AUBURN – The Auburn City Council on Monday narrowly approved a tax increment financing district that would allow the city to capture up to 100% of tax revenues generated on the increased valuation of the Stable Ridge development at 555 Court St. for special development projects over the next 20 years.

The order was passed with an amendment from Councilor Ryan Hawes that would require the council to reconvene for a public hearing and vote on a proposed credit enhancement agreement with the property’s developer.

The original application would have given the city manager alone the authority to draft and execute the credit enhancement agreement with the developer.

“It does give the city manager a little bit more authority than I think a lot of people would be comfortable with,” Hawes said.

The application spells out the terms of a potential credit enhancement agreement, but the council’s vote does not immediately put such an agreement in place, Holmes said.

The application says the agreement could rebate up to 50% of the tax revenues generated on the increased value over 10 years or up to $500,000, whichever comes first. An agreement acts as a rebate where the developer must pay taxes on the property in full before receiving any money back.

The terms laid out in the application are “the maximum allowable cap, the maximum allowable term and the maximum allowed percentage,” Holmes said. “So that can be negotiated from anywhere from that down to zero on all of those.”

Council Joseph Morin said he liked Hawes’ amendment because it’s “very easy to conflate” the TIF district with the credit enhancement. By breaking it out, it allows the council to vote on the TIF application and “then having a longer discussion about, if any, credit enhancement, what’s an appropriate amount and not conflating the two issues at the same time.”

Hawes’ motion to amend the application to require that the credit enhancement agreement come back before the council passed 4-3.

Several residents who spoke at the public hearing said they were on the board with the TIF district, also called a development district, but expressed concern over a potential credit enhancement agreement.

“At this point, the developer has financed the project, the developer has built the project and the developer has rented the project. I’ve heard no reason whatsoever why the developer needs $500,000 of taxpayer money for a project that is completed,” John Cleveland said.

“At no time during this project has the developer come forward and said they needed some type of incentive to go forward with their development,” Jeffrey Harmon asid.

“The only thing that they’ve ever said is that this lot was a lot more difficult and expensive to develop than they anticipated. So, in effect, what we’d be doing here, it’d be taking $500,000 in taxpayer money, rebating it back to this developer because they’re disappointed in the amount of profit they’re going to make,” Harmon said.

Some members of the council echoed those concerns. Councilor Richard Whiting said this sets a “bad precedent” of signing such agreements with private housing developments that don’t “provide a direct benefit back to the city.”

A motion from Councilor Dana Staples to strike all references to a credit enhancement agreement from the application failed 3-4, however.

Mayor Jason Levesque said, “You don’t know what the opportunity or benefit is to the residents of Auburn until you start having those conversations with the developer.”

“By taking the potential conversation completely off the table, then there is no way for us to go back and fix this or amend this,” he said.

The final vote on the TIF application as amended passed 4-3 with Councilors Hawes, Morin, Stephen Milks and Leroy Walker in favor. Councilors Staples, Whiting and Belinda Gerry voted against.

The application includes that, at most, 15% of the funds generated from the development district would go toward the construction or operation of a public safety facility. Another significant amount would go toward road improvements for areas in or around the Stable Ridge property. The remainder of the money would go toward administrative costs associated with the district and costs related to economic development programs.

The city began drafting the application before the Planning Board voted to deny American Development Group’s proposal for a phase two, which would have doubled the number of apartments to 120.

The application estimated that the property’s valuation would increase from the original assessed value of $235,500 to more than $14 million over the next 20 years. Without phase two, the valuation would be cut in half, Glen Holmes, Auburn’s business and community development director, said in an interview Monday.

If there is no credit enhancement agreement, the projected TIF revenues on the increased value are estimated to total more than $5.6 million – or $2.8 million without phase two – over the course of the TIF. It is expected to bring in about $280,000, or $140,000, on average every year for the identified development funds.

With a credit enhancement agreement of 50% of TIF revenues over 10 years or up to $500,000, the city would see about $4.4 million total or an average of $220,000 per year. Without phase two, those totals are slashed in half.

The TIF application now goes to the Maine Department of Economic and Community Development for final approval. Holmes said it will likely take about a month to get a decision.