The Windham Town Council voted 3-2 Tuesday night to reject a 15-year extension of a development program funded by taxation of a natural gas pipeline property that runs through town.

Councilors Tommy Gleason and Roy Moore voted for the extension while David Nadeau, Donna Chapman and Robert Muir voted against. The three expressed concerns that the proposal directed too much tax revenue away from the town’s general fund.

A pipeline tax increment financing (TIF) district is a legal designation meant to provide funds for public infrastructure projects through increased municipal revenues. Windham adopted the pipeline district on March 30, 2000, and it is set to expire at the end of this month.

The 13-mile, 3-foot-wide stretch of pipeline property, owned by the Portland Natural Gas Pipeline Transmission System company, runs north to south through Windham. Every year, using the TIF district, the town has directed a fixed $50,000 in tax revenue from the pipeline toward public infrastructure projects and programs such as wastewater planning and Geographic Information Systems mapping. The remaining tax revenue, or about $120,000 this fiscal year, goes to the general fund.

Under the existing development program this fiscal year, $50,000, or 29 percent, of the annual property tax revenue from the pipeline property is channeled into specific public infrastructure uses authorized by the TIF. In turn, the state deducts 29 percent of the $11.7 million valuation of the pipeline from the town’s total assessed valuation. The reduction in the town’s total valuation affects state and county funding formulas – decreasing county taxes and increasing the amount of state education aid and revenue sharing.

But as the pipeline has aged, its property has steadily depreciated in value – declining nearly $2 million in the past 15 years – a change that has affected state and county funding formulas.

In order to shelter more of the town’s assessed value from state and county funding formulas, the proposed 15-year extension of the district would have sent 100 percent of annual tax revenues from the pipeline to five public infrastructure uses authorized under the TIF district, and nothing to the general fund. The extension would have sheltered 100 percent of the pipeline’s assessed value from the funding formulas.

According to Town Manager Tony Plante, during the next 15 years, the extension would have channeled $2,039,746 of property tax revenue specifically toward the five public infrastructure uses and avoided losses of $1,139,131 in state education aid, revenue sharing, and county tax increases. The approved uses include economic development staffing and programming, geographic information systems, and Route 302 roadway intersection, sewer and sidewalk projects.

On Tuesday, the proposal for “100 percent capture” proved controversial. Councilor Bob Muir, who voted against the extension, characterized the proposal as unbalanced.

“I want to make sure that we have a balance between TIFs and money going to the general fund,” Muir said. “I didn’t want to see the whole 100 percent captured by the TIF.”

Muir said he was concerned that the 100-percent-capture provision would unduly restrict the types of services the town can provide.

“I understand it’s sheltered money and all that,” Muir said. “It helps a little bit. When we come to the budget that’s less money that you’ve got to play with for everything else. I don’t want to see them have to raise taxes to make up that money in the general fund that’s not there.”

For Roy Moore, who voted for the extension, the debate was a broad one – pro-TIF versus anti-TIF.

“It’s just a matter of philosophy,” Moore said. “I believe in TIFs. That’s a tool given to us by our state that we can more or less save a little bit of money for infrastructure and rehab of our town.”

“It’s a complicated process but the bottom line is it allows us to have more money to do what we were going to do anyway,” Moore added.

Muir said he does not opposed TIFs generally, but rather the 100-percent-capture provision.

“It was the 100 percent capture that I was against and I was willing to compromise on it, but we didn’t have any takers,” he said.

But for Moore, it’s all or nothing.

“I didn’t want to go 50 percent,” he said. “I want to go 100.”

Tom Bartell, executive director of the Windham Economic Development Corp., said he was disappointed by the council’s vote.

“If you’re going to do these projects, which the council says they want to do, it’s better to use those dollars from within a TIF district that is not affected by that loss of subsidy,” he said. “When you put that money into the TIF district, or when money goes into the TIF district it goes in without that loss of subsidy. When it goes into the general fund, you take that subsidy hit. If you’re going to do a million dollar project, it would be better to pay for it with $1 million of TIF funds than from the general fund.”

According to Plante, the pipeline district will exist until the end of the month.

“It isn’t gone yet,” he said. “The council failed to approve the amendment last night, but the district still exists until the end of the month, so we’ll see.”