A developer seeks to avoid paying 70 percent of the new property taxes it expects to owe the town of Bucksport when it builds what looks to be the state’s first land-based Atlantic salmon farm.
Whole Oceans is applying with the town to use the state’s Tax Increment Financing, or TIF, program to help launch the farm in 2021 on the site of the former Verso Paper mill. The benefits could help secure at least 50 jobs expected to be created when the company completes its $190 million first phase.
According to a 39-page draft of a TIF agreement between Bucksport and Whole Oceans, the town supports the TIF because it will “encourage new employment opportunities within the town” and “will encourage and promote economic development that will broaden the town’s tax base.”
Tax increment financing is among the state’s most popular tools for aiding economic development. It allows businesses tax breaks on new development while allowing the host town to avoid state aid reductions and county tax increases that accompany substantial increases in local property values that can result from such development.
Under the draft agreement between Whole Oceans and Bucksport, Whole Oceans would not have to pay property taxes on any of the new value it creates on its portion of the former paper mill site for the first five years of the 20-year agreement. It would have to pay 25 percent of its new property tax obligations over the subsequent five years and 50 percent for the remaining 10 years.
Whole Oceans’ development on a 90-acre portion of the former mill site is expected to increase the site’s property value by $42.2 million, according to the draft TIF agreement prepared by the Portland law firm Pierce Atwood. The site’s value as of March 31 was $1.4 million, according to the agreement.
If taxed at the town’s current tax rate of $16.30 for every $1,000 in property value, that increased value would translate into $13.7 million in new taxes for Whole Oceans in the salmon farm’s first 20 years, or $687,000 annually.
But under the TIF program, the town will reimburse approximately 70 percent of the new taxes — $473,000 a year on average — to Whole Oceans, said attorney Jim Saffian, who represents Whole Oceans.
That reimbursement, which would work out to $9.45 million over 20 years, “will be an important benefit to help the company in its startup phase as it implements an emerging technology,” Saffian said.
“This is a capital-intensive business that is not without risk, and it is trying to bring an important food product to market,” he said.
While the town would forgo new property tax revenue, a TIF allows a town to “shelter” the new property value a business development generates. As a result, the state disregards the new value in calculating the town’s share of school aid and revenue sharing. Because those amounts generally decline with increased property values, the sheltering of the new property value allows larger amounts of state aid to continue flowing. The sheltering also allows the town to pay a lower amount in taxes to the county.
In the case of Whole Oceans and Bucksport, an average of more than $400,000 would be preserved annually in state revenue sharing and school aid, and the town would save about $18,600 in county taxes each year of the 20-year arrangement, according to the TIF agreement draft.
That budget benefit is about $50,000 shy of canceling out the average amount in taxes Bucksport would reimburse to Whole Oceans each year.
The Bucksport Town Council will hold a hearing on the TIF application July 11.
Geared primarily toward industrial development, the TIF program is especially helpful in situations like that of Whole Oceans, Town Manager Susan Lessard said.
“Particularly in this case, in a project that will see no revenue stream for its first four years, this tool assists them in getting up and running,” Lessard said.
Whole Oceans has said it will take two years to build the facility and two years to grow Atlantic salmon from egg to harvest size, which is 10 to 12 pounds.
The town will still get tax money from Whole Oceans. It will pay taxes on the real estate it owns at the value of the property when it was purchased and on the business equipment it will be placing at the former mill site, Lessard said.