BANGOR, Maine — City councilors voted Monday to enter into a three-year agreement with the American Folk Festival that would gradually draw down municipal support for the annual waterfront event.

The council order, which passed by a unanimous vote, includes several articles detailing the level of support Bangor intends to provide as host city to the popular festival — something that has never before been put to paper.

The main points of the order are:

• A promissory note that addresses $300,000 in debt, built up over a five-year period, that the festival owes to the city. The total would be paid back over 10 years at no interest.

• An agreement that fiscal agent duties, which historically have been executed by the city’s finance department, will be turned over to the festival no later than June 30, 2010.

The city will no longer provide any cash contributions to the folk festival, nor will the festival seek any cash contributions from the city.

• The city will commit to providing in-kind services — including but not limited to police, fire, public works and engineering duties — not to exceed $65,000 for the 2010 festival, not to exceed $50,000 for the 2011 festival and no more than $40,000 for the 2012 event. The value is determined by what the city would charge to provide those services, both in staff time and what it costs to operate specific equipment.

The folk festival board of directors agrees to change its by-laws to remove the two City Council representatives from the board.

The three-year agreement is something that could be extended at the council’s pleasure once the three years are up, according to city solicitor Norman Heitmann, who drafted the order.

Despite a reduction in contribution from the city, Maria Baeza, chairwoman of the folk festival’s board of directors, praised a process that she called both necessary and beneficial.

“I applaud the council for asking tough questions. This is your responsibility as city representatives,” she said. “This transition year will be a learning experience for all of us, and we look forward to meeting with you at the end of the festival to evaluate those changes.”

Councilors were unanimous in their support of the agreement, but Pat Blanchette said she was uncomfortable not charging any interest on the festival’s debt.

“It’s not revenge,” she said. “But we’ve never done that before. There are no freebies.”

Gerry Palmer wondered whether the agreement is too restrictive.

“I think the council is being quite harsh,” he said. “I wish we could be more flexible.”

Every councilor, though, was happy to put the matter to rest.

The American Folk Festival on the Bangor Waterfront branched off from the National Folk Festival in 2005. While popular, the festival built significant debt over the course of five years, most of which has been paid by the city of Bangor through surplus funds.

Last year, the city cut off its funding and the previously undisclosed financial relationship between the city and the festival became public, prompting festival organizers to take a harder look at the budget. The folk festival board last month unveiled a 2010 budget that cut $140,000 from expenses in an effort to keep the event financially solvent.

Although the festival will remain free, some changes were made. The number of stages will decrease from six to four, the festival will contract directly for technical services rather than relying on an outside service, and the festival will expand the selection of crafters and vendors to increase revenue.

Baeza said Monday that she, her board colleagues and the festival’s staff are eager to proceed with the 2010 festival.