For Municipalities: Tax Increment Financing Law – Near Miss at the Legislature

You may have heard recently that the ME Legislature was considering a bill that would have created significant problems for municipalities who use, or plan to use, tax increment financing as part of their economic development toolbox. The good news is that on April 27, 2015, the Joint Standing Committee on Taxation voted “ought not to pass” on LD 581, An Act to Clarify the Municipal Development District Law. An important takeaway from the short life of LD 581 is that even TIF bills that appear to have a positive purpose could have a devastating impact on ME’s TIF program if those bills are passed into law without careful scrutiny. LD 581 was not designed to target any particular industry, but would have effectively eliminated most of the credit enhancement agreements municipalities enter into today. Some of the problematic provisions of LD 581 included the following restrictions:

• Onerous job creation requirements for credit enhancement agreements which would have been impossible for most developers to meet

• Provisions that would have limited the use of a credit enhancement agreement to only those TIF programs located in an area designed as a blighted area in a municipal comprehensive plan

• Provisions that would have limited credit enhancement agreements to property “owners” even though many credit enhancement agreements are entered into with leaseholders

• Revised notice provisions that would have been onerous and extremely expensive to execute

Had it been passed into law, the bill would have taken away the local control that communities currently enjoy in setting economic development policies and practices for their own communities. The Bernstein Shur Municipal and Regulatory Practice Group and the Bernstein Shur Legislative Practice Group coordinated efforts on behalf of various clients to oppose the bill and educate the Joint Standing Committee on Taxation about the impact of the bill. 

Shana Cook Mueller and Joan Fortin are members of Bernstein Shur’s Municipal and Regulatory Practice Group and Kate Knox is a member of the Legislative and Political Law Practice Group. For more information, please contact them at smueller@bernsteinshur.com or 207 228-7134 or jfortin@bernsteinshur.com or 207 228-7310.