SKOWHEGAN — Sappi Fine Paper Co. has agreed in principle to withdraw its tax abatement requests against the town for 2014 and 2015 in exchange for an agreed upon $64 million in reduced value for taxation beginning this coming year.

The tentative agreement is a move to save jobs at the paper mill on U.S. Route 201 and is a compromise between mill owners and the town, officials said Tuesday night.

Under the agreement, the town would lose about $1.2 million in taxes for fiscal year 2016-17, the town’s assessor’s agent Bill Van Tuinen said Tuesday night after an executive session of the Board of Assessors and the Board of Selectmen.

“All the details are not done,” Van Tuinen said, “but the concept is totally agreed to.”

S.D. Warren Co., a subsidiary of Sappi and the legal owner of the property, agrees to withdraw its pending abatements before the state Board of Property Tax Review, he said.

“Those are dismissed. Those are done away with. The town doesn’t owe any back money to S.D. Warren,” Van Tuinen said. “Going forward, the 2016 valuation is set at $380 million. That’s about a $64 million reduction from the most recent tax bill, and it will probably be less.”

In the year following, the town assessors will update the property valuation, but not to exceed $380 million in 2016-17 and 2017-18.

“I think it’s a good compromise with the situation that we’re face with,” Van Tuinen said.

Mark Hittie, director of communications at Sappi, was out of the office Tuesday night and said he could not comment on the agreement.

Donald Skillings, chairman of the Skowhegan Board of Selectmen, said the compromise means that the town will received roughly $1.2 million less in taxes for the 2016-17 tax year, which begins July 1. He said the budget will be attacked in a “three-pronged approach,” meaning the town budget, the school budget and the county tax all will have to be considered.

“Everyone has worked diligently in coming to a solution that would be acceptable to the town of Skowhegan and acceptable for Sappi,” Skillings said. “We have to remember that our neighbors recent lost 200-plus jobs, and as bad as we feel for them and as much as we want to help them, to the best of our abilities we need to limit that exposure here.”

He said town officials will work with state, county, school and local officials in meetings to come to find ways to increase funding, especially promised funding for education.

Skillings said the deal is a mutual understanding that is reasonable to enable Sappi to operate and enable the town to continue operating. He said the town already gave Sappi a reduction in valuation of about $100,000 in September 2014.

The previous reduction in the mill’s value, from $567 million to $463 million, approved by assessors in 2014, cut its tax bill to $7.94 million, or about 48 percent of the town’s total property tax revenue.

Skowhegan selectmen agreed earlier this month to spend $150,000 to hire a professional appraising company to assess the value of the Sappi mill in the town’s battle over the value of the mill for taxation and the paper company’s abatement appeal.

MR Valuation Consulting LLC, with U.S. offices in New York, New Jersey and Florida, was to begin the job in the coming weeks. At stake was about $137 million in valuation for taxes.

The town of Skowhegan has assessed the paper mill for taxation at $463,630,900. The company claims the property should be taxed based at the lower value of $326,343,426.

The compromise comes in at $380 million as the established value for taxation, a reduction of about $64 million from the previous year’s tax assessment.

The Skowhegan Board of Assessors denied a request in April from Sappi to cut the property tax value of its paper mill on U.S. Route 201 by more than $137 million. The board voted 3-0 on April 23 not to grant the abatement request, based on the recommendation of Van Tuinen, the assistant to the town’s assessors, which would have resulted in the loss of $2.3 million in revenue for the town.

An appeal to the town’s Board of Assessment Review also was denied. The paper company later filed an appeal of that ruling with the Maine Board of Property Tax Review.

The request, filed by S.D. Warren Co., a subsidiary of Sappi and the legal owner of the property, followed months of negotiations between the town and the mill that resulted in a $100 million cut in the tax valuation of the mill.

Sappi claimed that reduction was not enough to reflect actual diminished value of the mill. Sappi paid $9.3 million in property taxes to the town in 2014.

The town recently received an announcement from Sappi of an abatement request for 2015 in the amount of $171 million, which also would be withdrawn.

Van Tuinen agreed that the compromise will result in an increase of property taxes in Skowhegan or a reduction in some services, but it amounts to saving jobs and keeping Skowhegan’s largest taxpayer in place and working.

“This is a real reduction in valuation and it’s going to have the effect, unless spending is proportionately reduced, of increasing the tax rate,” he said. “S.D. Warren at $380,000 of value is still by far the largest taxpayer. The biggest taxpayer in town is going to pay more of that increase than anybody else. They’re still the largest taxpayer in town by a factor of many times.”

Doug Harlow — 612-2367

dharlow@centralmaine.com

Twitter:@Doug_Harlow