SOUTH PORTLAND — City councilors on Monday unanimously extended a tax break for one of the city’s two major semiconductor plants.
The tax increment financing, or TIF, deal between South Portland and Texas Instruments reimburses TI for a portion of its taxes, and funnels other tax money into a fund for specific improvements in the city.
The deal extends an annual tax break of up to 50 percent for TI through fiscal 2024. The deal was set to expire this summer after a one-year extension was granted last July.
At that time, Texas Instruments was in the process of buying National Semiconductor, and in the process taking over National Semi’s South Portland plant. TI asked the city for a one-year tax break extension to alleviate uncertainty about the company changing hands.
The TIF agreement was originally signed by the city and National Semiconductor in 1996. It locked in the 1996 taxable property assessment of $20.5 million. Any taxes levied on increased value since then (the 2012 assessed value of Texas Instruments was $184 million) is split between the city and the company.
Between 1996 and 2011, National Semiconductor received about $45 million in TIF revenue.
Today, 50 percent of the taxes paid on the increased assessed value goes to the city’s general fund. The other 50 percent is split by the city and TI, depending on how much the company invests in the South Portland plant.
The company must average $6 million of investment to be eligible for TIF reimbursement. As they invest more, their share of TIF revenue grows. For fiscal 2012, TI will receive about $1 million in tax reimbursements, city Finance Director Greg L’Heureux said. The city captured about $1.9 million in TIF revenue.
The National Semi/TI TIF has funded improvements on Western Avenue, the construction of Jetport Plaza Road and sewer separation at Long Creek, among other city projects.
Continuing the arrangement is a good deal for the city and the company, City Manager Jim Gailey said in a memo to councilors.
He said the extension will help TI remain competitive and create an incentive for the company to invest in its South Portland operations.
L’Heureux said that when he tells his colleagues in other cities that South Portland is home to two major semiconductor companies (Fairchild Semiconductor is the other), they can’t believe it.
“They’re all shocked that we would have the presence here in South Portland,” he said. “The nature of this business is substantial. Their presence here is huge.”
Fairchild and Texas Instruments employ 1,315 people, L’Heureux said. Combined, he said, the companies pay more than 6.9 percent of the city’s property taxes. General Growth Properties, which owns the Maine Mall, is the city’s largest individual property taxpayer, with 6.2 percent of all payments.
The city could easily take its full tax bill on the $184 million Texas Instruments complex and use the revenue to fund projects. But L’Heureux said the TIF is about stability.
“If you don’t incentivize businesses to further develop or maintain their property at a high level, you’re at risk of that business failing or moving out of town,” he said.