How Do We Keep Scarborough Affordable?

Council Corner: How Do We Keep Scarborough Affordable?

By Jon Anderson, Scarborough Town Council

“How do we keep Scarborough affordable?” It’s a simple question, but the answer is complex. One unpopular mechanism is through smart growth. If you don’t like growth, but want stable taxes, it is difficult to have it both ways. On October 2nd, Crossroads Holding LLC voluntarily presented their latest progress to the Town. The Downs is a divisive topic due to the Credit Enhancement Agreement (CEA). I would never live at the Downs. High density development and modern New England architecture is not for me, but it has a place in our Town. Many wonderful people live there who contribute to our community and are welcome here. Some even have roots in Scarborough, downsizing due to an empty nest or younger residents returning home but can’t afford a single family home elsewhere in town.  

The Town established a tax increment financing (TIF) district in Oak Hill and the Downs. This allows us to shield new taxable value from the state, keeping our state valuation lower than it would be otherwise, which impacts our state aid and county taxes. Having this tax shelter benefit allows for the Town to invest back into ourselves to help stabilize the tax rate. In order for the benefit to be effective, the TIF district must generate new value. The rationale of the CEA was to spur economic development to generate this new value by providing a tax credit if the developer met non-residential performance standards. The standards are designed to also generate a fiscal benefit to the Town. This credit allows the developer to take on the risk and invest in upfront infrastructure to activate the development.  

As of Year 6 of the CEA, the Town has provided a cumulative total of ~$4M in tax credits. Conversely, the Downs has invested $81M in water, sewer and roadway infrastructure to service the development, including traffic improvements throughout other parts of Town. Our updated financial modeling indicates by the end of the 30-year CEA, the Town stands to gain a next positive fiscal impact of $125,000,000, excluding the tax shelter benefit. This is based on the revenue collected by the Town minus the cost to serve the development AND the tax credit they will receive. The total tax credit they are estimated to receive is $79,000,000 - significantly less than the developers investment costs over the life of the project, particularly when you consider the time value of money. Without the agreement, the Town may have been responsible for these infrastructure costs to generate new value, much like the costs incurred by the Town to activate Haigis Parkway.

With the $125M “profit”, the Town can use funds to offset the increased operating costs from inflation, fund facilities and infrastructure improvements, and continue to provide the services you expect, and perhaps some new ones you would like, while continuing the tradition of a goal of 3% or less annual tax increase. In this high inflationary environment, many communities in Maine without projects like the Downs have experienced double digit tax increases. Scarborough, on the other hand, had a tax increase of 1.35% this year (normalized for the revaluation). While I’ve been on the Council, our tax increases have been in alignment with our goal, in part due to our smart growth strategy at the Downs with the new commercial and residential value they have created.  

Traffic is often a concern expressed by residents. At our workshop, the Downs shared they are seeking a partnership with the Town to pursue federal and state grants to assist with transportation costs. They hired an outside firm and have already identified opportunities for application to address projects in the area. If we are successful, we can leverage these grants to fund traffic improvements that would otherwise likely require more debt and higher taxes. 

With the Downtown Area ahead of schedule, everyone will hopefully find something they enjoy in the Downs in the near future. A restaurant, a coffee shop, a specialty grocer with the treats you like, a small business that provides services that you can’t get elsewhere in Town. These new businesses will also continue to offset property taxes by shifting from residential to commercial businesses to stabilize the tax rate.  

While smart growth is one way to keep Scarborough affordable, it’s not the only way. We need to explore other options and consider the right mix of spending, growth, timing of investments, new revenue sources, affordable housing projects, senior property tax relief and other tools to keep Scarborough affordable. I look forward to exploring ways with the new Council to keep Scarborough affordable, hearing ideas from you, and continuing to work together to make our community better tomorrow than it was yesterday!

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Scarborough Town Council.