements ($1,000,000), annual dues to the Greater Franklin Development Corp. ($600,000), commercial revolving loans ($500,000), County match for economic development ($500,000), tourism marketing for the UT’s ($300,000), public safety/fire protection equipment ($250,000), nature based tourism planning ($200,000), global positioning system plotting and mapping of trails ($200,000), TIF administration ($200,000), business recruitment marketing ($100,000), snowmobile trail signage ($73,000), scenic Byway planning and updates ($50,000) and annual dues to AVCOG ($27,000).

This may all appear to be good stuff, but what you must realize is that this money doesn’t just drop out of the sky and what needs to be asked is: are these services really needed and do the residents in the UT’s really want this program. If this project is built and if this TIF is not approved, this money (twelve million) will pay for existing County, UT and State services which will reduce the taxes owed by all twenty-one municipalities and plantations and the UT’s in Franklin County along with other property taxpayers throughout the UT’s in the State of Maine (for State services rendered). Yes, some municipalities like Jay, Rangeley, Carrabassett Valley and Farmington would see more of a reduction in their county tax obligation than other towns because these Towns pay more for county taxes. However, every community would see a property tax reduction.

For example, the Town of Jay (where Commissioner Gary McGrane lives) would see an additional approximate reduction of $22,000 per year for the next twenty years (over and above the other $22,000 representing 50% of the property taxes not in the TIF). The Town of New Sharon (where Commissioner Fred Hardy lives) would see an additional reduction in taxes of approximately $1,850. Do you suppose that if each of these two Towns, and all the other Towns in this County, had an article in their annual Town meeting warrant in each of the next twenty years “to see if their Town would vote to expend this money (their share of the “lost” TIF money) for a marketing and economic development plan and for additional scenic Byway improvements in the Unorganized Territories” that it would be approved? Of course not, but that is exactly what is being proposed.

As to the whether or not these services (listed above) are either warranted or desired in the UT’s, if the Commissioners feel they are valuable then perhaps they should include them ($200,000 for the next twenty years) in the annual budget for the Franklin County UT’s. It would make for an interesting budget debate. But please, do not expect the twenty-one municipalities and plantations in Franklin County to pay for these services (through lost TIF funding). In addition, some of these services are already being provided by other sources. A commercial revolving loan fund ($500,000 in this TIF proposal) is already provided through AVCOG (and incidentally, my inquiry indicated that no one in the UT’s is currently utilizing this program). If the Greater Franklin County Development Corp. needs additional funding ($600,000 in this program) they should make a case for it with the Commissioners and the County Budget Committee. With an approximate $200,000 a year reduction in “County Tax obligation” to County municipalities and plantations there may be some money available for this purpose if this organization can make a case for it (and I believe they do a great job).

In addition to being fiscally irresponsible, I believe this proposal to be a real boondoggle for several reasons. I believe TIF’s were intended to develop projects that “passed a straight face test” with respect to need and providing a “public good”. As an example, an old mill facility that otherwise would not be economically feasible to redevelop could be developed through a TIF. The problem is TIF’s are now the norm and are used for every new project that comes into Town. According to Value Line Investment Survey’s most recent quarterly report on TransCanada (March 14, 2008, p. 427), the company’s revenues for 2007 were almost $9 billion ($8.993 billion and change) with a net profit for 2007 of $1.26 billion. Does this company (TransCanada) need a Franklin County TIF to build a Windfarm Project in Kibby and Skinner Townships to make the project work? I think you know what the answer is. In addition, TransCanada’s zoning petition to LURC (ZP 709, submitted in April 2007) contains an economic benefits study by Charles Colgan (Appendix 9-A, p. 5), where one reads “Trans Canada estimates its annual property tax bill will be in excess of $1 million. An estimate of $1 million in payments would… make TransCanada by far the largest property tax payer in the Unorganized Territory in Franklin County.” I have to believe they had planned to pay their fair share of property taxes until someone told them about a TIF.

You will hear that Washington County approved a similar TIF and municipalities in this County have approved them (hopefully, for more substantial public good such as significant job creation). You will also hear from organizations and businesses that want a piece of this action, but remember this is not free money. TIF’s need to provide real significant public benefits (not whether or not this is good energy policy) and this situation (deferring twelve million dollars in property tax relief), in my estimation, is very questionable.

The Consultants and the Commissioners are in a hurry! It turns out that if this TIF is not approved by the County Commissioners by July 1st of this year it may not be legal after that date to “capture” (watch out for that word) tax reductions that would otherwise go to the State for State Services to the UT’s in the rest of the State.

Finally, I hope that this has been informative and that if you are interested you will take the time to attend the Commissioner’s Public Hearing on this subject to be held at 6:00 p.m. May 29th upstairs in the Franklin County Courthouse.

Sincerely,

Dave Cota
Town Manager, Carrabassett Valley

Daily Bulldog

19 May 2008