Thoughts on Scarborough's TIF and CEA

Scarborough is confronted with a desire to lower real estate property taxes for its residents coupled with a requirement to comply with an existing TIF and CEA. In this case the CEA returns to the developer 40% of all property tax collected in the TIF zone while the TIF itself strictly limits what the 60% balance of the TIF zone tax can be used for. The fundamental problem is that taxes collected within a TIF zone are intended to be used for improvements to that zone and with but few exceptions prohibited from helping the ordinary cost burdens of that zone such as school enrollment increases, Fire and Police Department costs, etc. The only hope Scarborough has to alleviate ever increasing residential tax burdens is to try to find ways to tap into the 60% by convincing the State that they can offset certain other fixed expenses that the town might dream up. Sadly, what they are suggesting are items way out on the periphery of the normal town expenses which come from the General Fund. The net result is that the typical homeowner will only realize a fraction of 1% improvement to his tax bill. The fact that Scarborough hopes to include a sizable residential area within the existing TIF zone further complicates their problem.

North Yarmouth is experiencing a problem similar to ours in Falmouth. Developers love to have no limit on the number of homes they can build each year. Existing taxpayers realize that a town needs to carefully control its growth to make certain that it does not over extend itself. We do have a growth cap in Falmouth but the growth cap is meaningless if you have residential TIF districts available. Commercial and Industrial TIFs are a different story. They do not introduce a school enrolment increase, most of the operating expenses, trash pickup, snow plowing, etc. are picked by that entity. The letters written by North Yarmouth residents are perfectly on target and should be heeded by those of us living in Falmouth.

             Falmouth’s Town Council is considering whether to create a new Tax Increment Financing (TIF) district for an area along Route 100 in West Falmouth.

             The State created TIFs to promote and facilitate growth. They’re meant to provide funding for infrastructure projects that serve that sole purpose.  They’re also meant to fund planning staff, consultants, and promotional activities to serve that purpose.

             From the date of a TIF’s creation, all growth in valuation of properties within the TIF’s boundaries is separated from the general tax base and thereafter taxed solely for the TIF’s benefit.  Revenues that would normally go to pay for Town and School services go to the TIF account instead.  This revenue loss boosts the Town’s tax rate – all in the name of growth.

             As an incentive for Towns to create TIFs and boost growth, the valuation that is set aside for the TIF is disregarded in calculations about State revenue sharing, school contribution, and county taxes.  This results in a relatively small subsidy to the Town.  But what’s the good of a subsidy if it induces you to do something you don’t want?

             Falmouth’s 2016 zoning ordinance changes were designed to promote growth, especially dense residential growth.  Ever since, residents have been boisterously opposing the results of those unwanted changes. Their distaste for such growth was overwhelmingly evident in last year’s Vision and Values survey. Their opposition to the resulting excessive residential growth in West Falmouth has been especially loud and persistent.

             TIF spending escapes the discipline of the budget process, where it would compete with other priorities. TIF revenues flow automatically into the TIF accounts and are spent on TIF projects without having to compete with other Town priorities.  In 2020 in response to the dire economic emergency that year, the Council cut the Fire & Rescue reserve funding without having the option to instead draw the necessary savings from TIF reserves. We are still paying the price of that misplaced priority.Accordingly, residents who don’t want the Town government to promote and facilitate residential growth in that part of town should promptly demand that the Council nix this TIF proposal.

             Per the statute that created them, TIFs are not meant for prosperous, growing towns like Falmouth.  They are meant for economically depressed neighborhoods or precincts in need of revitalization or redevelopment. Hence this could be seen as an equity issue – boosting growth and subsidizing it in an already prosperous and growing town.

             Adding to the urgency is the looming economic crisis and emergency need to sharply curb the budget.  You can send your message via the Town website, https://www.falmouthme.org/town-council-town-manager. 

Robert D. King

82 Falmouth Road

Falmouth, ME 04105

(207) 781-2767