PROGRAM GUIDE
AFFORDABLE HOUSING
TAX INCREMENT FINANCING
PROGRAM GUIDE
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April 2005
Affordable Housing Tax Increment Financing
Program Guide
This Program Guide provides guidance to municipalities in designating an affordable housing development district and adopting an affordable housing development program. The designation of a district and adoption of a development program approved by the Maine State Housing Authority allow a municipality to use tax increment financing for affordable housing.
A municipality may designate a specific geographic area of the municipality as an affordable housing development district and use some or all of the new property tax revenues resulting from affordable housing development and other development in the district to help pay authorized costs of those development projects. A municipality that designates a district must adopt an affordable housing development program for the district. The development program describes the affordable housing development projects and related improvements and facilities and the plan for financing those project costs with the new property tax revenues from the district and other sources of funding. An affordable housing development district and its development program offer municipalities a great deal of flexibility in developing affordable housing while maintaining local control.
After a municipality’s legislative body designates an affordable housing development district and adopts a development program for the district, the municipality must apply to the Maine State Housing Authority (MSHA) for approval of the district designation and the development program. MSHA’s role is to ensure compliance with statutory requirements.
We welcome and strongly encourage municipalities who are developing plans to pursue tax increment financing of affordable housing to contact MSHA’s Research and Planning staff early in the planning process, even if a municipality has retained a consultant to assist it with the development of a proposal. MSHA staff can provide guidance on meeting statutory requirements as a municipality’s plans evolve. This approach will help ensure that applications submitted to MSHA are complete and move smoothly through the MSHA approval process.
Contact information:
Julie Hashem, Research and Planning Manager
Michael Martin, Senior Planner
Maine State Housing Authority
353 Water Street
Augusta, Maine 04330
(207) 626-4600
Affordable Housing Tax Increment Financing
Program Guide
Table of Contents
1. Program Purpose and General Application Information 1
Program Purpose 1
Benefits of Affordable Housing Development District 1
Municipal Designation of District and Adoption of 1
Development Program
MSHA Approval 2
How to Apply for MSHA Approval 2
Application Deadlines 2
2. Frequently Asked Questions: Summary of Program 4
Guide Information
3. Sheltering and Using Tax Increment Revenues 10
Sheltering Increased Taxable Value with a District 10
Eligible Uses of Tax Increment Revenues 11
Funding Alternative Improvements 12
with Tax Increment Revenues
Funding Capital and Operating Costs 13
Project Costs within the District 14
Project Costs outside the District 15
Funding Mechanisms for Project Costs 17
Municipal Debt 18
Credit Enhancement Agreement 19
Municipal Project Cost Account 20
4. Recapture of Public Funds 21
5. Procedural Requirements for Municipalities 23
Notice and Hearing 23
Factors to be Considered 23
Majority Vote 23
Separate Consideration of Development Program 23
6. Application Requirements for MSHA Approval 24
Application Required 24
Preliminary Filing Requirement 24
Contents of Complete Application 24
Establishing Original Assessed Value 25
Time Requirement for Submitting Complete Application 25
7. Checklist for Approval of Affordable Housing Development 26
District and Affordable Housing Development Program
8. Amendment of Affordable Housing Development District 39
or Affordable Housing Development Program
Amendments 39
When Amendment Is Necessary 39
Amendment Procedure 40
Application to MSHA Required 40
Preliminary Filing Requirement 40
Contents of Complete Application for Approval 41
of Amendment
Time Requirement for Submitting Complete Application 42
Effective Date of Amendment 42
9. MSHA Review of Applications 43
Review by Director 43
Action on Application 43
Certificate of Approval—Original District and 43
Development Program
Certificate of Approval—Amendment 44
Conditional Approval 45
10. Annual Reporting Requirements; Site Visits 46
Annual Reporting Requirements 46
Site Visits 48
Appendix A – Application Cover Sheet A-1
Appendix B – Tax Shift Formulas B-1
Appendix C – Statute C-1
Appendix D – MSHA Recovery of Public Revenue Rule D-1
Affordable Housing Tax Increment Financing
Program Guide
1. Program Purpose and General Application Information
Program Purpose
A Maine law enacted in 2003 allows municipalities to create affordable housing development districts to support the development of affordable housing in their communities. An affordable housing development district allows a municipality to provide financial assistance to an affordable housing development project by setting apart all or a portion of the new property taxes resulting from development and inflationary growth in the district to help pay the costs of that project, including related public improvements. Affordable housing is a single-family, owner-occupied home, including a condominium, or an apartment or other rental unit for a household earning no more than 120 percent of area median income.
Benefits of Affordable Housing Development District
Development in a municipality increases the municipality’s assessed value, that is, its taxable value, which results in additional property tax revenues. As taxable value increases, the municipality’s state revenue sharing and education subsidies decrease and its county taxes increase. Therefore, new tax revenues generated by a development project are offset by the loss of a portion of revenue sharing and education subsidies and the increase in county taxes. This offset leaves the municipality with an amount of new property tax revenues for its use that is less than the total of the new tax revenues.
An affordable housing development district allows the municipality to use up to 100 percent of the incremental tax revenues from the increased taxable value of property located inside the district without any adverse adjustments to its revenue sharing and education subsidies or county taxes. To shelter the increased taxable value of the property in the district from subsidy reductions and county tax increases, the municipality must use the tax increment to pay authorized costs of affordable housing development projects and related improvements and facilities. This shelter makes the full amount of the new property tax revenues generated by the increased taxable value within the district available to the municipality to pay authorized project costs.
Municipal Designation of District and Adoption of Development Program
A municipality’s legislative body may designate a specific geographic area of the municipality as an affordable housing development district for a period up to 30 years. A municipality that designates a district must also adopt an affordable housing development program that describes the affordable housing development projects and related improvements and facilities to be financed with the incremental property tax revenues from the district. The development program also describes the project costs and other funding sources and the means for ensuring the continuing affordability of at least 33 percent of the housing in the district. The municipality must hold a public hearing after at least a 10-day published notice before designating a district and adopting an affordable housing development program.
MSHA Approval
Maine law requires that the municipality’s district designation and development program be reviewed by the Director of the Maine State Housing Authority (MSHA) to ensure that they comply with statutory requirements. The district designation and the affordable housing development program for the district do not become effective until the date of MSHA approval.
How to Apply for MSHA Approval
This Program Guide includes information on application requirements. Each application must fully address all items required by this Program Guide. Complete applications must be addressed to:
Director
Maine State Housing Authority
353 Water Street
Augusta, Maine 04330
MSHA will review applications in a timely manner and in the order in which they are received. If an application is incomplete, MSHA will contact the applicant to request the required information. Applicants will be notified of their acceptance or rejection in writing. Please direct any questions to Julie Hashem at 626-4600.
Application Deadlines
If the municipality’s legislative body has not taken final action on the designation of an affordable housing development district or adoption of an affordable housing development program for the district by February 15 of the property tax year (April 1 through March 31) in which the municipality intends to apply for MSHA approval of the district designation and the district’s development program, or, the municipality’s application materials are not otherwise complete by that date, the municipality must provide to MSHA, no later than February 15 of that tax year:
■ A physical description of the district, with municipal and tax maps clearly delineating the boundaries of the district and showing district boundaries relative to municipal boundaries; and
■ A copy of the affordable housing development program in the form in which it was or will be presented to the municipality’s legislative body for adoption.
MSHA will review this preliminary filing and offer guidance to the municipality regarding incomplete or missing elements.
No later than March 15 of the property tax year in which the municipality designated its affordable housing development district, the municipality must submit a complete application to MSHA for approval of the district designation and the development program for the district. The Director of MSHA, if requested by the municipality before March 15, may, for good cause established by the municipality, authorize submission of an application after March 15 but no later than March 31. Requests for extensions of time are not encouraged, however, and a municipality requesting an extension will be required to make a strong showing of good cause.
An application submitted to MSHA for approval of a district designation must state the taxable value of the property within the district as of the March 31st preceding the date of the application (original assessed value). The actual original assessed value of a district approved by MSHA will be the taxable value of all property within the district as of the March 31st preceding the date of MSHA approval.
Consideration of an application after March 31 of the property tax year in which the municipality designated the affordable housing development district is likely to affect the original assessed value of the district and invalidate the financial plan for the municipality’s affordable housing development program. Municipalities are encouraged to discuss their plans to designate a district with MSHA staff and to submit their applications to MSHA as early in the property tax year as possible to avoid this risk.
Original Assessed Value Date Preliminary Filing Application Deadline
March 31, 2004 February 15, 2005 March 15, 2005
March 31, 2005 February 15, 2006 March 15, 2006
March 31, 2006 February 15, 2007 March 15, 2007
March 31, 2007 February 15, 2008 March 15, 2008
2. Frequently Asked Questions: Summary of Program Guide Information
This section summarizes, in question and answer form, the information in this Program Guide. Municipalities should consult other sections of this Program Guide for more complete, detailed information.
Q. What is tax increment financing of affordable housing?
A. Tax increment financing of affordable housing allows a municipality to use some or all of the new property tax revenues resulting from affordable housing development and other development and inflationary growth in an affordable housing development district to pay authorized costs of those development projects and related improvements and facilities.
Q. What is an affordable housing development district?
A. An affordable housing development district is a specific geographic area of a municipality designated as such a district for up to 30 years by the municipality’s legislative body after a public hearing. Development in the district occurs under an affordable housing development program adopted by the municipality’s legislative body after a hearing.
Q. What is an affordable housing development program?
A. An affordable housing development program describes the affordable housing development projects and related improvements and facilities to be financed with all or a portion of the new property tax revenues from development and inflationary growth in the district and the project costs and other funding sources. The development program also describes the means for ensuring the continuing affordability of at least 33 percent of the housing in the district.
Q. What is the effect on new property tax revenues when development occurs without an affordable housing development district?
A. When development occurs, the taxable value of property in the municipality increases and, as a result, new property tax revenues are produced. As taxable value increases, the municipality’s share of state revenue sharing and education subsidies decreases and its county taxes increase. The effect of these adjustments in state revenue sharing and education subsidies and county tax obligations is to reduce the net amount of new tax dollars available to the municipality.
Q. What are the advantages of establishing an affordable housing development district to finance affordable housing development?
A. The municipality can exclude up to 100% of the increased taxable value of all the property in the district from the total municipal valuation as long as the incremental tax revenues generated by that increased taxable value are used to pay authorized costs of affordable housing development projects and related improvements and facilities. This sheltering of increased assessed value allows the municipality to use the corresponding amount of incremental tax revenues from the district for authorized project costs without any adverse adjustments to the municipality’s state revenue sharing and education subsidies or county taxes.
Q. What are the key requirements of an affordable housing development district and affordable housing development program?
A. The key requirements of a district and its development program are:
■ At least 25% of the area of the district must be suitable for residential use or in need of rehabilitation or redevelopment.
■ The area of the district must not exceed 2% of the total municipal acreage.
■ The area of all development districts, including existing and proposed affordable housing development districts, in the municipality must not exceed 5% of the total municipal acreage.
■ The original assessed value of all affordable housing development districts, including the proposed district, in the municipality must not exceed 5% of the value of all taxable property in the municipality as of April 1 before the date of MSHA approval of the new district.
■ The district must last no more than 30 years.
■ The district must be primarily a residential development.
■ The development program must meet an identified community housing need.
■ At least 33% of the dwelling units in the district must be affordable.
■ A mechanism must exist to ensure the ongoing affordability of at least 33% of the dwelling units in the district (10 years for single-family, owner-occupied homes including condominiums and 30 years for rental units).
■ Sheltered tax increment revenues generated by the increased taxable value of property in the district must only be used to pay authorized project costs inside and outside the district.
Q. How does a municipality determine if an affordable housing development district is primarily residential?
A. An affordable housing development district is primarily residential if the overall character of the uses in the district is residential. Residential uses include both housing and uses related to residential uses, such as recreational facilities and child care facilities available to the residents of the district and small-scale nonresidential uses that are intended to provide services primarily to the residents of the district.
Q. What qualifies as affordable housing in an affordable housing development district?
A. Affordable housing is a single-family, owner-occupied home, including a condominium, or an apartment or other rental unit for a household earning no more than 120% of area median income. No purchase price limits on homes or rent restrictions on rental units are required.
Q. What project costs can be paid with tax increment revenues from an affordable housing development district?
A. Authorized costs of improvements and facilities located inside the boundaries of the district include:
■ Capital costs, including land acquisition; public infrastructure improvements; demolition and renovation of existing buildings; site preparation and finishing work; and licensing, permitting, planning, engineering, architectural, testing, legal and accounting fees
■ Financing costs
■ Project operating costs
■ Professional service costs
■ Administrative and start-up expenses
■ Costs of recreational and child care facilities available to the residents of the district
Costs of improvements and facilities outside the district must be directly related to or made necessary by the creation or operation of the district. They include:
■ Costs of infrastructure and public safety improvements
■ Costs to mitigate adverse impacts of the district on the municipality and its residents, including educational costs
■ Costs to establish permanent housing development revolving loan and investment funds
Q. What funding mechanisms can be used to pay approved project costs?
A. Various funding mechanisms may be used alone or may be combined. They include municipal debt, a credit enhancement agreement, and a municipal project cost account.
A municipality may issue bonds or notes maturing in no more than 20 years. A municipality’s total affordable housing development district general obligation debt is limited to $50 million per county. Tax increment revenues must be used to pay municipal debt service before they may be paid to a developer under a credit enhancement agreement or used for any other purpose. The municipality must continue to cover all debt service on general obligation debt even if shortfalls in tax increment revenues occur.
A credit enhancement agreement under which the municipality pays a percentage or fixed amount of the tax increment revenues from the affordable housing development district to the developer of affordable housing in the district may also be used to finance authorized project costs. If structured properly, this approach removes the risk from the municipality of any shortfalls in tax increment revenues and allows multiple project costs to be paid through the developer.
A municipality may also reserve a portion of the tax increment revenues to itself to fund public infrastructure improvements and public facilities or to pay educational costs directly without issuing debt.
Q. How much of the incremental tax revenues can be used to pay authorized project costs?
A. Up to 100% of the tax increment can be used.
Q. How is the amount of incremental tax revenues to be used for authorized project costs determined?
A. When the municipality adopts an affordable housing development program, it designates the percentage of incremental tax revenues that will be used to pay authorized project costs. The portion of the increased assessed value of property in the district that generates these incremental tax revenues is called the captured assessed value.
Q. From what date is the increase in taxable value of property in an affordable housing development district measured?
A. When an affordable housing development district is established, the taxable value of the property in the district is measured as of the March 31st preceding the date of MSHA approval of the district. This value is the original assessed value and it provides a baseline for measuring increases in the taxable value of the property within the district during the life of the district.
Q. What means is used to shelter the increased taxable value of property in an affordable housing development district?
A. The municipality shelters the increased assessed value of the property by claiming it as captured assessed value on the municipal valuation return that it files with Maine Revenue Services.
Q. If incremental tax revenues exceed the amount needed to pay authorized project costs, may the municipality return those revenues to its general fund?
A. The municipality may return those revenues to its general fund, but may not shelter the corresponding portion of increased assessed value by claiming it as captured assessed value on its municipal valuation return. That portion of increased assessed value must be included in the municipality’s total valuation and cannot be sheltered.
Q. Other than returning tax increment revenues to a municipality’s general fund, are there any situations in which the municipality is not allowed to shelter the increased assessed value of property in an affordable housing development district by claiming it as captured assessed value on its municipal valuation return?
A. If the district is not in compliance with conditions of its approval, the municipality may not claim the increased assessed value of property in the district as captured assessed value on its municipal valuation return for the period of noncompliance.
Q. If a municipality inappropriately claims captured assessed value on its municipal valuation return, is the municipality liable for repaying any amounts?
A. If captured assessed value is claimed for any period that the affordable housing development district is not in compliance with conditions of its approval or for any period during which the municipality has returned tax increment revenues to its general fund, the municipality must pay to MSHA the value of tax shifts benefiting the municipality during that period. If the municipal valuation return is corrected before the municipality’s state revenue sharing, education subsidies and county taxes are affected, there would be no benefit of tax shifts to the municipality and the municipality would not be liable to pay any amounts. MSHA will remit any amounts recovered to the State Treasurer.
Q. What procedures must a municipality follow to designate an affordable housing development district and adopt an affordable housing development program for the district?
A. The municipality’s legislative body must hold a public hearing. Notice of the hearing must be published in a newspaper of general circulation in the municipality at least 10 days before the hearing. A majority vote of the municipality’s legislative body is required for the designation of the district and adoption of the development program.
Q. Are any other approvals of the affordable housing development district and affordable housing development program necessary?
A. The statute allowing the creation of affordable housing development districts requires MSHA to review and approve a municipality’s district designation and the development program for the district to ensure compliance with statutory requirements.
Q. How does a municipality obtain MSHA approval of the designation of its affordable housing development district and the development program for the district?
A. The municipality must file an application with MSHA that complies with the requirements of this Program Guide, including the Checklist provided in Section 7.
Q. Is there a deadline for applying for MSHA approval?
A. At minimum, a physical description of the affordable housing development district, with municipal and tax maps showing boundaries, and a copy of the affordable housing development program that were or will be submitted to the municipality’s legislative body for adoption must be provided to MSHA by February 15 of the property tax year (April 1 through March 31) in which the municipality intends to seek MSHA approval. The municipality’s complete application to MSHA must be submitted by March 15 of that tax year.
Q. What is the effective date of an affordable housing development district and the affordable housing development program for that district?
A. The effective date is the date of MSHA approval. MSHA issues a Certificate of Approval that indicates the effective date when it approves a municipality’s district designation and the development program for the district.
Q. Can an affordable housing development district or affordable housing development program be amended?
A. An affordable housing development district and affordable housing development program can be amended in the same manner in which they were originally designated and adopted. An application must be submitted to MSHA for approval of an amendment to a district or development program. The amended district or development program becomes effective on the date of MSHA approval.
Q. What types of changes to an affordable housing development district or affordable housing development program require MSHA approval?
A. Any change to the boundaries of the district requires MSHA approval. Material changes to a development program also require MSHA approval. They include changes in the duration of the district or the development program; changes in the increased assessed value retained as captured assessed value; changes in the level of tax increment revenues allocated to the funding of specific project costs; the addition or deletion of project costs; and substitution of the mechanism to assure the ongoing affordability of at least 33 percent of the housing in the district.
Q. How does MSHA monitor compliance with ongoing requirements after an affordable housing development district and affordable housing development program are approved?
A. For each property tax year, the municipality must submit a compliance report to MSHA. The required contents of each report are listed in Section 10 of this Program Guide and include information on compliance with ongoing affordability requirements for housing in the district; a description of the improvements, facilities and other project costs for which tax increment revenues from the district were used and the amounts expended; and the amount claimed as captured assessed value on the municipal valuation return filed with Maine Revenue Services.
3. Sheltering and Using Tax Increment Revenues
Sheltering Increased Taxable Value with a District
An affordable housing development district allows a municipality to use up to 100 percent of the incremental tax revenues from the increased taxable value of property located inside the district without any adverse adjustments to its revenue sharing and education subsidies or county taxes.
When a municipality establishes an affordable housing development district, the value of all the taxable property inside the boundaries of the district is “frozen” so that a baseline for measuring any increase in the taxable value of that property can be established. The value is frozen as of the March 31st before the date of MSHA’s approval of the municipality’s designation of the district. The statute refers to the value of the affordable housing development district as of this March 31st date as “original assessed value.” Because the tax year runs from April 1 through March 31 and the taxable status of property is determined as of April 1, the value of property on March 31 is the same as the value fixed as of the preceding April 1. Here are some examples:
Example 1
MSHA approves a district designation on March 1, 2005. The value of the taxable property in the district is frozen as of March 31, 2004 and is the same as the value fixed as of April 1, 2003.
Example 2
MSHA approves a district designation on April 30, 2005. The value of the taxable property in the district is frozen as of March 31, 2005 and is the same as the value fixed as of April 1, 2004.
For each year that the district exists, the municipal assessor determines the taxable value of all the property within the district as of April 1st. The statute refers to this April 1st valuation as “current assessed value.” The municipal assessor must also certify the amount by which the assessed value has increased or decreased from the original assessed value for each year that the affordable housing development district exists. In any tax year when the April 1st current assessed value is greater than the original assessed value frozen at the March 31st preceding MSHA approval of the district designation, an increase in assessed value results. The statute refers to the amount by which the current assessed value exceeds the original assessed value as “increased assessed value.” Increased assessed value includes only the increment in the taxable value above the original assessed value. If the current assessed value is equal to or less than the original assessed value, there is no increased assessed value.
As the total taxable value of the property in the district increases, both through increased development and inflation, incremental tax revenues are produced. The municipality may use all or part of these revenues to pay authorized costs of affordable housing development projects and related improvements and facilities. A discussion of authorized project costs both within and outside the boundaries of the district is included in this Section under “Eligible Uses of Tax Increment Revenues.”
At the time that the municipality adopts the affordable housing development program for its affordable housing development district, it must decide what part of the tax increment generated by the increased assessed value of property in the district it will retain, or “capture”, to fund authorized project costs. The municipality captures these incremental taxes by designating the portion of increased assessed value of the district that will be retained as “captured assessed value.” The designation of captured assessed value, which must cover each year that the district will remain in effect, can be in the form of a specified percentage or percentages or can describe a method or formula for determining the percentage. The captured assessed value may be up to 100 percent of the increased assessed value. For each year that the district exists, the municipal assessor must certify the amount of captured assessed value to the municipality.
When the municipality files its annual municipal valuation return with Maine Revenue Services, it is allowed to exclude the captured assessed value of property in the affordable housing development district from the total taxable valuation of property located in the municipality. The municipal valuation return includes lines for reporting separately the total amount of captured assessed value of property in tax increment financing districts, including affordable housing development districts, and the associated tax revenue used to pay approved project costs. The municipality may exclude the captured assessed value of property in the affordable housing development district from total municipal valuation only if the associated tax increment revenues have been used to pay costs of improvements, facilities or activities approved by MSHA.
The captured assessed value is not included in the determination of state valuation by Maine Revenue Services, which is used to calculate a municipality’s state revenue sharing and education subsidies and its county taxes. As a result, there is no reduction in the municipality’s state revenue sharing and education subsidies or increase in its county taxes. Because the municipality avoids adverse subsidy and tax adjustments by sheltering the increased assessed value of property in the district in this way, the full amount of the new property taxes generated by the increased taxable value of property in the district is available to the municipality to pay authorized project costs.
Sheltering the increased assessed value of property in an affordable housing development district results in a reallotment of state revenue sharing and education subsidies and county tax obligations among the other municipalities in Maine. The statute refers to this reallotment as “tax shifts.”
Eligible Uses of Tax Increment Revenues
The incremental tax revenues generated by affordable housing development and other development as well as inflationary growth inside an affordable housing development district may be used to pay costs of improvements and facilities within the district that are approved by MSHA. In addition, tax increment revenues may be used to pay for public infrastructure and public safety improvements made outside the boundaries of the district; to mitigate any adverse impact of the district on the municipality and its residents, including educational costs; and to establish a permanent housing development revolving loan or investment fund. Any costs outside the district must be directly related to or made necessary by the creation or operation of the district.
As part of its review of a municipality’s affordable housing development program, MSHA must make sure that the costs of affordable housing development projects and related facilities, improvements and activities to be financed with the tax increment from the district are authorized by the statute. These costs may include both expenditures for these items and monetary obligations that have been or will be incurred. The municipality’s use of the tax increment to fund these project costs must be consistent with the financial plan for the district that is submitted to and approved by MSHA. If the tax increment is used to pay costs that are not approved, the municipality may not claim the corresponding portion of increased assessed value as captured assessed value on the municipal valuation return filed with Maine Revenue Services.
Funding Alternative Improvements with Tax Increment Revenues
MSHA recognizes that all sources of funding for planned improvements, facilities or other project costs may not be fully known at the time a municipality files an application with MSHA for approval of a district designation and the development program for the district. The municipality may have applied for federal, state or other funding for one or more specified improvements or facilities, but may not have received a decision on the availability of that funding. The municipality may intend to use tax increment revenues for a specific, identified improvement only if other funding is unavailable. If the municipality obtains federal funding for that improvement, for instance, it may wish to redirect tax increment revenues to pay the costs of another improvement included in the municipality’s development program. If only partial funding is obtained, the municipality may choose to apply that funding source to the costs of the improvement and use tax increment revenues to fill the funding gap.
A municipality’s affordable housing development program may include alternative plans for the use of tax increment revenues. The development program must specifically identify each improvement, facility or other project cost for which the municipality may use either tax increment revenues or an alternative funding source, or both. Municipalities are cautioned, however, that a broad recitation of all or substantially all of the project costs listed in the statute will not be accepted by MSHA. The municipality must fully support each potential alternative use of tax increment revenues to pay all or part of the costs of identified improvements and facilities. The development program must also identify all sources and amounts of known and potential funding, including tax increment revenues and other funding sources, and describe the plans and contingencies that affect the use of tax increment revenues to pay for those improvements, facilities or other project costs. Additional information that must be included in the municipality’s development program is contained in the Checklist in Section 7 of this Program Guide.
Any approval of a municipality’s affordable housing development program by MSHA will indicate (i) whether the use of tax increment revenues is restricted to specific improvements or facilities or (ii) whether those revenues may be used to pay the costs, up to a stated maximum for each improvement or facility, of one or more authorized improvements or facilities included in the municipality’s development program, as determined by the municipality. The use of tax increment revenues must be consistent with the terms of any approval given by MSHA. If a “menu” of authorized project costs is approved by MSHA, giving the municipality the flexibility, within the terms of the MSHA approval, to determine the specific improvements or facilities that should be funded entirely or partially with tax increment revenues, the municipality’s annual report to MSHA must identify the specific improvements and facilities for which tax increment revenues were used during the property tax year for which the report is filed and the amount of tax increment revenues for each.
Funding Capital and Operating Costs
A municipality may seek MSHA approval to use a specified amount of tax increment revenues to pay the capital costs of an improvement or facility and an additional specified amount of tax increment revenues to pay the operating costs of that improvement or facility. Alternatively, due to funding or other uncertainties, a municipality may wish to retain the flexibility to allocate tax increment revenues, up to a specified maximum aggregate amount, to pay either or both the capital and operating costs of one or more specifically identified improvements or facilities.
A municipality’s affordable housing development program may include such alternative plans for the use of tax increment revenues. If a municipality wishes to retain the flexibility to use tax increment revenues to pay either or both the capital and operating costs of an improvement or facility, it must fully support each potential alternative use of tax increment revenues to pay those capital or operating costs, or both. The municipality’s development program must specifically identify each improvement or facility for which the capital or operating costs, or both, will be entirely or partially funded with tax increment revenues. The municipality must also include in its development program the additional information required by the Checklist in Section 7 of this Program Guide, including plans for allocating tax increment revenues to capital and operating costs, contingencies affecting those plans, and amounts of capital and operating costs to be funded with tax increment revenues.
Whether the payment of debt service on municipal general obligation or revenue bonds or other municipal debt issued to finance project costs included in the municipality’s affordable housing development program is characterized as a capital or operating cost, a municipality will be required to comply with statutory requirements applying to municipal debt issuances. As discussed in this Section under “Municipal Debt,” the statute imposes a per-county cap on certain municipal debt issuances, a maximum maturity, and other requirements. In addition, if municipal debt, whether general obligation bonds or any other indebtedness, is issued to finance approved project costs, the statute requires that an amount of tax increment revenues sufficient to pay annual debt service be deposited into a development sinking fund account specifically dedicated to that purpose before any tax increment revenues are deposited into any project cost account for the payment of other authorized project costs, including payments to a developer under a credit enhancement agreement.
Any approval of a municipality’s affordable housing development program by MSHA will indicate (i) whether the use of tax increment revenues is restricted to the payment of either the capital or operating costs of specific improvements or facilities or (ii) whether those revenues may be allocated to pay capital or operating costs, or both, of one or more authorized improvements or facilities included in the municipality’s development program, as determined by the municipality. The use of tax increment revenues must be consistent with the terms of any approval given by MSHA. If MSHA approves only the payment of the capital costs of a specific improvement or facility, tax increment revenues may not be used to pay the operating costs of that improvement or facility. Likewise, approval of the payment of the operating costs of a specific improvement or facility with tax increment revenues does not allow the municipality to use those revenues to pay capital costs. If MSHA approves a “menu” of authorized capital and operating costs that may be paid with tax increment revenues, giving the municipality the flexibility, within the terms of the MSHA approval, to determine what portion of tax increment revenues should be applied to the capital costs and what portion should be applied to the operating costs of those improvements or facilities, the municipality’s annual report to MSHA must identify the specific improvements and facilities for which tax increment revenues were used during the property tax year for which the report is filed, the amount of tax increment revenues for each, and whether those amounts funded capital or operating costs.
Project Costs within the District
If approved by MSHA, eligible project costs within an affordable housing development district include but are not limited to the following costs:
■ Capital costs, including costs for
■ land acquisition;
■ construction of public infrastructure improvements for affordable housing development;
■ demolition, alteration, remodeling, repair or reconstruction of existing buildings, structures and fixtures;
■ site preparation and finishing work; and
■ fees and expenses includible in capital costs of improvements made within the district, such as licensing, permitting, planning, engineering, architectural, testing, legal and accounting fees and expenses.
■ Financing costs, including
■ closing costs;
■ issuance costs;
■ interest; and
■ redemption premiums.
■ Project operating costs.
■ Real estate assembly costs.
■ Professional service costs, such as licensing, architectural, planning, engineering, and legal expenses.
■ Administrative costs, including reasonable charges for time spent by municipal employees on the implementation of an affordable housing development program.
■ Relocation costs.
■ Costs of setting up the affordable housing development district, including costs of environmental studies, costs of informing the public about the district and development program, and costs of a consultant retained by the municipality.
■ Costs of recreational facilities available to the residents of the district, including recreation centers, athletic fields, and swimming pools.
■ Costs of child care facilities available to the residents of the district, including construction, finance, staffing, training, and certification costs.
Project Costs outside the District
Costs of improvements, facilities and other project items located outside the boundaries of an affordable housing development district must be directly related to or made necessary by the creation or operation of the district.
If a municipality wishes to use tax increment revenues from the district to pay costs of improvements and facilities located outside the district, the municipality must show that each of the intended improvements and facilities or other project costs outside the district is directly related to or made necessary by an attribute of the district, that is, a particular improvement, facility or activity in the district or some other distinguishing feature of the district. Senior housing, for instance, is not an attribute of a district that would support elementary school funding. An improvement or facility located outside the district that is necessary for a reason unrelated to the district and has no connection with an improvement or facility in the district or any other feature of the district may not be funded with tax increment revenues from the district. Among other uses, costs of buildings, portions of buildings, or other facilities used for the general conduct of local government, including but not limited to city halls or other facilities where the local government meets regularly, are not eligible uses of tax increment revenues.
Eligible costs outside the district include the following if they are directly related to or made necessary by the district and approved by MSHA:
■ Construction, alteration or expansion of infrastructure, including
■ sewage or water treatment plants;
■ storm, sewer or water lines;
■ electrical lines;
■ fire stations; and
■ street amenities, such as plantings, benches, trash receptacles, street signs, sidewalks and pedestrian malls.
■ Public safety improvements.
■ Costs incurred to mitigate adverse impacts of the district on the municipality and its residents, including
■ public kindergarten through grade 12 costs; and
■ public facilities and improvements.
In seeking approval of project costs included in its affordable housing development program under this provision, the municipality must identify one or more features of the district that create an adverse impact on the municipality and its residents and must quantify that impact. The municipality must also demonstrate that the amount of tax increment revenues specified in the municipality’s development program to mitigate adverse impacts is actually targeted towards the mitigation of those impacts. Tax increment revenues intended to mitigate adverse effects of the district may not exceed the amount needed to achieve that result.
■ Operating costs of new improvements or facilities outside the district if those improvements or facilities are directly related to or made necessary by the creation or operation of the district. For example, if new streetlights are installed near the district for the safety of the residents of the district, the operating costs of those streetlights may be paid with tax increment revenues from the district. If MSHA approves the use of tax increment revenues to pay only a portion of an improvement or facility, any approval to pay operating costs of that improvement or facility with tax increment revenues will be limited to no more than that portion. Generally, tax increment revenues may not be used to pay the operating costs of existing improvements or facilities located outside the district.
■ Costs to establish permanent housing development revolving loan or investment funds.
A permanent housing development revolving loan or investment fund must be used solely for the development of affordable permanent housing. Housing is permanent if it is a single-family home, including a condominium, or an apartment or other rental unit intended to be occupied by a household on a continuing basis. Permanent housing does not include facilities such as shelters, nursing homes, convalescent homes, hospitals, residential treatment facilities, correctional facilities, or student dormitories. Affordable permanent housing includes single-family homes, condominiums, and apartments or other rental units for a household earning no more than 120 percent of area median income.
Loans made from a permanent housing development revolving loan fund must be repaid to the municipality, and all loan repayments must be deposited into that revolving loan fund and used for additional loans for the development of affordable permanent housing. Loans may be made from a permanent housing development revolving loan fund for both new construction of affordable permanent housing and the rehabilitation of existing housing as long as the rehabilitation results in the creation of affordable permanent housing.
Funds in a permanent housing investment fund may be used only for the purchase of property by the municipality for the development of affordable permanent housing by the municipality itself or by a developer to which the municipality sells or leases the property. All proceeds of sales of that property by the municipality or rental revenues from leases into which the municipality enters must be placed in the permanent housing investment fund and used for additional purchases of property by the municipality for the development of affordable permanent housing by a developer or the municipality.
Affordable permanent housing developed with loans from a permanent housing development revolving loan fund or property purchased by a municipality with funds from a permanent housing investment fund may be located within or outside the boundaries of the affordable housing development district from which the tax increment revenues were used to capitalize the loan or investment fund, but must be located in the municipality. Because loan and investment funds are capitalized with tax increment revenues from the district and proceeds disbursed from a loan or investment fund are required to be returned to the fund, MSHA has determined, as the entity charged with administering the statute, that a direct relationship exists between the use of fund proceeds for affordable housing development outside the boundaries of the affordable housing development district and the creation of the district. Therefore, it is not necessary for a municipality to make any further showing that costs of establishing a permanent housing development revolving loan or investment fund are directly related to or made necessary by the district.
A municipality that intends to use tax increment revenues from an affordable housing development district to establish a permanent housing development revolving loan fund or investment fund must describe the fund and its intended use and provide the additional information required by the Checklist in Section 7 of this Program Guide.
Funding Mechanisms for Project Costs
Various mechanisms to fund approved project costs may be used alone or may be combined. A municipality may issue bonds or notes to fund authorized project costs of an affordable housing development program. The municipality may also enter into a credit enhancement agreement with the developer of an affordable housing project in the district under which the municipality pays a fixed amount or percentage of tax increment revenues directly to the developer to pay approved project costs. In addition, the municipality may reserve a portion of the tax increment revenues to itself to pay for approved public improvements and facilities or other approved costs relating to the district without issuing debt.
Municipal Debt
A municipality may issue bonds, including general obligation or revenue bonds, or notes to finance authorized project costs that are part of the municipality’s affordable housing development program. The bonds or notes must mature in no more than 20 years from their issuance date. The municipality may issue 3-year bond anticipation notes in connection with the anticipated sale of municipal bonds.
When a municipality issues debt to fund authorized project costs, the municipality must place tax increment revenues from the district in a development sinking fund account in an amount sufficient to satisfy all annual debt service on the municipal indebtedness, taking into account estimated future tax increment revenues and earnings on funds in the account. Tax increment revenues may not be deposited in any project cost account established under the municipality’s affordable housing development program for the district, including a project cost account from which tax increment revenues are paid to a developer under a credit enhancement agreement, until annual municipal debt service relating to approved project costs is fully funded in this manner. Each year, the municipality must return to its general fund any tax increment revenues remaining in the development sinking fund account in excess of the amount required to cover debt service for that year or transfer that excess to a project cost account established under its development program. The municipality may not claim the amount of valuation corresponding to tax increment revenues returned to its general fund as captured assessed value on the municipal valuation return filed with Maine Revenue Services.
A municipality that chooses to fund approved project costs by issuing general obligation indebtedness is subject to a debt cap. The total amount of general obligation debt issued by a municipality in connection with affordable housing development districts within any county may not exceed $50 million.
Acquisition, construction and installation of all buildings and other improvements and equipment included in the municipality’s affordable housing development program and financed with municipal bonds must be completed within 5 years of the date of MSHA approval of the municipality’s designation of the affordable housing development district.
Financing affordable housing development projects with municipal debt creates a well-defined municipal obligation, both with respect to time and money. It offers a simple, straightforward approach to supporting affordable housing development in the district and improvements or facilities outside the district that are directly related to or made necessary by the creation or operation of the district. In addition, the interest rate generally available on municipal tax-exempt bonds may have the effect of increasing the total amount of available financing.
A municipality that issues general obligation bonds remains liable, however, for debt service on the bonds. If tax increment revenues fall short of projections in any year, the municipality must still make any required principal and interest payments on the bonds. To mitigate its risk, a municipality may require the developer of an affordable housing project in the district to guarantee the payment of amounts sufficient to make up for any shortfalls in tax increment revenues. Of course, a developer guarantee is only as strong as the financial strength of the developer providing it. A secured guarantee can further strengthen a developer guarantee, but may adversely affect the developer’s ability to obtain bank or other financing needed for the project. Even with a developer guarantee of any shortfalls in tax increment revenues, it may be difficult to obtain voter approval of a municipal debt financing of project costs that are part of the municipality’s development program. A property revaluation can also negatively affect the amount of tax increment revenues available for debt service.
Credit Enhancement Agreement
Authorized project costs may be paid through a credit enhancement agreement, which provides for a specified amount or percentage, or a method or formula for determining a percentage, of the incremental tax revenues to be paid directly to the affordable housing developer. A credit enhancement agreement allows varying percentages of tax increment revenues to be paid to the developer over the term of the agreement. With a credit enhancement agreement, the municipality deposits tax increment revenues from the district into a project cost account when property taxes are paid to the municipality. The municipality makes payments from the account to the developer, typically within 15 to 30 days after the developer pays its property taxes.
The credit enhancement agreement may establish a floor for payments to the developer, so that the developer receives a specified minimum amount even if tax increment revenues for that period are lower than the percentage payable to the developer under the agreement. Payments to the developer may also be capped under the agreement. The municipality may condition payments to the developer on the payment of property taxes by the developer or the completion of certain project milestones by specified dates. Amounts paid from the project cost account may reimburse the developer for the payment of approved project costs, may pay directly for those costs, or may satisfy debt service on indebtedness incurred by the developer to finance approved project costs. Unlike a municipal debt issuance, which generally finances one type of public improvement or facility, payments under a credit enhancement agreement can finance multiple project costs that are part of the municipality’s approved affordable housing development program.
The developer is typically allowed to assign its interest in the credit enhancement agreement and grant a security interest and pledge in the amounts payable to the developer under the agreement as a means of securing additional financing for the approved improvements. If the municipality has issued debt to finance approved project costs, the first priority given by the statute to the payment of municipal debt service with tax increment revenues may adversely affect the developer’s ability to secure additional financing by pledging the tax increment revenue stream payable to the developer under the credit enhancement agreement.
A credit enhancement agreement is structured as a limited obligation of the municipality; it provides that the amounts payable by the municipality to the developer are payable solely from tax increment revenues from the affordable housing development district and are not a general obligation or debt of the municipality. Typically, the credit enhancement agreement authorizes the municipality to invest monies in the project cost account in any securities and obligations in which municipalities may invest their funds under Maine law and to convert those investments to cash when needed for disbursements to the developer. The credit enhancement agreement may provide that the municipality may withdraw investment earnings for its own use, generally at the time it makes payments to the developer from the account, or may require the municipality to reinvest earnings and apply them to the purposes of the account. The terms of the credit enhancement agreement can also negate the effects of any revaluation of property in the district so that the municipality is not required to deposit any increase in tax increment revenues in the project cost account.
Municipal Project Cost Account
Even if a municipality enters into a credit enhancement agreement with a developer, the municipality may retain a designated portion of the incremental tax revenues from the affordable housing development district to fund public infrastructure improvements and other project costs without issuing debt. The portion of tax increment revenues retained by the municipality for these purposes must be placed in a project cost account and used to pay approved project costs.
By a majority vote of the municipal officers, the municipality may return to its general fund any tax increment revenues in the project cost account that are not needed to pay approved project costs at any time during the life of the district. If the municipality returns a portion of incremental tax revenues to its general fund, it may not claim the corresponding amount of valuation as captured assessed value on the municipal valuation return filed with Maine Revenue Services. Tax increment revenues must be used to fund approved project costs. The municipality may not allow tax increment revenues in a municipal project cost account to build up unless MSHA has approved a specific plan, contained in the municipality’s affordable housing development program, for the use of the revenues in the account to pay project costs after a specified period of time.
4. Recapture of Public Funds
The statute authorizing the creation of affordable housing development districts required MSHA to adopt a rule for the recovery of public funds in the event a district is out of compliance with conditions of its approval. The rule adopted by MSHA, which has been reviewed and approved by the Maine Legislature, provides that for any period of time that a district is out of compliance with conditions of its approval, the municipality will not claim the increased taxable value of property in the district as captured assessed value on the municipal valuation return that it files with Maine Revenue Services. A district may be out of compliance because the municipality spent incremental tax revenues from the district on unauthorized improvements. Noncompliance may also result from the failure to maintain at least 33 percent of the dwelling units in the district as affordable housing or from other violations of conditions of approval of the district. In such cases, the municipality may not shelter the increased assessed value of property in the district for the period of the noncompliance by claiming it as captured assessed value on the municipal valuation return filed with Maine Revenue Services.
The statute contains a parallel provision. A municipality that chooses to return a portion of the tax increment generated by development and inflationary growth in the district to its general fund rather than using it for authorized project costs may not claim the corresponding amount of increased assessed value of property in the district as captured assessed value on its municipal valuation return.
Under both the MSHA rule and the statute, a municipality that knows that its affordable housing development district is out of compliance with conditions of its approval or that opts to return a portion of the incremental tax revenues from the district to its general fund rather than using those tax revenues for approved project costs simply would not claim the corresponding amount of captured assessed value on its municipal valuation return. In that case, there would be no need for MSHA to recover from the municipality.
If the municipality has claimed captured assessed value on its municipal valuation return for any period of noncompliance with conditions of the district’s approval or any period during which the municipality has returned tax increment revenues from the district to its general fund, the municipality must pay to MSHA, on demand, the value of the tax shifts benefiting the municipality during that period. MSHA will remit any amounts recovered to the State Treasurer. Because the captured assessed value claimed on a municipal valuation return does not affect the amount of the municipality’s state revenue sharing and education subsidies for approximately two years after the return is filed, there is sufficient time to make any necessary adjustments to the valuation stated on the return to avoid an unwarranted benefit of tax shifts to the municipality. If MSHA becomes aware of any noncompliance during this period, it may notify Maine Revenues Services of the noncompliance so that Maine Revenue Services may make an appropriate adjustment. Even if a municipality improperly claimed captured assessed value on its municipal valuation return, the municipality would not be required to pay MSHA the value of the tax shifts if the return were adjusted before the captured assessed value claimed on the return affected revenue sharing and education subsidy allotments or county tax obligations. In such a case, the valuation adjustment would prevent the municipality from gaining any benefit of tax shifts and there would be nothing for MSHA to recover from the municipality.
Under the rule, MSHA may, in its discretion, waive events of noncompliance that are insubstantial or that are being corrected diligently and in good faith or for other reasons satisfactory to MSHA. Waivers will depend on the particular circumstances of each situation involving noncompliance. As an example, MSHA may choose to waive noncompliance if the amount of recovery is small. MSHA may also decide to waive noncompliance, for example, if the percentage of affordable dwelling units in the affordable housing development district fell below 33 percent for a limited time because some of the units were damaged by fire and the developer was rebuilding the units.
Municipalities have the flexibility to establish their means of enforcing compliance by developers with conditions of approval of an affordable housing development district such as ongoing affordability requirements. Nothing in MSHA’s rule prevents a municipality from recovering the value of tax shifts from a developer or another responsible entity to the extent allowed by law. A credit enhancement agreement may contain provisions for such recovery either through offsets against amounts of tax increment revenues otherwise payable to the developer under the agreement or through other means.
The MSHA rule provides that as an additional condition of MSHA approval of an affordable housing development district, the municipality will be required to enter into an agreement with MSHA under which the municipality acknowledges that it is bound by the terms of the rule and agrees to comply with its provisions.
MSHA will provide a copy of each Certificate of Approval and each Certificate of Approval of Amendment issued by MSHA to Maine Revenue Services.
5. Procedural Requirements for Municipalities
Notice and Hearing
Before designating an affordable housing development district or adopting an affordable housing development program, a municipality’s legislative body must hold at least one public hearing on the proposed district designation and development program. Notice of the hearing must be published in a newspaper of general circulation in the municipality at least 10 days before the hearing.
Factors to be Considered
At the meeting at which the municipal legislative body takes up the designation of the district and adoption of the affordable housing development program, the legislative body must consider whether the proposed district and development program will contribute to the expansion of affordable housing in the municipality or to the improvement of the health, welfare or safety of the residents. Interested parties must be given an opportunity to present testimony concerning the district or development program at the hearing. If an interested party claims at the hearing that the district or development program will result in a substantial detriment to that party’s existing property interests and produces substantial evidence to support that claim, the legislative body must consider that evidence. In considering that evidence, the municipality’s legislative body must balance any adverse economic effect of the district or development program on that party’s property against the increased availability of affordable housing or the improvement of the health, welfare or safety of the residents of the municipality and determine whether the benefits of additional affordable housing or those improvements outweigh any adverse economic effect.
Majority Vote
A municipality’s legislative body must designate an affordable housing development district and adopt an affordable housing development program by majority vote. The quorum required by the municipality’s charter or other governing document must be present for the vote.
Separate Consideration of Development Program
The municipality may adopt an affordable housing development program at a different time than it designates an affordable housing development district, but in that case, must hold a separate public hearing on the development program after at least 10 days notice published in a newspaper of general circulation in the municipality. In addition, the municipality’s legislative body must consider the same factors and evidence as described above.
6. Application Requirements for MSHA Approval
Application Required
After a municipality designates an affordable housing development district and adopts an affordable housing development program for the district, MSHA must review the district designation and the development program to ensure that they comply with the requirements of the statute. The district designation and the development program become effective on the date of MSHA approval, as shown in the Certificate of Approval issued by MSHA. The municipality may not claim any amounts relating to the district as captured assessed value on its municipal valuation return for any period prior to the effective date contained in the Certificate of Approval.
A municipality must request MSHA approval of the designation of its affordable housing development district and its affordable housing development program by filing an application with MSHA. The application should be addressed to:
Director
Maine State Housing Authority
353 Water Street
Augusta, Maine 04330
Preliminary Filing Requirement
If the municipality’s legislative body has not taken final action on the designation of an affordable housing development district or adoption of an affordable housing development program for the district by February 15 of the property tax year (April 1 through March 31) in which the municipality intends to apply for MSHA approval of the district designation and the district’s development program, or, the municipality’s application materials are not otherwise complete by that date, the municipality must provide to MSHA, no later than February 15 of that tax year:
■ A physical description of the district, with municipal and tax maps clearly delineating the district boundaries and showing district boundaries relative to municipal boundaries; and
■ A copy of the affordable housing development program in the form in which it was or will be presented to the municipality’s legislative body for adoption.
Contents of Complete Application
A complete application for approval of a municipality’s designation of an affordable housing development district and the affordable housing development program for the district must include the following:
1. A letter of transmittal from an authorized municipal official certifying that all information contained in the application is true and complete to the best of his or her knowledge.
2. A completed Application Cover Sheet in the form attached to this Program Guide as Appendix A.
3. All information and materials on the Checklist in Section 7 of this Program Guide.
4. A copy of the affordable housing development program adopted by the municipality’s legislative body, including the financial plan.
Establishing Original Assessed Value
An application submitted to MSHA for approval of a district designation must state the taxable value of the property in the district as of the March 31st preceding the date of the application (original assessed value). The actual original assessed value of a district approved by MSHA will be the taxable value of all property within the district as of the March 31st preceding the date of MSHA approval.
Time Requirement for Submitting Complete Application
To establish the original assessed value specified in the municipality’s application, a municipality must submit a complete application to MSHA no later than March 15 of the property tax year in which the municipality designated the affordable housing development district. The Director of MSHA, if requested by the municipality before March 15, may, for good cause established by the municipality, authorize submission of an application after March 15 but no later than March 31. Requests for extensions of time are not encouraged, however, and a municipality requesting an extension will be required to make a strong showing of good cause.
Consideration of an application after March 31 of the property tax year in which the municipality designated the affordable housing development district is likely to affect the original assessed value of the district and invalidate the financial plan for the municipality’s affordable housing development program. Municipalities are encouraged to discuss their plans to designate an affordable housing development district with MSHA staff and submit their applications to MSHA as early in the property tax year as possible to avoid this risk.
Original Assessed Value Date Preliminary Filing Application Deadline
March 31, 2004 February 15, 2005 March 15, 2005
March 31, 2005 February 15, 2006 March 15, 2006
March 31, 2006 February 15, 2007 March 15, 2007
March 31, 2007 February 15, 2008 March 15, 2008
7. Checklist for Approval of Affordable Housing Development District and Affordable Housing Development Program
This section of the Program Guide contains a Checklist of information that must be addressed in connection with a municipality’s designation of an affordable housing development district and adoption of an affordable housing development program and submitted as part of the municipality’s application to MSHA for approval of the district designation and the development program. The Checklist provides additional information on the requirements of the statute and, where appropriate, offers suggestions on how those requirements may be satisfied.
Process
□ Notice of public hearing published in newspaper of general circulation in municipality 10 days before hearing
______ Certified copy of notice as prepared by municipality; and
______ Actual newspaper page showing notice, name of newspaper and date
□ Public hearing
______ Certified copy of record of meeting at which public hearing was held
□ Vote of municipal legislative body
______ Certified copy of resolution or order and vote, with date of vote
Affordable Housing Development District
Affordable Housing Development Program
□ District consistent with comprehensive plan
______ Date of comprehensive plan final adoption; and
______ Statement of no conflict with comprehensive plan
□ District not in conflict with municipal charter
______ Statement of no conflict with municipal charter
□ District is within municipal boundaries
______ Physical description of district; and
______ Municipal map showing location of district relative to municipal boundaries; and
______ Tax map showing boundaries of district
□ At least 25% of district area is
______ (a) suitable for residential use; or
______ (b) blighted; or
______ (c) in need of rehabilitation/redevelopment; and
______ Physical description of district to support (a), (b) or (c); and
______ Zoning map showing district boundaries; and
______ Allowed uses in zone where district located; and
______ Copy of any contract zoning agreement
□ District area is no more than 2% of total acreage of municipality
______ Total area of district; and
______ Total municipal acreage; and
______ District area as percent of total acreage
□ Area of all development districts (affordable housing and municipal) is no more than 5% of total acreage of municipality
______ Total area of all development districts (including this district); and
______ Total municipal acreage; and
______ Total development district area as percent of total acreage
□ Original assessed value of district
______ Dated certification from municipal assessor showing amount and date of original assessed value
NOTE: An application submitted to MSHA for approval of a district designation must state the taxable value of the property in the district as of the March 31st preceding the date of the application (original assessed value). See Sections 1 and 6 of this Program Guide for additional information.
□ Original assessed value of all affordable housing development districts in the municipality does not exceed 5% of total value of all taxable property in the municipality as of April 1 before date of MSHA approval of the proposed district
______ Aggregate original assessed value of all affordable housing development districts in the municipality (including this district); and
______ Total value of all taxable property in municipality as of April 1 before MSHA approval of this district; and
______ Aggregate original assessed value of all affordable housing development districts as a percentage of total taxable value of municipality
□ Duration of district (maximum 30 years)
______ Number of years
□ Affordable housing development program meets identified housing need in municipality
______ Description of need; and
______ Description of how development program meets need; and
______ Number of new construction rental units; and
______ Number of rehabilitated existing rental units; and
______ Number of new construction homes, including condominiums; and
______ Number of rehabilitated existing homes, including condominiums
□ District must be primarily a residential development
______ Description of housing, including types and acreage; and
______ Description of uses relating to residential uses, including types and acreage; and
______ Description of balance of uses, including types and acreage
NOTE: A district is primarily residential if the overall character of the uses in the district is residential. Residential uses include both housing and uses related to residential uses, such as recreational facilities and child care facilities available to the residents of the district and small-scale nonresidential uses that are intended to provide services primarily to the residents of the district.
□ At least 33% of the dwelling units in the district must be affordable
______ Number of affordable single-family owner-occupied homes, including condominiums, in district; and
______ Number of affordable apartments and other rental units in district; and
______ Total number of dwelling units in district; and
______ Affordable dwelling units as a percentage of total units
NOTE: An affordable dwelling unit is a single-family, owner-occupied home (including a condominium) or an apartment or other rental unit for a household earning no more than 120% of area median income (“AMI”). No purchase price limits on homes or rent restrictions on rental units are required to establish that a unit is affordable. Regardless of its purchase price, a single-family home, including a condominium, will qualify as affordable housing if it is for a household earning no more than 120% of AMI. Likewise, as long as a rental unit is for a household at or below 120% of AMI, it can be counted as an affordable dwelling unit in meeting the threshold 33% requirement even if it is not a rent-restricted unit.
2005 Affordable Housing Development District Income Limits
for Metropolitan Statistical Areas (MSA) and Counties
|MSA/County Name |Median |District |
| | |(120%) |
|Androscoggin Non-MSA |52,900 |63,480 |
|Aroostook |42,100 |50,520 |
|Bangor MSA |54,350 |65,220 |
|Cumberland Non-MSA |54,600 |65,520 |
|Franklin |44,150 |52,980 |
|Hancock |50,400 |60,480 |
|Kennebec |51,050 |61,260 |
|Knox |51,250 |61,500 |
|Lewiston-Auburn MSA |51,050 |61,260 |
|Lincoln |53,050 |63,660 |
|Oxford |46,200 |55,440 |
|Penobscot Non-MSA |43,450 |52,140 |
|Piscataquis |40,350 |48,420 |
|Portland MSA |64,400 |77,280 |
|Portsmouth MSA |69,600 |83,520 |
|Sagadahoc |57,700 |69,240 |
|Somerset |42,600 |51,120 |
|Waldo Non-MSA |47,600 |57,120 |
|Washington |36,850 |44,220 |
|York Non-MSA |57,450 |68,940 |
Maine MSA Towns
Portland MSA Cape Elizabeth Portland
Casco Raymond
Cumberland Scarborough
Falmouth South Portland
Freeport Standish
Gorham Westbrook
Gray Windham
North Yarmouth Yarmouth
in York County: Buxton
Hollis
Limington
Old Orchard Beach
Portsmouth-Dover-Rochester, NH - ME MSA
Maine portion Berwick
in York County: Eliot
Kittery
South Berwick
York
Lewiston-Auburn MSA Auburn Poland
Greene Sabattus
Lewiston Turner
Lisbon Wales
Mechanic Falls
Bangor MSA Bangor Milford
Brewer Old Town
Eddington Orono
Glenburn Orrington
Hampden Penobscot Indian Island
Hermon Indian Reservation
Holden Veazie
Kenduskeag
in Waldo County: Winterport
□ Mechanism to ensure ongoing affordability of 33% of the dwelling units in district
______ Description of affordability mechanism for single-family owner-occupied units (including condominiums); and
______ Description of affordability mechanism for rental units; and
______ Copies of any available agreements and declarations of restrictive covenants and conditions (whether or not executed or recorded)
NOTES: A dwelling unit is affordable if it is for a household earning no more than 120% of area median income (“AMI”). The affordability period for single-family owner-occupied homes, including condominiums, is 10 years. The affordability period for apartments and other rental units is 30 years. No specific affordability mechanism is required. Municipalities have the flexibility to determine appropriate means for ensuring affordability for the required time. The following descriptions of affordability mechanisms are offered only to illustrate possible approaches to achieving affordability, but municipalities are free to adopt other approaches.
Homeownership districts: At least 33% of the units in a district with only single-family owner-occupied homes, including condominiums, (“homeownership units”) must be affordable for 10 years. Mechanisms to ensure ongoing affordability include:
■ Fixed affordable units, so that the same units in the district are always the affordable units. For units in the same development, affordability may be fixed in a declaration identifying each of the affordable units that is recorded prior to the sale of the first unit in the development (whether or not sold as an affordable unit). The declaration would restrict sales and resales of the fixed affordable units to households earning no more than 120% of AMI during the 10-year affordability period. A unit sold to a buyer earning no more than 120% of AMI would remain an affordable unit during that owner’s period of ownership even if income increased above 120% of AMI.
■ “Floating” affordable units, so that at any given time during the 10-year affordability period, different homeownership units in the district may be the affordable units. A unit sold to a buyer earning no more than 120% of AMI would remain an affordable unit during that owner’s period of ownership even if income increased above 120% of AMI. Without a restrictive covenant on the property, such as the one described above in connection with fixed affordable units, the owner would, however, be free to sell the homeownership unit to a buyer with income exceeding 120% of AMI. Since the statute requires the municipality to account for all property sales in the district in its annual report to MSHA, the municipality must devise a system to track those sales. Once it became aware of the sale of an affordable unit, the municipality could substitute, for the remaining portion of the 10-year affordability period, another unit initially sold by the developer to a buyer earning no more than 120% of AMI and still occupied by that owner. This approach may not be feasible in smaller developments.
■ Purchase price limits and income limits. Purchase price limits alone or combined with the recapture by the developer of a portion of the resale price of homeownership units in a development above an established level during the 10-year affordability period and the use of that sum to subsidize the purchase prices of those units may help to ensure that the homes are within reach of households earning no more than 120% of AMI. Income limits of
120% of AMI for purchasers of the units would ensure that affordability
requirements were satisfied. Purchase price and income limits established in a recorded declaration could apply to specific homes in the development or to the entire development.
Rental housing districts: At least 33% of the rental units in a district with only rental units must be affordable for 30 years. Mechanisms to ensure ongoing affordability include:
■ “Floating” affordable rental units, so that at any given time, different rental units may be the affordable units. This approach could be accomplished with a recorded declaration providing for:
1) a 30-year term;
2) ongoing use of the property as multifamily rental housing;
3) a specified number of rental units to be occupied by
households earning no more than 120% of AMI;
4) the owner of the rental housing to submit annual tenant household income certifications to the municipality; and
5) a unit initially rented to a household earning no more than
120% of AMI to continue to be occupied by that household if income increases to more than 120% of AMI as long as the next available unit is rented to a household earning no more than 120% of AMI.
■ Fixed affordable units, so that the same rental units are always the affordable units. This approach would require annual income recertifications. If a household’s income exceeded 120% of AMI, another rental unit that was not established as an affordable unit could be offered to the household.
Combination homeownership and rental housing districts: In a district with both homeownership units and rental units, a minimum of 33% of the aggregate number of homeownership units and rental units in the district must be affordable for the required affordability periods. Approaches described above or other approaches may be combined to ensure affordability for the required periods.
□ Description of all improvements, buildings, structures, facilities, equipment, programs, activities, and other costs that may be funded in whole or in part with tax increment revenues from the district
NOTE: Costs that are eligible to be paid with tax increment revenues from the affordable housing development district are discussed in Section 3 of this Program Guide under “Eligible Uses of Tax Increment Revenues.” Municipalities are cautioned that a broad recitation in an affordable housing development program of all or substantially all of the authorized project costs listed in the statute will not be accepted by MSHA.
______ Description of each improvement, building, structure, facility, piece of equipment, program, activity and other cost that may be funded in whole or in part with tax increment revenues; and
______ Listing of improvements, buildings, structures, facilities, equipment, programs, and activities inside the district; and
______ Listing of improvements, buildings, structures, facilities, equipment, programs, and activities outside the district; and
______ For each item outside the district, explanation of how item is directly related to or made necessary by creation or operation of the district, with available supporting documentation including but not limited to any studies, research, estimates, assumptions and basis of assumptions; and
______ Cost estimate for each improvement, building, structure, facility, piece of equipment, program and activity; and
______ All sources and amounts of funding for each of above, including but not limited to tax increment revenues, bank financings, government program financings, grants, municipal or other public debt issuances, developer equity, and tax credits; and
______ Timing of each planned improvement, building, structure, facility, piece of equipment, program and activity and related expenditures.
NOTE: If funding other than with tax increment revenues for one or more specifically identified improvements, facilities or other items described above has been requested from the federal or state government or another entity but a funding decision has not yet been made, and the municipality wishes to retain the flexibility to use tax increment revenues to pay all or a portion of the costs of that improvement, facility or other item or to redirect some or all of those revenues to a different improvement or facility, depending on the availability of other funding, the following additional information must be provided.
______ Identification of the specific improvement, facility or other item for which the municipality may use either tax increment revenues or an alternative funding source, or both; and
______ All sources and amounts of definitive and potential funding for each specifically identified improvement, facility or other item, including but not limited to tax increment revenues, bank financings, government program financings, grants, municipal and other public debt issuances, developer equity, and tax credits, with each funding source identified as definitive or potential, reasons why a funding source is potential rather than definitive, and the anticipated timing of decisions on potential sources; and
______ The priority for use of tax increment revenues and a description of plans and contingencies affecting use of tax increment revenues for each identified improvement, facility or other item.
NOTE: If the municipality wishes to retain the flexibility to use tax increment revenues to pay either or both the capital and operating costs of a specifically identified improvement or facility, the following additional information must be provided.
______ Identification of the specific improvement or facility for which capital or operating costs, or both, will be paid with tax increment revenues; and
______ For each identified improvement or facility for which authorization is requested to pay both capital and operating costs, (i) the amount of tax increment revenues to be used to pay capital costs and (ii) the amount of tax increment revenues to be used to pay operating costs; and
______ For each identified improvement or facility for which authorization is requested to allocate up to a maximum aggregate amount of tax increment revenues to the capital or operating costs, or both, of that improvement or facility, as determined by the municipality, the maximum aggregate amount requested and the reason or reasons why the municipality is requesting flexibility; and
______ Priority for use of tax increment revenues to pay capital or operating costs and a description of plans and contingences affecting use of tax increment revenues for capital or operating costs.
NOTE: A municipality that intends to use tax increment revenues from an affordable housing development district to establish a permanent housing development revolving loan fund or investment fund must provide the following additional information.
______ A description of the fund, including type, purpose, operation, and provisions for repayment or return of fund proceeds to the fund; and
______ The timing of the establishment and use of the fund; and
______ The property to be purchased or the housing to be developed with fund proceeds and the timing of that development or purchase. If both property purchases and housing development are intended, provide information on both; and
______ The location of the property and the housing.
□ Description of terms and conditions of any agreements or other obligations relating to the district (whether or not executed or recorded)
______ Copy of each credit enhancement agreement; and
______ Copy of each other agreement or obligation relating to the district; and
______ Description of plans regarding each project cost account for tax increment revenues
□ For each year the district will be in effect
______ Estimate of increased assessed value of the district
(including assumptions); and
______ Portion of increased assessed value to be retained as captured assessed value and resulting tax increments; and
______ Calculation of estimated tax shifts resulting from creation of district
NOTE: Tax shift calculations must show the effect on the municipality’s state revenue sharing, education subsidies, and county tax obligations from the designation of captured assessed value. Tax shift formulas are included in Appendix B to this Program Guide.
□ Description of plan for relocation of persons displaced by development activities
______ Relocation plan description; or
______ Statement that no relocation is necessary
□ Description of environmental controls to be applied
______ Statement regarding environmental controls, such as permitting and licensing, adherence to laws and regulatory conditions, use of qualified contractors, or use of environmental mitigation measures during development and operation of district
□ Description of proposed operation of district after completion of improvements
______ Description of operation of housing, facilities, improvements, programs and activities, including, e.g., responsible entity, manner of operation, funding
□ Assurance of municipality that its affordable housing development program complies with Maine law limiting growth-related capital investments (see 30-A M.R.S.A. §4349-A)
______ Written assurance stating how compliance is achieved
□ For municipal debt financing only: Amount of public indebtedness to be incurred with maximum 20-year maturity to finance approved project costs
______ Principal amount, maturity and type of each municipal debt issuance (general obligation bonds, revenue bonds, notes or other evidences of indebtedness); and
______ Description of plans regarding development sinking fund account for tax increment revenues
□ For municipal debt financing only: Aggregate municipal general obligation debt relating to affordable housing development districts within any county cannot exceed $50 million
______ County where district is located; and
______ Principal amount of municipal general obligation debt for this district; and
______ Aggregate principal amount of municipal general obligation debt relating to all other affordable housing development districts (excluding this district) in that county
□ For municipal debt financing only: All improvements financed with municipal bonds must be completed within 5 years from MSHA approval date
______ List of improvements to be financed with municipal bonds
______ Planned completion date
8. Amendment of Affordable Housing Development District
or Affordable Housing Development Program
Amendments
A municipality may amend an approved affordable housing development district or affordable housing development program. Any amendment to the district or the development program must comply with all requirements of the statute. A municipality may not amend its district or development program if it would result in noncompliance with the statute.
When Amendment Is Necessary
Any change to the boundaries of a designated affordable housing development district may be made only by amendment.
Material changes to an approved affordable housing development program must also be made by amendment. Material changes include but are not limited to:
■ An increase or decrease in the duration of the district.
■ An increase or decrease in the duration of the affordable housing development program.
■ An increase or decrease in the percentage of increased assessed value retained as captured assessed value.
■ An increase or decrease in the amount or percentage of tax increment revenues allocated to the funding of specific project costs.
■ The addition of new project costs. New project costs can arise from the use of tax increment revenues to pay the costs of improvements, facilities or other items not included in the approved affordable housing development program. In addition, new project costs can arise from the use of tax increment revenues exceeding a specified approved amount or percentage to fund a type of improvement previously approved, for example, the construction of more affordable housing than specified in the approval.
■ The deletion of project costs.
■ Substitution of the mechanism to assure the ongoing affordability of at least 33 percent of the housing in the district.
If MSHA has approved the use of a maximum aggregate amount of tax increment revenues to pay one or more project costs on a “menu” of approved project costs, no amendment of the development program is necessary as long as the municipality stays within the limits of that approval. The municipality may not spend or commit tax increment revenues exceeding the maximum aggregate amount specified in MSHA’s approval or use any amount of tax increment revenues to pay costs of improvements, facilities or other items not included on the “menu” of approved project costs.
MSHA invites and encourages a municipality contemplating changes in its affordable housing development district or its affordable housing development program, or both, to contact MSHA’s Research and Planning staff to discuss its plans early in the planning process.
Amendment Procedure
To amend its district or development program, the municipality must follow the same notice and hearing procedures that applied to its original designation of the district and adoption of the affordable housing development program. These procedures require the municipality to hold at least one public hearing on the proposed district or development program amendment and to publish notice of the hearing in a newspaper of general circulation in the municipality at least 10 days before the hearing is held. As described in Section 5 of this Program Guide, the municipality’s legislative body must consider certain factors and evidence at the public hearing and approve a district or development program amendment by majority vote.
Application to MSHA Required
After the municipality’s legislative body adopts an amendment to an affordable housing development district or affordable housing development program, the municipality must request MSHA approval of the amendment by filing an application with MSHA. The application should be addressed to:
Director
Maine State Housing Authority
353 Water Street
Augusta, Maine 04330
Preliminary Filing Requirement
Preliminary filing is not required for applications to amend an affordable housing development program only. Preliminary filing is required, however, for any application to amend the boundaries of an affordable housing development district in any way because such an amendment will affect the original assessed value of the district.
If the municipality’s legislative body has not taken final action on the amendment of the district by February 15 of the property tax year (April 1 through March 31) in which the municipality intends to apply for MSHA approval of its amended district, or, the municipality’s application materials are not otherwise complete by that date, the municipality must provide to MSHA, no later than February 15 of that tax year:
■ A physical description of the proposed amended district, with municipal and tax maps clearly delineating the boundaries of both the amended and existing districts and showing district boundaries relative to municipal boundaries; and
■ A copy of the proposed amended affordable housing development program in the form in which it was or will be presented to the municipality’s legislative body for adoption.
MSHA will review this preliminary filing and offer guidance to the municipality as necessary.
Contents of Complete Application for Approval of Amendment
A complete application for approval of an amendment to a municipality’s affordable housing development district or affordable housing development program must include the following:
1. A letter of transmittal from an authorized municipal official certifying that all information contained in the application is true and complete to the best of his or her knowledge.
2. An updated Application Cover Sheet in the form attached to this Program Guide as Appendix A.
3. A narrative summary of the changes included in the proposed amendment(s).
4. Citations to the specific provisions (including references to page and section numbers in the original application) of the municipality’s affordable housing development program that are being amended and an explanation of how they are being amended.
5. Citations to the specific project costs that are being amended and an explanation of how they are being amended.
6. A detailed physical description of any changes to the boundaries of the district; a municipal map showing the boundaries of both the amended and existing districts relative to municipal boundaries; and a tax map clearly delineating the boundaries of the amended and existing districts.
7. If the amendment changes the boundaries of the existing district, a statement of the new original assessed value of the district certified by the municipal assessor.
NOTE: The original assessed value of property included in the affordable housing development district as of the date of the most recent MSHA approval of the district designation remains unchanged. The amended original assessed value must reflect the taxable value of the property proposed to be added to or removed from the district as of the March 31st preceding the date of the application submitted to MSHA for approval of the amendment. The actual original assessed value of the amended district approved by MSHA will be the original assessed value of the district as of the date of the preceding MSHA approval of the district, adjusted by the taxable value, as of the March 31st preceding the date of MSHA approval of the amendment, of property added to or removed from the district as a result of the amendment.
8. All items listed under “Process” in the Checklist included in this Program Guide.
9. A copy of the full affordable housing development program, as proposed to be amended.
Time Requirement for Submitting Complete Application
A complete application for approval of an amendment to an affordable housing development program only may be submitted at any time. An application that includes any amendment to the boundaries of an affordable housing development district, however, must be submitted in accordance with the following schedule.
To establish the original assessed value of the amended affordable housing development district indicated in the municipality’s application, a municipality must submit a complete application to MSHA no later than March 15 of the property tax year in which the municipality designated the amended district. The Director of MSHA, if requested by the municipality before March 15, may, for good cause established by the municipality, authorize submission of an application after March 15 but no later than March 31. Requests for extensions of time are not encouraged, however, and a municipality requesting an extension will be required to make a strong showing of good cause.
Consideration of an application after March 31 of the property tax year in which the municipality designated the amended district may affect the original assessed value of property proposed to be added to the amended district and invalidate the financial plan for the municipality’s affordable housing development program. Municipalities are encouraged to discuss their plans to amend an affordable housing development district and submit their applications to MSHA as early in the tax year as possible to avoid this risk.
Effective Date of Amendment
The amended affordable housing development district and amended affordable housing development program become effective on the date of MSHA approval, as shown in the Certificate of Approval of Amendment issued by MSHA.
9. MSHA Review of Applications
Review by Director
MSHA will review each application for approval of the designation of an affordable housing development district and the affordable housing development program for that district to ensure compliance with statutory requirements.
MSHA will review each application for approval of an amended district or amended affordable housing development program, or both, to ensure compliance with statutory requirements.
Action on Application
After reviewing an application, the Director will issue a Certificate of Approval, or, in the case of an amended district or development program, a Certificate of Approval of Amendment; deny the application, stating in writing the reasons for the denial; or issue a conditional approval as provided below.
Certificate of Approval—Original District and Development Program
A Certificate of Approval approving the original designation of an affordable housing development district and the original affordable housing development program for the district will include the following:
1. The name of the district.
2. The term of the district.
3. The effective date of approval of the district and affordable housing development program.
4. The original assessed value of the district as certified by the municipal assessor.
5. The percentage of increased assessed value that the municipality is authorized to retain as captured assessed value.
6. Authorization for the use of specified amounts or percentages of tax increment revenues from the district for specified improvements, facilities or other project costs.
7. The requirement that tax increment revenues be deposited and held in one or more project cost accounts or development sinking fund accounts, or both, as appropriate, and be used only for approved project costs.
8. Reporting requirements.
9. The requirement that the municipality notify MSHA promptly if the affordable housing development district is terminated.
10. The requirement that the municipality enter into an agreement with MSHA providing that if the district is not in compliance with conditions of its approval, including but not limited to statutory conditions, or if tax increment revenues derived from the district are deposited into the municipality’s general fund, the municipality will not include the corresponding amount of valuation as captured assessed value on its municipal valuation return, and otherwise requiring compliance with MSHA’s Affordable Housing Development District—Recovery of Public Revenue Rule.
11. Any other terms that MSHA determines are necessary, including but not limited to any conditions of approval.
Certificate of Approval—Amendment
A Certificate of Approval of Amendment approving an amendment to an affordable housing development district or affordable housing development program, or both, will include the following:
1. The name of the district.
2. The term of the district, not to exceed 30 years from the date of approval of the designation of the original district.
3. The effective date of approval of the amended district or amended development program, or both.
4. If applicable, MSHA’s authorization to increase or decrease the original assessed value of the district and the amount of the increase or decrease.
5. The original assessed value of the district, as certified by the municipal assessor.
6. If any change: The percentage of increased assessed value that the municipality is authorized to retain as captured assessed value.
7. If any change: Authorization for the use of specified amounts or percentages of tax increment revenues from the district for specified improvements, facilities or other project costs.
8. The requirement that tax increment revenues be deposited and held in one or more project cost accounts or development sinking fund accounts, or both, as appropriate, and be used only for approved project costs.
9. Reporting requirements.
10. The requirement that the municipality notify MSHA promptly if the affordable housing development district is terminated.
11. Any other terms that MSHA determines are necessary, including but not limited to any conditions of approval.
Conditional Approval
To ensure compliance with the statute allowing the creation of affordable housing development districts while at the same time furthering the intent and goals of the statute, the Director may approve the designation or amendment of a district and conditionally approve a portion of the related affordable housing development program. Conditional approval will generally be reserved for instances in which all or substantially all of the statutory requirements have been satisfied with respect to the development program intended to be carried out within the boundaries of the district, but additional requirements relating to development activities outside the district must be satisfied. In that situation, the Director may approve the portion of the development program, or amended development program, for which all requirements have been satisfied, conditioned on the municipality providing additional information to satisfy the remaining requirements. The municipality must submit the additional information required by MSHA for full, unconditional approval of the development program.
If the Director approves the designation of an affordable housing development district or a district amendment and approves only part of the affordable housing development program for the district under a conditional approval, the municipality may expend tax increment revenues from the district only on the approved part of the development program. The municipality may not expend tax increment revenues on any part of an affordable housing development program for which the Director has not issued a Certificate of Approval or Certificate of Approval of Amendment, as applicable.
NOTE: The need to resort to a conditional approval often can be avoided by a municipality’s early communication with MSHA regarding its affordable housing development program and the project costs involved in the development program.
10. Annual Reporting Requirements; Site Visits
Annual Reporting Requirements
On or before April 30 of each year, a municipality must provide the following information to MSHA for the preceding property tax year for each affordable housing development district located in the municipality that was in effect at any time during that property tax year. The report submitted to MSHA must provide the information below separately for each affordable housing development district in the municipality. The report must be made in the name of the municipality’s legislative body and certified by signature of an authorized municipal official as true and complete as of the date of the report. Each report shall include all of the following:
1. The name of the district.
2. The total assessed value of the district as certified by the municipal assessor.
3. The captured assessed value of the district as certified by the municipal assessor.
4. The amount by which the current assessed value of the taxable property in the district increased or decreased from the original assessed value as certified by the municipal assessor.
5. A copy of the most recent municipal valuation return filed by the municipality with Maine Revenue Services.
6. Improvements funded:
a. An itemized listing of improvements, facilities, and other items funded with tax increment revenues in whole or in part during the property tax year and an indication of location inside or outside the district.
b. Amount of tax increment revenues paid or committed for each identified improvement, facility or other item; the account from which the tax increment revenues were paid (one or more project cost accounts, and in the case of debt service on municipal debt, a development sinking fund account); and whether capital costs or operating costs were paid. Indicate which of these payments were made under a credit enhancement agreement, the party to whom the payments were made, the project costs for which the payments were made, and the amounts paid.
c. The extent to which each identified improvement, facility or other item was completed during the property tax year.
7. As of the end of the property tax year for which the report is filed, the balance in each project cost account and development sinking fund account.
8. A listing of property sales within the district.
9. Dwelling units:
a. The total number of rental units in the district and the total number of affordable rental units in the district (including apartments and other rental units). Please break out the total number of units of senior rental housing, if any, and indicate the number of affordable senior rental housing units.
b. The total number of homeownership units in the district and the total number of affordable homeownership units in the district (including single-family owner-occupied homes and condominiums).
c. Of the total number of dwelling units in the district (including single-family homes, condominiums, apartments and other rental units), show the affordable rental units as a percentage of total dwelling units. If the percentage of affordable rental units is less than 33% of the total number of dwelling units in the district, the report must also show that there is a sufficient number of other affordable dwelling units in the district to meet the requirement that at least 33% of the total number of dwelling units in the district are affordable.
NOTE: An affordable dwelling unit is a single-family, owner-occupied home (including a condominium) or an apartment or other rental unit for a household earning no more than 120% of area median income. No purchase price limits on homes or rent restrictions on rental units are required to establish that a unit is affordable.
10. An assessment of the continuing effectiveness of the approved affordability mechanisms for rental and homeownership dwelling units.
11. To show that the district is primarily a residential development, a description of types of residential uses and acreage; types of uses relating to residential uses (including recreational facilities and child care facilities available to the residents of the district and small-scale nonresidential uses intended to provide services primarily to the residents of the district) and acreage; and types of other uses in the district and acreage.
12. A statement, with its own separate certification, that the public purpose of assisting the implementation of affordable housing development set forth in the statute (30-A M.R.S.A. c. 206, sub-c. 3) is being met; that the municipality’s affordable housing development district and affordable housing development program are in compliance in all respects with the provisions of the statute; and that the municipality is in compliance in all respects with MSHA’s Affordable Housing Development District—Recovery of Public Revenue Rule.
The municipality shall also provide any additional information requested by MSHA.
Site Visits
MSHA may make site visits to approved affordable housing development districts as part of its duties to ensure compliance with statutory requirements.
APPENDIX A
APPLICATION COVER SHEET
Name of municipality: _________________________________________________
Mailing Address: _____________________________________________________
____________________________________________________________________
Project Contact Person: ________________________________________________
Telephone: __________________________ Fax: __________________________
Email address: ________________________________________________________
Name of District: ______________________________________________________
Duration of District: ____________________________________________________
Name and Address of Developer: ________________________________________
_____________________________________________________________________
Original Assessed Value Date: ___________________________________________
Brief narrative summary of development project, including costs (attach additional sheets if necessary):
_____________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
APPENDIX B
TAX SHIFT FORMULAS
Creation of an affordable housing development district affects a municipality’s state education subsidies, state revenue sharing, and county taxes, each of which uses municipal valuation as a basis for calculation. The statute allowing the creation of affordable housing development districts refers to this effect as “tax shifts.” Presented below are the formulas used in the calculation of each of these tax shifts resulting from the creation of an affordable housing development district.
STATE EDUCATION SUBSIDY TAX SHIFT
The current state education subsidy formula is adjusted each year that the district is in effect to include the increased valuation within the municipality based on the annual Captured Assessed Value. All other factors affecting the subsidy calculation are held constant. The difference in the actual education subsidy and the adjusted education subsidy represents the projected state education subsidy tax shift for that year.
STATE REVENUE SHARING TAX SHIFT
To determine the state revenue sharing tax shift, collect the following information, available from the State Treasurer’s office and at state.me.us/treasurer/revenue.htm:
1. Projected total municipal revenue sharing pool for the current fiscal year;
2. Municipality’s “current factor”;
3. Municipality’s “computed number,” and the three figures used to calculate the current computed number: Municipality’s population, local assessment, and State Valuation;
With this information in hand, proceed through the steps outlined below:
STEP ONE
Calculate the Aggregate Computed Number:
Computed Number
Current Factor
STEP TWO
Calculate the Adjusted Local Computed Number: (CAV=Captured Assessed Value)
__Municipal Population x Local Assessment__
State Local Valuation + Projected Annual CAV
STEP THREE
Calculate the Adjusted Aggregate Computed Number:
Aggregate Computed Number – Computed Number + Adjusted Local Computed Number
STEP FOUR
Calculate the State’s Adjusted Current Factor:
__Adjusted Local Computed Number__
Adjusted Aggregate Computed Number
STEP FIVE
Calculate Municipality’s Current Projected Revenue Sharing:
Projected Total Municipal Revenue Sharing Pool
x Municipality’s Adjusted Current Factor
STEP SIX
Calculate the Projected Municipal Revenue Sharing for each year:
Step 5 in given TIF District year – Step 5 in the Base Year
Repeat for each year’s Projected Annual CAV.
Note that the Projected Municipal Revenue Sharing calculation for the base year should be the same as the Municipality’s Current Projected Revenue Sharing.
COUNTY TAX SHIFT
Determining the county tax shift requires information from Maine Revenue Services and from the County office for the county in which the municipality is located.
From Maine Revenue Services, obtain the most recent State County Valuation and the State Local Valuation. From the County office obtain the County Tax Levy and the County budget for the current year and five or more years past.
STEP ONE
Calculate the Current Municipal Percent of County Value:
Current State Local Valuation_
Current State County Valuation
STEP TWO
Calculate the Projected County Budget:
Using the current County budget and historic County budgets, calculate the average annual increase in the county budget. Using the average annual increase, project the annual budget for each year of the TIF District.
STEP THREE
Calculate the Municipal Share of County Tax without CAV (Captured Assessed Value):
Current Percent of County Value x Projected County Budget
STEP FOUR
Adjust the projected State County Valuation and the State Municipal Valuation to include the projected CAV.
STEP FIVE
Using values from Step Four, calculate the Adjusted Municipal Percent of County Value.
STEP SIX
Calculate the average Municipal Share of County Tax with the CAV:
Adjusted Municipal Percent of County Value x Projected County Budget
STEP SEVEN
Calculate the County Tax Shift:
Municipal Share of County Tax with CAV – Municipal Share of County Tax without CAV
Repeat for each year’s Projected Annual CAV.
APPENDIX C
MUNICIPAL
AFFORDABLE HOUSING DEVELOPMENT DISTRICTS
30-A M.R.S.A. Chapter 206, subchapter 3
Section 5245. Findings and declaration of necessity
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 required 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.
Section 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 living 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 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. Tax 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.
Section 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 within 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%, 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 show that the development meets an identified community housing need. The affordable housing development program must provide a mechanism to ensure the ongoing affordability for a period of at least 10 years for single-family, owner-occupied units and 30 years for rental units.
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.
G. The district must be primarily a residential development on which at least 33% of the dwelling units are affordable housing and that may be designed to be compact and walkable and to include internal open space, other common open space and one or more small-scale nonresidential uses of service to the residents of the development.
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.
Section 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;
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 revenue;
D. A description of the terms and conditions of any agreements, contracts or other obligations related to the affordable housing development program;
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.
Section 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 acquisition 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 accreditation 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 required due to improvements or activities within the district, 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 funding public kindergarten to grade 12 costs and 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.
Section 5250. 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 in a newspaper of general circulation within the municipality.
2. Review 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.
Section 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 revenues 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 within the affordable housing development district pays real property taxes apportioned equally with property taxes paid elsewhere in the municipality.
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 5250-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 paragraph C. The municipality, at any time during the term of the district, by vote of the municipal officers, may return to the municipal general 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.
Section 5250-B. Rules
The director may adopt rules necessary to carry out the duties imposed by this subchapter and to ensure municipal compliance with this subchapter following designation of an affordable housing development district. Rules adopted pursuant to this section are routine technical rules as defined in Title 5, chapter 375, subchapter 2-A.
Section 5250-C. Grants
A municipality may receive grants or gifts for any of the purposes of this subchapter. The tax increment revenues within an affordable housing development district may be used as the local match for certain grant programs.
Section 5250-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 within 20 years from the date of issue to finance all project costs needed to carry out the affordable housing development program within 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 period of up to 3 years by issuing temporary notes and notes in renewal of the bonds. All revenues derived under section 5250-A received by the municipality are 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.
Section 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 met;
B. Account for any sales of property within the district; and
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 in accordance with Title 5, chapter 375, subchapter 2-A.
Section 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.
Section 5250-G. Unorganized territory
For the purposes of this subchapter, a county may act as a municipality for the unorganized territory within the county and 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.
APPENDIX D
MSHA RECOVERY OF PUBLIC REVENUE RULE
INDEPENDENT AGENCIES – NOT PART OF STATE GOVERNMENT
346. MAINE STATE HOUSING AUTHORITY
CHAPTER 31 Affordable Housing Development District –
Recovery of Public Revenue
Summary: Subject to the satisfaction of certain conditions and the approval of the Maine State Housing Authority, municipalities may create affordable housing development districts within their corporate limits. A municipality that creates an affordable housing development district benefits from the use of increased property values relating to the district without any offsets to the municipality’s State revenue sharing and education subsidies or increase in county taxes. In the event that an affordable housing development district fails to continue satisfying conditions of its creation, this rule provides for the recovery of public revenue resulting from these beneficial tax shifts.
1. Definitions. The following terms shall have the following meanings:
A. “Affordable Housing” means a decent, safe and sanitary dwelling, apartment or other living accommodation for a household whose income does not exceed 120 percent of the median income for the area as defined by the United States Department of Housing and Urban Development.
B. “Affordable Housing Development District” means a specified area within the corporate limits of a municipality that has been designated as such in accordance with the provisions of Sections 5247 and 5250 of Title 30-A M.R.S.A. for a duration of up to 30 years and that is developed under an Affordable Housing Development Program and financed under Section 5250-A of Title 30-A M.R.S.A.
C. “Affordable Housing Development Program” means a statement of means and objectives designed to encourage the development and maintenance of Affordable Housing within an Affordable Housing Development District.
D. “Authority” means the Maine State Housing Authority.
E. “Captured Assessed Value” means the amount of Increased Assessed Value that is utilized from year to year to finance the Project Costs contained in the Affordable Housing Development Program.
F. “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 is in effect.
G. “Director” means the Director of the Authority.
H. “District” means an Affordable Housing Development District.
I. “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.
J. “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.
K. “Project Costs” means any expenditures or monetary obligations incurred or expected to be incurred that are authorized by Section 5249 of Title 30-A M.R.S.A. and included in the Affordable Housing Development Program.
L. “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 from Captured Assessed Value.
2. Recovery of Public Revenue
a. For any period of time during which conditions for approval of an Affordable Housing Development District of continuing applicability after approval of the District by the Director were not maintained, the municipality where the District is located shall not claim for that period of noncompliance the corresponding amount of local valuation as Captured Assessed Value on the municipal valuation return that the municipality is required to file with Maine Revenue Services pursuant to 36 M.R.S.A. Section 383.
b. For any period of noncompliance with conditions of approval of an Affordable Housing Development District for which the municipality where the District is located has claimed the corresponding amount of local valuation as Captured Assessed Value on the municipal valuation return filed with Maine Revenue Services for that period, the municipality is liable to the Authority and shall pay to the Authority, on demand, the value of the Tax Shifts benefiting the municipality during the period of the noncompliance. The Authority may, in its discretion, waive events of noncompliance that are insubstantial or that are being corrected diligently and in good faith or for other reasons satisfactory to the Authority.
c. The Authority shall take those steps necessary to recover the value of the Tax Shifts as provided in Section 2.b of this rule. Nothing in this rule precludes a municipality from recovering such amounts from a developer, owner, or sponsor of Affordable Housing or other responsible entity to the extent permitted by applicable law.
d. The Authority shall remit to the Treasurer, State of Maine, amounts recovered from a municipality that represent the value of the Tax Shifts described in Section 2.b of this rule.
e. A municipality seeking approval of an Affordable Housing Development District by the Director shall be required, as an additional condition of such approval, to enter into a binding agreement with the Authority in which the municipality expressly agrees to be bound by terms and conditions substantially similar to those set forth in this rule.
BASIS STATEMENT: Maine law requires the Authority to develop a rule providing for the recovery of public revenue if conditions for approval of an Affordable Housing Development District are not maintained for the duration of the District. The proposed rule is subject to review of the Maine Legislature as a major substantive rule.
FISCAL IMPACT NOTE: The proposed rule will not impose any cost on municipalities as a result of its adoption. In cases in which a municipality is out of compliance with conditions of approval of an Affordable Housing Development District, the municipality may be required to pay to MSHA the value of the Tax Shifts benefiting the municipality for the period of the noncompliance. MSHA will remit amounts recovered from the municipality to the State Treasurer.
STATUTORY AUTHORITY: 30-A M.R.S.A. §§5250-E.2, 4741.1.
EFFECTIVE DATE: June 19, 2004
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