BELFAST - Should the city give tax breaks to big businesses that want to open shop in Belfast, or to established ones hoping to expand? The question was the topic of a City Council work session on Tuesday night, and the answer from the Council was something like "it depends."

At issue were the proceeds from tax increment financing districts, or TIFs, which allow municipalities to shelter tax revenue from the state and use it for public improvements, or in a more a controversial version discussed at length on Tuesday, pay it to a business for private improvements in hopes that the rising tide will lift all boats.

Belfast currently has two tax increment financing disticts and both are of the first variety.

The largest covers most of the downtown and waterfront. New taxes from real estate improvements in the area, including the redevelopment of the property that is now Front Street Shipyard, is left out of the state's school funding formula. Money from these "incremental" improvements are earmarked for fixing sidewalks and any other upgrades to public property that lies within the TIF district.

Belfast's second TIF includes a stretch of Northport Avenue and was set up in anticipation of Mathews Brothers relocating it's manufacturing facility to Perkins Road. Tax money from the window manufacturing factory has been used to pay off a bond for a sewer extension on Perkins Road.

The Northport Avenue TIF will soon include the value of improvements at the new Coastal Farms Food Processing facility, which lies within the zone. City officials would not speculate on Tuesday as to how much the development would add, but said the pool of money would become larger than what is needed to pay off the sewer bond. The additional money, however, could be transferred to another TIF district like the downtown if it is not needed in the Northport Avenue district.

Currently only real property is included in Belfast's TIF districts. The major idea being pursued by the city is to also include personal property, which typically means business equipment.

City Planner Wayne Marshall said this would immediately add $9,000 to $16,000 to the sheltered revenue pool. 

Economic Development Director Thomas Kittredge called the inclusion of personal property a "no brainer" and the idea seemed to have strong support from the Council.

Answers were less obvious in a discussion of credit enhancement TIFs, which help businesses directly.

City Manager Joe Slocum pointed out on Tuesday that the Northport Avenue TIF was similar to a "credit enhancement" in that it brought a public utility to the sparsely populated area that included the then-new Mathews Bros. factory.

Marshall was quick to point out that the city did not pay for the sewer line running between the road and the factory, but Slocum's comment illuminated a gray area of public improvement TIFs.

By law, public improvements using tax increment proceeds must be made inside the TIF district. As a result, the business or businesses for which the TIF was created will often indirectly benefit from the "public" work. Likewise the location of big businesses could determine where public improvements are made.

A credit enhancement TIF turns the tables, giving a direct benefit to the business, with the public potentially getting an indirect benefit through new jobs or services.

City Councilor Mike Hurley pointed to the shopping plazas in Augusta as an example of a credit enhancement TIF. The proceeds there, he said, were used to build the terraced lots and "labyrinth" of roads that serve only the stores.

In a nutshell, a "credit enhancement" TIF is a form of tax break. What Kittredge, Marshall, Slocum wanted to know from the Council is what they should say when businesses ask for an incentive.

Marshall said there have been four such "asks" in the last six months.

"So there's some interest out there," Marshall said. "People are interested in doing things."

Asked if the askers were local or from out of town, Marshall said they were all local.

Kittredge added that the interest has been around expansion as opposed to new development, which he said could be a problem if the city appeared to be helping some businesses but not others.

"That's always a potential risk," he said, "if someone asks for a credit enhancement TIF and they have a direct competitor in town."

There was some disucussion as to whether developments of under $1 million should be considered for new TIF districts. Kittredge noted that the tax yeild on a million dollar property is around $20,000. Among council members, lowering the bar to a half million seemed like a possibility, but below that there were questions about whether it would be worth the staff time required to set up and manage the district.

"There's got to be a threshold and it's got to be serious, but I don't want to say no to credit enhancement without knowing what [the actual proposal] is," said Hurley.

Councilor Eric Sanders expressed the strongest reservations about opening the doors to credit enhancement TIFs saying they would "dilute the value" of why he would want a TIF, namely for public improvements. But when urged to by Marshall to consider businesses located outside of the downtown, Sanders softened his objection.

On the flip side, Marshall cautioned that offering credit enhancement TIFs would almost certainly set a precedent.

"If you start issuing them, there will be a new way of doing business in town," he said in a tone that suggested something between a surge of requests and a sea change.

Slocum summarized that the Council appeared open to hearing proposals, and none of the councilors disagreed.

Kittredge said the guidelines discussed by the Council were a good starting point.

"This gives us talking points when we have a conversation with a business," he said. "It sets the stage [and says] nothing's impossible."

In other business, the Council:

• Adopted an amendment to the city's Parks and Recreation Ordinance. The changes stem from a review of the Parks and Recreation Department after the resignation of department head Jim Bell in October 2012. Major changes include the addition of a parks director in the ordinance where previously only the Parks and Recreation Commission was named. The Council also debated and accepted changes around coordination with outside groups and the department's role with regard to rangeways and rights of way.

• Tabled discussion on awarding a contract to build a commercial fisherman's dock at the foot of Main Street. City officials asked for more information about the engineering of the dock.

• Held a closed-door session with city attorneys William Kelly and Kristin Collins under the statute allowing for private discussion of 1) the condition, acquisition or the use of real or personal property permanently attached to real property or economic development, and 2) legal rights, pending or contemplated litigation, or settlement offers. 

Contact Ethan Andrews by email: news@penbaypilot.com