LEWISTON — Neighborhoods in Lewiston and Auburn will be included in a new federal program aimed at encouraging private investment, and city officials on Tuesday were both pleased and perplexed by the selections.

The federal opportunity zones program, created by the Republican tax bill passed last year, gives investors a tax incentive for using capital gains from other investments toward developments in the designated areas.

According to a news release Monday, Gov. Paul LePage selected 25 percent of Maine’s eligible low-income census tracts to be designated Opportunity Zones, based “primarily on identified investment opportunities where such investments would likely be met with success.”

In Lewiston, the area selected differed from what city officials advocated.

LePage chose Lewiston census tract 203, which includes Bates College, St. Mary’s Regional Medical Center and the Sabattus Street corridor. City officials had stumped for tract 204, the Tree Streets neighborhood, or 201, the downtown area featuring mill buildings deemed ripe for reinvestment.

Lincoln Jeffers, Lewiston’s director of economic and community development, said census tract 203 is part of the city’s target area for Community Development Block Grant funds, which fits the criteria for supporting low-income neighborhoods.

But, he said, officials were “a little surprised” by the governor’s decision.

“We’re glad to have a designation of any portion of the city, and I think it will attract investment,” he said.

But, Jeffers said, city officials had told the LePage administration that census tracts 201 and 204 were “ripe” for the opportunity zone, with available commercial buildings and workforce.

He said tract 203 has “many of the same attributes” but that there aren’t any large commercial buildings available, and that the area is mostly residential, except along Sabattus Street.

Jeffers said possible investments could be mixed-income housing projects.

According to a Portland Press Herald article Monday, the opportunity zones program was created to free up money from investors who are hesitant to cash out of investments because of capital gains taxes.

However, critics worry the program will give tax breaks to investments in high-end real estate or other projects that don’t benefit poor neighborhoods, and that the administration is misusing the zones to give tax breaks to projects already in development.

Doug Ray, spokesman for the Maine Department of Economic and Community Development, said Tuesday that state officials sought public input on which areas to designate for the program, and heard from local municipalities, economic developers and legislators.

Ray said his department created a “framework” on which zones to choose, including the availability of commercial property and a “pipeline” of projects ready to be funded. He said the downtown mill building area was “considered strongly.”

Asked whether there were specific projects identified in the area, Ray said he didn’t know of any.

Potential investors in the Bates neighborhood may have stiff competition from the college, however, which has quietly acquired dozens of properties surrounding the school in order to expand its footprint and house more employees.

Of the 128 eligible tracts in Maine, LePage could select a maximum of 32 for designation into the program. Many areas chosen are in northern or eastern Maine with a history of economic woes, but southern Maine areas, including downtown Portland, South Portland and Saco, also were chosen.

The investment is tax-free for up to 10 years and investors get a 15 percent tax break on their initial investment.

In Auburn, census tract 105 — the New Auburn neighborhood — was chosen by LePage. At a City Council meeting Monday, officials celebrated the news.

The economic development office agrees with the census tract selection, pointing to a redevelopment plan for the neighborhood that is already underway.

Mayor Jason Levesque said, “This was a highly competitive application process and while I would have liked our downtown included, as well, I think the selection of New Auburn is a great choice, especially considering our (New Auburn Village Center) development project and the ability for this zone to spur investment into our aging housing stock.”

According to a memo from Amanda Methot, economic development specialist in Auburn, the city has invested close to $2 million over the past three years in implementing the New Auburn Village Center Plan.

“By the end of this year, three new development sites will be shovel-ready to market to investors and developers,” she said. “By the end of 2019, four more sites could be ready for development.”

Methot said the biggest barriers developers face to commit to development projects in Auburn are low rental rates for apartments, low market rates for housing and low rental or lease rates of commercial space.

“The opportunity zone program could fill the gap for developers’ bottom line and stimulate new construction, building rehabilitation, (and) create new businesses and jobs,” according to her memo.

Former Auburn City Councilor and mayoral candidate Adam Lee questioned the selection Tuesday via social media.

“While I’m glad to see New Auburn’s inclusion as an opportunity zone, the non-inclusion of our downtown area — where our historically important and potentially community-changing housing stock continues to deteriorate — is frustrating,” he wrote.

arice@sunjournal.com