HALLOWELL — The City Council voted narrowly Monday to relax city guidelines governing tax breaks for developers.

Councilors voted 3-2 to revise previous guidelines that capped the city’s preferred limit on tax-increment financing at 60 percent.

The new guidelines recommend that TIFs can exceed 50 percent if the developer creates the equivalent of one full-time job for every $12,000 of tax-sheltered value, or provides a recreational service “prohibitively expensive” for the city to pursue.

But projects that are determined to be beneficial to the city can have special consideration to gain a TIF, regardless of the percentage.

Under prior city guidelines, developers were urged to create one-time job for every $40,000 sheltered under the TIF if seeking one larger than 50 percent. All guidelines are nonbinding, however.

With a TIF, municipalities agree to forfeit property tax generated by new development within designated districts, as long as the sheltered money is used for purposes such as economic development or infrastructure improvements.

Though the municipality loses tax revenue, it also sees a benefit: Money sheltered through a TIF doesn’t count toward a municipality’s overall property tax value during the TIF’s life. Lower taxable value means more state revenue sharing.

The city was prompted to look at its guidelines after the owner of the Kennebec Ice Arena’s formally asked the city to rebate him 100 percent of the property tax generated for the 20 years after he built a new, $4 million arena.

Councilors Steven Vellani and Lisa Harvey-McPherson voted against the approval, saying they objected to the language they said favors recreational businesses.

“We’re singling out a particular industry, and I don’t think that’s fair,” Vellani said.

Councilors Phillip Lindley, Peter Schumacher and Gail Wipplehauser voted for the change. Councilor Edmund Cervone was absent; Councilor Mark Walker sat as mayor in lieu of Mayor Charlotte Warren, who was absent.

Les Wilkinson, an Augusta-based lawyer at Bernstein Shur, representing ice arena owner Peter Prescott, attended the meeting.

“I see this adjustment as an incremental step,” Wilkinson told the council. “The Kennebec Ice Arena would support this policy change.”

After the vote, Wilkinson said Prescott’s TIF application would be filed this week.

The arena collapsed in March under a heavy snow burden. Prescott hopes to rebuild at a cost of $4 million.

At a June meeting, Prescott, of Manchester, expressed his interest in a TIF that could shelter more than $1.2 million in property taxes over 20 years.

Councilors authorized Starn to negotiate the contract outside competitive bidding. The issue is now being mulled by the council’s Protection Committee.

In other business, the council authorized Starn to draft a purchase-and-sale agreement for more than 29 acres of land near the Hallowell Recreation Area off Town Farm Road.

The land is owned by the Hallowell Water District, which is separate from the city. An appraisal paid for the by the water district valued the land at $74,000.

Before the meeting, Dennis Kinney, the district’s superintendent, said the land, with two small ponds, supplied Hallowell’s drinking water from 1834 to 1934. The water supply has changed multiple times since then.

Kinney said the land has simply become a pain for him to manage — he cited multiple requests for land use from fishermen and those who want to shoot guns there.

“Why we’ve kept this all these years is beyond me,” Kinney said. “It makes more sense to have this land in the city’s name — not the water district’s.”

Harvey-McPherson was the only councilor opposing, saying she wanted to see further plans for land development before proceeding further.

Schumacher said the land’s value alone made it worth the city’s while.

“The sale price is quite fair and I think it is something we should acquire,” he said. “It provides a contiguous path from Town Farm Road to Beacon Road on Granite Hill.”

Michael Shepherd — 621-5662

mshepherd@mainetoday.com