BRUNSWICK — The state’s economic development agency this week approved the town’s new tax increment financing district, including a tax rebate program for a proposed inn at Maine Street Station.

The rebate program for the 54-room inn has triggered a pair of lawsuits opposing its provision to return an average of 85 percent of property taxes to the developer over 10 years.

The plaintiff in one of the lawsuits, Peter Anastos of Maine Course Hospitality Group in Freeport, also convinced two state lawmakers to question the fairness of the program, arguing that it amounted to an unfair competitive advantage that could doom other local hotels. 

The increased scrutiny from lawmakers succeeded in delaying approval of the new TIF district by the state’s Economic and Community Development Department.

DECD officials recently met with Town Manager Gary Brown to discuss the tax-sheltering district. According to Brown, the officials were interested in whether the town followed proper procedure in adopting the district, specifically if it sufficiently considered the potential impacts the program would have on competitors.

“Their questions were pretty much all the questions Mr. Anastos raised in his letter (to DECD),” Brown said, referring to Anastos’ March letter to DECD. 

DECD officials were apparently satisfied with the answers. On Tuesday, Brown received word that the TIF district would be approved, including the rebate provision for the inn.

The new district will shelter taxes through a defined downtown region, the proceeds of which the town can use to fund other development projects.

The only provision in the town’s proposal that wasn’t approved was one that would have allowed the town to use proceeds to buy land.

The denial is noteworthy because the town had hoped to use the TIF proceeds to reimburse itself for the 1999 acquisition of property for Maine Street Station.

Additionally, Brown has previously hinted that TIF money could be used to buy land for a new police station, a strategy he deployed to fund a new public safety building in Topsham while he was that town’s chief executive.

Until recently the Town Council had met in executive session to discuss potential sites for a new station to replace the Police Department’s subterranean facility on Federal Street. 

The council recently suspended the police station discussions, presumably to tackle a 2011 budget that will probably include layoffs of some town employees.

The council is tentatively scheduled to revisit the police station issue this fall.

Nonetheless, news of DECD’s approval was a positive development for town officials who have argued that the inn is the lynchpin for the Maine Street Station project and vital to its success.

The $14 million joint development project between JHR Development and the town has managed to navigate multiple obstacles, including a weakened economy and town investment that has exceeded initial estimates while the project valuation has shrunk to half of its original projection.

The inn tax rebate is estimated at $907,000 and would be tacked on to the town’s $5.2 million investment in Maine Street Station.

“We are pleased that the DECD has approved our TIF application and the development program for Maine Street Station and downtown Brunswick,” Brown said in an e-mail on Wednesday. “The completion of Maine Street Station is the top economic development goal of the (council) and this will assist in achieving that goal.”

“While the credit enhancement is an overall small component of the plan, it generated controversy,” Brown added. “The larger components will allow for reimbursement to the Town for its investments at Maine Street Station, People Plus and future investments in the downtown district.”

Anastos said the DECD’s decision wouldn’t deter his lawsuit against the town.

“It’s not totally unexpected, but it’s disappointing,” he said. “Obviously, with local hotels at a 45 percent occupancy rate, we’re all losing money. Why they would favor one business over all the others is puzzling.”

Anastos added that he would continue fighting the inn rebate “more aggressively than ever.”

Steve Mistler can be reached at 373-9060 ext. 123 or smistler@theforecaster.net