An Act To Establish a Municipal Affordable Housing Development District Tax Increment Financing Program
Maine Legislature, Session 121, LD 0858
Committee: Taxation
Sponsors: MILLS, KOFFMAN, SUSLOVIC

Legislative Document 
No. 858 
H.P.635 
House of Representatives, February 20,2003 
An Act To Establish a Municipal Affordable Housing Development 
District Tax Increment Financing Program 
Reference to the Committee on Taxation suggested and ordered printed. 
Presented by Representative MILLS of Cornville. 
/rj~/J7.~ 
MILLICENT M. MacFARLAND 
Clerk 
Cosponsored by Representatives: KOFFMAN of Bar Harbor, SUSLOVIC of Portland. 
Printed on recycled paper 
Be it enacted by the People of the State of Maine as follows: 
Sec. I. 30-A MRSA c. 206. sub-c. 3 is enacted to read: 
SUBCHAPTER 3 
MUNICIPAL AFFORDABLE HOUSING 
DEVELOPMENT DISTRICTS 
§5245. 
Findings and declaration of necessit~ 
1. 
Legislative finding. 
The Legislature finds that there 
is a need for the development of affordable, livable housing and 
the 
containment 
of 
the 
costs 
of 
unplanned 
growth 
in 
Maine 
municipalities. 
2. 
Authorization. 
For the reasons set out in subsection 1, 
a 
municipality may 
develop 
a 
program to provide 
impetus for 
affordable 
housing 
development 
within 
a 
district 
of 
the 
municipality, as provided in the comprehensive plan adopted by 
the legislative body of the municipality. 
3. 
Declaration of public purpose. 
It is declared that the 
actions 
reguired 
to 
assist 
the 
implementation of 
affordable 
housing development programs are a public purpose and that the 
execution and financing of these programs are a public purpose. 
§5246. 
Definitions 
As 
used in this subchapter, unless the context otherwise 
indicates, the following terms have the following meanings. 
1. 
Affordable 
housing. 
"Affordable 
housing" 
means 
a 
decent, safe and sanitary dwelling, 
apartment or other livina 
accommodation for a household whose income does not exceed 120°" 
of the median income for the area as defined by the United States 
Department of Housing and Urban Development under the United 
States Housing Act of 1937, Public Law 412, 50 Stat. 888, Section 
8, as amended. 
2. 
Affordable housing development district. 
"Affordable 
housing development district" or "district" means 
a 
specified 
area within the corporate limits of a municipality that has been 
designated 
as 
provided 
under 
sections 
5247 
and 
5250 
to 
be 
developed under 
an affordable housing development program and 
financed under section 5250-A. 
3. 
Affordable housing development 
program. 
"Affordable 
housing development program" or "program" means a statement of 
Page I-LR0787(1) 
means and objectives designed to encourage the development and 
maintenance of affordable housing within an affordable housing 
development district. 
4. 
Amenities. 
"Amenities" means items of street furniture, 
signs and landscaping, including, but not limited to, plantings, 
benches, 
trash 
receptacles, 
street 
signs, 
sidewalks 
and 
pedestrian malls. 
5. 
Authority. 
"Authority" means the Maine State Housing 
Authority. 
6. 
Captured assessed value. 
"Captured· assessed 
value" 
means the amount, 
as a percentage or stated sum, of increased 
assessed value that is utilized from year to year to finance the 
project costs contained within the affordable housing development 
program. 
7. 
Current assessed value. 
"Current assessed value" means 
the assessed value of the district certified by the municipal 
assessor as of April 1st of each year that the affordable housing 
development district remains in effect. 
8. 
Director. 
"Director" means the Director of the Maine 
State Housing Authority. 
9. 
Financial plan. 
"Financial plan" means a statement of 
the project costs and sources of revenue required to accomplish 
the affordable housing development program. 
10. 
Increased assessed value. 
"Increased assessed value" 
means the valuation amount by which the current assessed value of 
an affordable housing development district exceeds the original 
assessed value of the district. If the current assessed value is 
equal 
to 
or 
less 
than 
the original, 
there is 
no 
increased 
assessed value. 
11. 
Maintenance and operation. 
"Maintenance and operation" 
means all activities necessary to maintain affordable housing 
after development and all activities necessary to operate the 
affordable housing, including, but not limited to, informational, 
promotional, safety and surveillance activities. 
12. 
Original assessed value. 
"Original 
assessed value" 
means the assessed value of an affordable housing development 
district as of March 31st of the tax year preceding the year in 
which it was designated. 
13. 
Project costs. 
"Project costs" means any expenditures 
or monetary obligations incurred or expected to be incurred that 
are authorized by section 5249, subsection 1 and included in an 
affordable housing development program. 
14. 
Tax increment. 
"Tax 
increment" means real property 
taxes assessed by a municipality, in excess of any state, county 
or special district tax, upon the increased assessed value of 
property in the affordable housing development district. 
15. 
Taz; 
shifts. 
"Tax 
shifts" 
means 
the 
effect 
on 
a 
municipality's state revenue sharing, 
education subsidies 
and 
county tax obligations that results from the designation of an 
affordable 
housing 
development 
district 
and 
the 
capture 
of 
increased assessed value. 
16. 
Tax 
year. 
"Tax 
year" 
means 
the 
period 
of 
time 
beginning on April 1st and ending on the succeeding March 31st. 
§5247. 
Affordable housing development districts 
1. 
Creation. 
A municipal legislative body may designate an 
affordable housing development district within the boundaries of 
the municipality in accordance with the requirements of this 
subchapter. If the municipality has a charter, the designation of 
an affordable housing development district may not be in conflict 
with the provisions of the municipal charter. 
2. 
Considerations 
for 
approval. 
Before 
designating 
an 
affordable housing development district within the boundaries of 
a 
municipality, 
or before establishing an affordable housing 
development 
program 
for 
a 
designated 
affordable 
housing 
development district, the legislative body of a municipality must 
consider whether the proposed district or program will contribute 
to the expansion of affordable housing opportunities wi thin the 
municipality or 
to the betterment of the health, welfare or 
safety of the inhabitants of the municipality. Interested parties 
must 
be 
given 
a 
reasonable opportunity to present testimony 
concerning 
the 
proposed district or 
program 
at 
the 
hearing 
provided for in section 5250, 
subsection 1. If an interested 
party claims at the public hearing that the proposed district or 
program will result in a substantial detriment to that party's 
existing property interests in the municipality and produces 
substantial evidence to that effect, the legislative body shall 
consider 
that evidence. 
When 
considering that 
evidence, 
the 
legislative body also shall consider whether any adverse economic 
effect of the proposed district or program on that interested 
party's 
existing property 
interests 
in 
the 
municipality 
is 
outweighed by the contribution made by the district or program to 
the availability of affordable housing within the municipality or 
to 
the betterment of 
the health, 
welfare or 
safety of 
the 
inhabitants of the municipality. 
3. 
Conditions for approval. 
Designation of an affordable 
housing 
development 
district 
is 
subject 
to 
the 
following 
conditions. 
A. 
At least 25'1>0, 
by area, of the real property within an 
affordable housing development district must: 
(1) 
Be suitable for residential use: 
(2) 
Be a blighted area: or 
(3) 
Be in need of rehabilitation or redevelopment. 
B. 
The affordable housing development district is subject 
to the area cap established in section 5223, subsection 3, 
paragraph B. 
C. 
The original assessed value of 
a 
proposed affordable 
housing 
development 
district plus 
the 
original 
assessed 
value 
of 
all 
existing 
affordable 
housing 
development 
districts within the municipality may not exceed 5°" of the 
total value of taxable property within the municipality as 
of April 1st preceding the date of the director's approval 
of 
the 
designation 
of 
the 
proposed 
affordable 
housing 
development district. 
D. 
The 
aggregate 
value 
of municipal 
general 
obligation 
indebtedness 
financed 
by 
the 
proceeds 
from 
affordable 
housing development districts within 
any 
county 
may 
not 
exceed 
$50,000,000 
adjusted 
by 
a 
factor 
equal 
to 
the 
percentage 
change 
in the 
United States 
Bureau of 
Labor 
Statistics Consumer Price Index, United States City Average 
from January 1, 2002 to the date of calculation. 
E. 
The affordable housing development program must 
sho"'-
that the development meets an identified community housing 
need. 
The 
affordable 
housing 
development 
program 
must 
provide a mechanism to ensure the ongoing affordabili ty for 
a period of at least 5 years. 
F. 
Acquisition, 
construction 
and 
installment 
of 
all 
property improvements, buildings, structures, fixtures and 
equipment included within the affordable housing development 
program and financed through municipal bonded indebtedness 
must be completed within 5 years of the director's approval 
of the designation of the affordable housing development 
district. 
4. 
Powers of municipality. 
Within an affordable housing 
development district and consistent with an affordable housing 
development 
program, 
a 
municipality 
may 
acquire, 
construct, 
reconstruct, 
improve, 
preserve, 
alter, 
extend, 
operate 
or 
maintain property or promote development intended to meet the 
objectives 
of 
the 
affordable 
housing 
development 
program. 
Pursuant 
to 
the 
affordable 
housing 
development 
program, 
the 
municipality may 
acquire property, 
land or 
easements 
through 
negotiation or by using eminent domain powers in the manner 
authorized for community development programs under section 5204. 
The 
municipality's 
legislative 
body 
may 
adopt 
ordinances 
regulating traffic in and access to any facilities constructed 
within 
the 
affordable 
housing 
development 
district. 
The 
municipality may install public improvements. 
§5248. 
Affordable housing development programs 
1. 
Adoption. 
The legislative body of a municipality shall 
adopt 
an 
affordable 
housing 
development 
program 
for 
each 
affordable housing development district. The affordable housing 
development program must be adopted at the same time as the 
district as part of the district adoption proceedings or, if at a 
different time, in the same manner as adoption of the district, 
with the same notice and hearing requirements of section 5250. 
Before adopting an affordable housing development program, the 
municipal 
legislative 
body 
shall 
consider 
the 
factors 
and 
evidence specified in section 5247. 
2. 
Requirements. 
The 
affordable 
housing 
development 
program must include: 
A. 
A financial plan in accordance with subsection 3; 
B. 
A description of facilities, improvements or programs to 
be financed in whole or in part by the affordable housing 
development program; 
c. 
Plans for the relocation of persons displaced by the 
development activities; 
D. 
The environmental controls to be applied: 
E. 
The 
proposed 
operation 
of 
the 
affordable 
housing 
development district after 
the 
planned 
improvements 
are 
completed; 
F. 
An 
assurance that the program complies with section 
4349-A: 
I 
, 
G. 
The duration of the program, which may not exceed 30 
years from the date of designation of the district; and 
H. 
All 
documentation 
submitted 
to 
or 
prepared 
by 
the 
municipality under section 5247, subsection 2. 
3. 
Financial 
plan 
for 
affordable 
housing 
development 
district. 
The 
financial 
plan 
for 
an 
affordable 
housing 
development district must include: 
A. 
Cost estimates for the affordable housing development 
program; 
B. 
The amount of public indebtedness to be incurred; 
C. 
Sources of anticipated revenues; 
D. 
A 
description 
of 
the 
terms 
and 
conditions 
of 
any 
agreements, contracts or other obligations related to the 
affordable housing development program; and 
E. 
For each year of the affordable housing development 
program: 
(1) 
Estimates 
of 
increased assessed values 
of 
the 
district; 
(2) 
The portion of the increased assessed values to be 
applied to the affordable housing development program 
as 
captured 
assessed 
values 
and 
resulting 
tax 
increments in each year of the program; and 
( 3) 
A calculation of the tax shifts resulting from 
designation 
of 
the 
affordable 
housing 
development 
district. 
4. 
Limitation. 
For 
affordable 
housing 
development 
districts, a municipality may expend the tax increments received 
for any affordable housing development program only in accordance 
with the financial plan. 
§5249. Project costs 
1. 
Authorized project costs. 
The director shall review 
proposed project costs to ensure compliance with this subsection. 
Authorized project costs are: 
A. 
Costs of improvements made within the affordable housing 
development district, including, but not limited to: 
(1) 
Capital costs, including, but not limited to: 
(a) 
The acguisition of land or construction of 
public infrastructure improvements for affordable 
housing development; 
( b) 
The 
demolition, 
alteration, 
remodeling, 
repair or reconstruction of existing buildings, 
structures and fixtures; 
(c) 
Site preparation and finishing work; and 
(d) 
All fees and expenses that are eligible to be 
included in the capital cost of such improvements, 
including, 
but 
not 
limited 
to, 
licensing 
and 
permitting 
expenses 
and 
planning, 
engineering, 
architectural, 
testing, 
legal 
and 
accounting 
expenses; 
(2) 
Financing costs, including, but not limited to, 
closing costs, 
issuance costs 
and interest paid to 
holders of evidences of indebtedness issued to pay for 
project costs and any premium paid over the principal 
amount of that indebtedness because of the redemption 
of the obligations before maturity; 
(3) 
Real property assembly costs; 
(4) 
Professional service costs, 
including, 
but 
not 
limited 
to, 
licensing, 
architectural, 
planning, 
engineering and legal expenses; 
(5) 
Administrative costs, including, but not limited 
to, reasonable charges for the time spent by municipal 
employees in connection with the implementation of an 
affordable housing development program; 
(6) 
Relocation costs, including, but not limited to, 
relocation payments made following condemnation; 
(7) 
Organizational costs relating to the establishment 
of the affordable housing district. including, but not 
limited 
to, 
the 
costs 
of 
conducting 
environmental 
impact and other studies and the costs of informing the 
public 
about 
the 
creation 
of 
affordable 
housing 
development districts and the implementation of project 
plans; 
(8) 
Costs 
of 
facilities 
used 
predominantly 
for 
recreational purposes, including, but not limited to, 
recreation centers, athletic fields and swimming pools; 
and 
(9) 
Costs for child care, including finance costs and 
construction, 
staffing, 
training, 
certification 
and 
accredi tation costs related to child care located in 
the affordable housing development district; and 
B. 
Costs 
of 
improvements 
that 
are 
made 
outside 
the 
affordable housing development district but are directly 
related to or are made necessary by the establishment or 
operation of the district, including, but not limited to: 
(1) 
That portion of the costs reasonably related to 
the 
construction, 
alteration 
or 
expansion 
of 
any 
facilities not located within the district that are 
reguired due to improvements or activities within the 
distr ict, 
including, 
but 
not 
limited 
to, 
sewage 
treatment 
plants, 
water 
treatment 
plants 
or 
other 
environmental 
protection devices: 
storm 
or 
sanitary 
sewer 
lines; 
water 
lines; 
electrical 
lines; 
improvements to fire stations; and amenities on streets; 
(2) 
Costs of public safety improvements made necessary 
by the establishment of the district; 
(3) 
Costs of funding to mitigate any adverse impact of 
the 
district 
upon 
the 
municipality 
and 
its 
constituents. 
This 
funding 
may 
be 
used 
for 
public 
facilities and improvements; and 
(4) 
Costs to establish permanent housing development 
revolving loan funds or investment funds. 
2. 
Limitation. 
Tax increments received from any affordable 
housing development program may not be used to circumvent other 
tax laws. 
§S2S0. Procedure 
1. 
Notice and hearing. 
Before designating an affordable 
housing development district or adopting an affordable housing 
development 
program, 
the 
municipal 
legislative 
body 
or 
the 
municipal legislative body's designee must hold at least one 
public hearing on the proposed district. Notice of the hearing 
must be published at least 10 days before the hearing ln 
a 
newspaper of general circulation within the municipality. 
2. 
Revie .... 
by director. 
Before final designation of 
an 
affordable 
housing 
development 
district. 
the 
director 
shall 
review the proposal for the district to ensure that the proposal 
complies with statutory requirements. 
3. 
Effective date. 
A designation of an affordable housing 
development district is effective upon approval by the director. 
4. 
Administration of district. 
The legislative body of a 
municipality 
may 
create 
a 
department, 
designate 
an 
existing 
department, office, 
agency, 
municipal housing or redevelopment 
authority or enter into a contractual arrangement with a private 
entity to administer activities authorized under this subchapter. 
5. 
Amendments. 
A municipality 
may 
amend 
a 
designated 
affordable housing development district or an adopted affordable 
housing development program only after meeting the requirements 
of 
this 
section 
for 
designation 
of 
an 
affordable 
housing 
development 
district 
or 
adoption 
of 
an 
affordable 
housing 
development program. A municipality may not amend the designation 
of an affordable housing development district if the amendment 
would result in the district's being out of compliance with any 
of the conditions in section 5247, subsection 3. 
§5250-A. 
Affordable housing tax increment financing 
1. 
Designation of captured assessed value. 
A municipality 
may retain all or part of the tax increment revenues generated 
from 
the 
increased 
assessed 
value 
of 
an 
affordable 
housing 
development district for the purpose of financing the affordable 
housing development program. The amount of tax increment revenue~ 
to be retained is determined by designating the captured assessed 
value. 
When 
an affordable housing development program for 
an 
affordable housing development district is adopted, the municipal 
legislative body shall adopt a 
statement of the percentage of 
increased assessed value to 
be 
retained as 
captured assessed 
value 
in 
accordance 
with 
the 
affordable 
housing 
development 
program. 
The statement of percentage may establish a 
specific 
percentage or percentages or may describe a method or formula for 
determination of the percentage. 
The municipal assessor shall 
certify 
the 
amount 
of 
the 
captured 
assessed 
value 
to 
the 
municipality each year. 
2. 
Certification of assessed value. 
Upon 
or after the 
formation of 
an 
affordable housing 
development district, 
the 
assessor of the municipality in which the district is located 
shall certify the original assessed value of the taxable property 
within 
the 
boundaries 
of 
the 
affordable 
housing 
development 
district. 
Each 
year 
after 
the 
designation 
of 
an 
affordable 
housing 
development 
district. 
the 
municipal 
assessor 
shall 
certify the amount by which the assessed value has increased or 
decreased from the original value. 
Nothing 
in 
this 
subsection 
allows 
or 
sanctions 
unequal 
apportionment or assessment of the taxes to be paid on real 
property in the State. 
An 
owner of real property wi thin the 
affordable housing development district pays real property taxes 
apportioned equally with property taxes paid elsewhere in the 
muni cipali ty. 
3. 
Affordable housing development program fund: affordable 
housing tax increment revenues. 
If a municipality has designated 
captured assessed value 
under 
subsection 
1, 
the municipality 
shall: 
A. 
Establish an affordable housing development program fund 
that consists of the following: 
(1) 
A project cost account that is pledged to and 
charged with the payment of project costs that are 
outlined in the financial plan and are paid in a manner 
other than as described in subparagraph (2); and 
(2) 
In 
instances 
of 
municipal 
indebtedness, 
a 
development sinking fund account that is pledged to and 
charged with the payment of the interest and principal 
as 
the 
interest 
and 
principal 
fall 
due 
and 
the 
necessary charges of paying interest and principal on 
any notes, 
bonds 
or other evidences of indebtedness 
that were issued to fund or refund the cost of the 
affordable housing development program fund; 
B. 
Annually set aside all affordable housing tax increment 
revenues on captured assessed values and deposit all such 
revenues to the appropriate affordable housing development 
program fund account established under paragraph A in the 
following order of priority: 
(1) 
To the affordable housing development sinking fund 
account, an amount sufficient, together with estimated 
future 
revenues 
to be deposited to the account 
and 
earnings 
on the 
amount, 
to satisfy all annual 
debt 
service on bonds and notes issued under section S2S0-D 
and the financial plan; and 
(2) 
To the affordable housing project cost account, an 
amount 
sufficient, 
together 
with 
estimated 
future 
revenues to be deposited to the account and earnings on 
the amount, 
to satisfy all annual affordable housing 
project costs to be paid from the account; 
C. 
Make transfers between affordable housing development 
program 
fund 
accounts 
established 
under 
paragraph 
A 
as 
required, provided that the transfers do not result in a 
balance in the affordable housing development sinking fund 
account that is insufficient to cover the annual obligations 
of that account; and 
D. 
Annually return to the municipal general fund any tax 
increment 
revenues 
remaining 
in 
the 
affordable 
housing 
development sinking fund account established under paragraph 
A in excess of those estimated to be required to satisfy the 
obligations of the development sinking fund account after 
taking into account any transfers made under J?aragraJ?h C. 
The 
municipality, 
at 
any 
time 
during 
the 
term 
of 
the 
district, by vote of the municipal officers, may return to 
the 
municipal 
gene~al 
fund 
any 
tax 
increment 
revenues 
remaining 
in the project cost account established under 
paragraph A in excess of those estimated to be required to 
satisfy the obligations of 
the 
development project cost 
account after taking into account any transfer made under 
paragraph C. 
In either case, 
the corresponding amount of 
local valuation may not be included as part of the captured 
assessed value as specified by the municipality. 
§S250-B. 
Rules 
The director may 
adoJ?t rules necessary to carry out the 
duties 
imposed 
by 
this 
subchapter 
and 
to 
ensure 
municiJ?al 
comJ?liance 
with 
this 
subchaJ?ter 
following 
designation 
of 
an 
affordable housing develoJ?ment district. Rules adopted pursuant 
to this section are routine technical rules as defined in Title 
5, chapter 375, subchapter 2-A. 
§5250-C. 
Grants 
A municipality may receive grants or gifts for any of the 
purposes of this subchaJ?ter. The tax increment revenues within an 
affordable housing development district may be used as the local 
match for certain grant J?rograms. 
§S250-D. 
Bond financing 
The legislative body of a municipality may authorize, issue 
and sell bonds, including but not limited to general obligation 
or revenue bonds or notes, that mature wi thin 20 years from the 
date of issue to finance all J?roject costs needed to carry out 
the affordable housing development program wi thin the affordable 
housing development district. The municipal officers authorized 
to issue the bonds or notes may borrow money in anticipation of 
the sale of the bonds for a J?eriod of up to 3 years by issuing 
temporary notes and notes in renewal of the bonds. All 
revenue~ 
derived under section 5250-A received by the municipality 
ar~ 
pledged 
for 
the 
payment 
of 
the activities described in 
the 
affordable housing development program 
and used to 
reduce or 
cancel the taxes that may otherwise be required to be expended 
for that purpose. The notes, bonds or other forms of financing 
may not be included when computing the municipality's net debt. 
Nothing in this section restricts the ability of the municipality 
to raise revenue for the payment of project costs in any manner 
otherwise authorized by law. 
§5250-E. 
Administration 
1. 
Reports. 
The legislative body of a municipality must 
report 
annually 
to 
the director 
regarding the 
status of 
an 
affordable housing development district. 
The report must: 
A. 
Certify that 
the 
public 
purpose 
of 
the 
affordable 
housing district, as outlined in this subchapter, is being 
B. 
Account for any sales of property wi thin the district; 
C. 
Certify that rental units within the affordable housing 
development district have remained affordable. 
2. 
Recovery of public funds. 
The authority shall develop 
by rule provisions for recovery of public revenue if conditions 
for approval of an affordable housing development district are 
not maintained for the duration of the district. Rules adopted by 
the authority pursuant to this subsection must be submitted to 
the 
Legislature 
ln 
accordance 
with 
Title 
5, 
chapter 
375, 
subchapter 2-A. 
§5250-F. 
Advisory board 
The 
legislative 
body 
of 
a 
municipality 
may 
create 
an 
advisory board, 
a majority of whose members must be owners or 
occupants 
of 
real 
property 
located 
in 
or 
adjacent 
to 
the 
affordable housing development district they serve. The advisory 
board shall advise 
the legislative body 
on the planning and 
implementation of the affordable housing development program, the 
construction of the district and the maintenance and operation of 
the district after the program has been completed. 
§5250-G. 
Unorganized territory 
Page l2-LR0787(1) 
For the purposes of this subchapter, a county may act as a 
municipality for the unorganized territory within the county anq 
may designate affordable housing development districts within the 
unorganized territory. When a county acts under this section, the 
county commissioners act as the municipality and as the municipal 
legislative body, the State Tax Assessor acts as the municipal 
assessor and the unorganized territory fund receives the funds 
designated for the municipal general fund. 
SUMMARY 
This bill creates a separate tax increment financing law for 
affordable housing development districts. 
Page l3-LR0787(1) 
,