It’s been said that there are only two things in life that are certain, death and taxes. That may be true, but a third thing is also fairly certain, people will always be looking for ways to cut their taxes.
One of the most common ways for businesses to cut their taxes is through the use of tax increment financing, or TIFs. Communities often use TIFs to refund a set percentage of tax money back to a business for a set number of years. TIFs are used for projects that have an overall benefit for residents and also broaden the tax base.
When used properly, TIFs can be a good deal for both a business and a town. The business gets a tax break, and the town benefits from the project supported by the TIF. But, towns need to exercise a measure of control when awarding TIFs so as to not unfairly benefit one business over another.
Recently, the Gorham Town Council approved a TIF for Moody’s Collision Center on Narragansett Road to install industrial power in connection with an expansion of the business. The agreement calls for Moody’s to get an approximately $47,000 tax break over 15 years.
This decision was passed by a 4-3 vote, and some councilors questioned whether the Moody’s project benefited the town. “Everything I see is a benefit to the applicant, not the town of Gorham,” Councilor Matt Robinson said.
Gorham has approved TIFs in the past, with one of the most recent being granted to VIP, an auto parts store and repair shop, for road improvements near the company’s new store on County Road.
However, some councilors feel that agreement has cost the town money, and in light of the Moody’s TIF, the council will be taking a look at how it awards TIFs and will come up with a policy to make sure everyone is treated equally and any TIF benefits taxpayers.
Certainly, the expansion of Moody’s and the addition of the industrial power will benefit Moody’s, but the overall benefit to the rest of Gorham is unclear.
Councilor Jane Willett said she felt the town would realize an increase in tax money from increased development in the area served by the newly-installed industrial power. As an additional benefit, Willett said she thought improvements would enhance the appearance of Narragansett Street.
That may be true, but there is no guarantee that any other businesses will come to town because of this TIF. Which still begs the question of what is the overall benefit of this TIF to the town?
While Gorham will be getting some tax money as a result of the expanded Moody’s, it is still paying part of the cost for an improvement, which, at least initially, benefits only one business.
As a contrast, local businessman Hans Hansen has proposed a development adjacent to his farm market on County Road. The town is requiring that Hansen pay up to $200,000 for improvements to the road and the traffic signal at the intersection of South Street and County Road, a project that would arguably have a bigger public benefit than the Moody’s project. Hansen recently said he is thinking about applying for a TIF to help pay for the project.
Not surprisingly, Hansen said he was in favor of the Moody’s tax break, and he should be.
By granting Moody’s a tax break, the council doesn’t have a reasonable argument against granting Hansen a TIF.
The town needs to get a handle on how and when it will grant TIFs so every business gets a fair shot at what they all want, a tax break.
Mike Higgins, assistant editor
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