BRUNSWICK — The town and the Midcoast Regional Redevelopment Authority resolved a tax dispute that lasted more than three years.

Terms of the settlement were announced at the Oct. 5 Town Council meeting.

At issue was 93,000 square feet of space at Hangar 6 at the Brunswick Executive Airport, leased to Kestrel Aviation Co. by MRRA.

MRRA argued that Kestrel’s operations fall under the state’s definition of “aeronautical purposes,” which would exempt the company from paying municipal property taxes.

The town maintained that Kestrel’s operations are primarily focused on research and development, not full-time aircraft construction or maintenance, and thus do not fit the state’s definition.

MRRA in April 2014 filed a lawsuit in Cumberland County Superior Court.

But Town Manager John Eldridge on Monday said the two sides reached an out-of-court settlement.

In the agreement, he said, the “properties that were questioned will be deemed taxable by the (town’s) tax assessor.”

But in exchange, the town agreed to amend the terms of two tax increment financing districts on the former base.

In the TIF district encompassing the airport, the property taxes coming from any “aeronautical business,” which is defined in the new agreement, will be eligible for 100 percent reimbursement to MRRA.

Kestrel is considered an aeronautical business in the language of the agreement.

What that means, effectively, is that MRRA pays the property taxes for their lessee, but that money then goes into the special TIF account. MRRA can then apply, through the town, to get all of that money back for future development purposes.

MRRA had already paid $238,000 in property taxes for Kestrel during the tax dispute. That money will now go straight into the TIF account, according to Eldridge.

Because more money will be flowing in and out of the TIF accounts, the cap for total reimbursement to MRRA was raised from $12 million to $15 million, Eldridge said in an interview Wednesday.

“Instead of no tax … we agreed to amend the program to provide 100 percent reimbursement on some properties,” Eldridge said. “That gives both of us some certainty.”

In addition, the agreement lowers the maximum amount of TIF funding MRRA is eligible for from accounts at Brunswick Landing, from 50 percent to 25 percent.

In an interview Tuesday, MRRA Executive Director Steve Levesque called the deal “a good compromise.”

“The town doesn’t lose revenues, and MRRA is allowed to market (these properties) competitively,” he said.

Levesque said that MRRA plans to use TIF funds primarily for infrastructure improvements, like updating its aging sewer system, maintaining the airport and building roads.

Also on Oct. 5, the council released the first batch of TIF funds to MRRA since the agency applied for them in 2013.

“During litigation, we were hesitant to make TIF funds available,” Eldridge said.

The $200,000 the town released Monday, though, came from properties not under dispute in the lawsuit.

The town and MRRA will now file a joint motion to stay the court proceedings, according to the agreement.

“It’s been a long time getting to this point,” Eldridge said Monday. “We’re both pleased we were able to get (here).”

“Thank you for your cooperative effort,” Levesque said after the agreement was announced. “This is good for the redevelopment effort, so thank you.”

Walter Wuthmann can be reached at 781-3661 ext. 100 or wwuthmann@theforecaster.net. Follow Walter on Twitter: @wwuthmann.

The tax status of Kestrel Aviation Co., which leases space in Brunswick from the Midcoast Regional Redevelopment Authority, was settled out of court.