By Gloria Austin
Staff Writer
Houlton Town Manager Eugene Conlogue got the OK from councilors last Thursday night to pursue Phase Two of the North Road water and sewer project, as well as extend the Tax Increment Finance District from 20 years to the maximum 30 years.
The vote was 5-0 to proceed with the infrastructure improvements. Councilor John White, Jr. was excused from the meeting.
More than a dozen community members, including North Street business owners, attended the meeting.
Last January, councilors discussed the sewer/water project, as a business was interested in moving onto the North Road.
“That business has since decided not to move into the area,” said Chairman Paul Cleary. “The discussion now is moving forward with a $1.6 million bond — whether it would be worth it in the long run; will the TIF [tax increment funding] money be there — or delay the project and hold onto the money until a business comes forward to make this worthwhile.”
Those were the two proposals for the council to decide.
Cleary cited the work to be done would be 1.1 miles of improvements, with no guarantee of what type of business if any would come after the infrastructure was completed.
John Clark, director of the Houlton Water Company, was invited to speak at the workshop. Other business owners raised their hands at times to address the council, but were not allowed to do so.
“My only contribution to this discussion is why the Water Company didn’t borrow the money and proceed with this project,” he said. “We’ve struggled with this.”
Clark pointed out that the Water Company board understood that the North Road was a prime piece of future development.
“We tried to retain grant money from Rural Development three years ago,” Clark said. “They refused us any money because there were not enough potential customers to make the project worthwhile from an economic point of view.”
Former Town Manager Doug Hazlett approached the Water Company a year ago and wanted to know if the town supplied TIF monies if the Water Company would borrow the money.
“My board discussed that,” said Clark. “But, they came to the conclusion from an economic point of view, as far as paying the debt, if the TIF money ever disappeared, we’d be in trouble with all the burden going onto our rate payers.
“Obviously, we are positive about development,” said Clark. “We — Houlton Water Company — do a lot of things to try to encourage development. But, we didn’t think we could cope with this.”
Since there is not enough usage to pay back the $1.6 million, if the Houlton Water Company was to take on the debt, by backend calculations, it would take something like the size of Houlton Regional Hospital times three to recoup the debt or five or six A.E. Staley [Tate & Lyle] with that development to make it pay for itself. Right now, it is just not there, said Clark.
Councilor Dan Peabody asked Clark what time period his board was looking at.
“It would have been over the life of the loan,” he said, which is 20 years.
In June 2012, a referendum was sent to the townspeople who voted in favor of the North Road project, 336-103.
“There are 4,200-plus registered voters,” Cleary stated. “Less than 10 percent voted on the issue.”
Councilor Sue Tortello inquired if existing businesses had to be hooked up on the new line. Code Enforcement Officer Kevin Tingley said, “Only new businesses within 200 feet would have to hook in. Existing businesses — within 200 feet — would not be forced to tie in, as long as everything was functioning properly.”
Tortello also wanted to know the cost for Houlton Water Company to maintain the line.
“The problem is there is no usage,” explained Clark. “Once a month, we’d have to flush the sewer line and turn the water over because it would be stagnant. We’d flush the water main down the sewer main, which would also be good for the pumping system. A rough calculation would be $2,000 a year.”
Town Manager Conlogue noted, once the bonds are paid off by the town, the line could be turned back to the Houlton Water Company and it would be feasible for them to maintain it.
But for Conlogue, the question remained how would the town finance the project? The North Road project is funded by two bonds, each of which has been approved and funds have been drawn from each for expenses incurred to date. The water bond carries a 1 percent interest rate and the sewer bond, 3 percent.
“You have seen fit as a previous council to take on the $1.6 million bonds, a total of two bonds, to do this project. The engineer has done his work, designed the project, and is now waiting to be put out to bid. The pieces are in place.”
Conlogue believed the project was viable.
If the council was to delay or stop the project, the repayment terms of the water bond, in essence, say, the town would need to pay an additional $81,857 on top of the $647,250 already borrowed and $22,000 spent to date to play off the loan.
The North Road TIF District — from the interstate to the Currier Road — was created to help fund future water/sewer infrastructure.
“Any new investment in that TIF District for the life of the district is sheltered,” said Conlogue.
There are two primary ways the monies are used: one is for qualifying purposes for the town and the other is for Credit Enhancement Agreements [CEA], which rebate some of the proceeds to a business who makes an investment in the TIF District.
Conlogue noted the TIF District is generating income to itself through payment of taxes on new investments over the years and that is going to happen for at least 20 years on agreements the town has made. The CEA give back to businesses for 10 years so in year 11, the full amount of taxes stay with the town side of the ledger not, business side.
Money generated in the 11th year would be able to be set aside in the town’s general fund, which in turn, can be used to lower the tax rate.
However, if a TIF District expires, any unused money in the TIF can be taken by the state because the town didn’t use all the monies. That is why Conlogue recommended extending the life of the TIF District from 20 to 30 years.
“We are basing a 20-year loan on information we have right now,” said Cleary. “Any time in 20 years, something could happen to change all of this.”
If the state were to abolish TIF Districts, around $99,000 would have to be absorbed into the town’s yearly budget.
“Obviously, the state can do what it wants,” said Peabody. “It must be a pretty big hurdle. If they do that to Houlton, Maine would they not do that in Augusta or Bangor? Those areas would be swallowing a lot more debt load beyond us.”
“A lot of evaluation is being based on hopes and prayers of things to happen,” said Cleary.
“Yes on development,” said Conlogue. “But, not to paying off our bonds.”
The bonds will have to be paid back. Conlogue noted that the town, by proceeding with the North Road project is “preparing itself for economic development. By having an infrastructure in place, it is a major advantage to any business looking to come. That is the type of project we have here.”
Cleary, again, noted borrowing $1.6 million with no expansion possibilities.
“No current proposals for construction,” added Conlogue.
“With a hope and prayer, if you build it, they will come,” Cleary said. “It’s a big investment hoping it is going to happen or is this coming back on the taxpayers of Houlton?”
“I don’t see the state pulling the TIF District,” Conlogue injected. “But, there are no guarantees in economic development.”
Councilor Tortello took offense to Cleary relating the council’s decision a year ago was not thought out.
“I don’t think this has been approached on a wing or prayer,” she said. “This has been a long-term project that has had a lot of thought put into it. Our comprehensive plan has addressed this, and has addressed this quite some time ago. We have identified the North Road as our business district. We created TIFs and Pine Tree zones.
“And, we have identified, one of the reasons we feel it is not living up to its potential is because it doesn’t have existing utilities,” she added. “It would be a whole lot easier to market the area if you have utilities in place than to try to entice someone to come without them. Frankly, shame on us if we go ahead with this project and we don’t encourage businesses to come. We have something to market out there. We have some large lots ready to go on a very major highway. Yes, this is a lot of hopeful thinking, but not unplanned hopeful thinking. I think this has been very well thought out. ”
Tortello also said the council has the townspeople’s support, the contractors are ready, the interest rates are low.
“If we don’t do it now,” she said, “it will be that much more expensive to do it if we wait.”
Councilor John Fitzpatrick backed Tortello.
“A year ago, we talked about this and everyone was really excited to put the extension of sewer/water up the North Road – not just for Grammy’s – but for future expansion. Hopefully, there will be future expansions. The money is here. If it is not used in some years, the state sweeps it out. We’ve done this all for not. We created TIF district to build infrastructure. I say let’s do it.”
