EAST MILLINOCKET – Tax disputes will be traded for tax breaks along with a pledge to consolidate all school and municipal services in the area, according to a deal cut between selectmen and Brascan officials this week.

Town officials described the agreement as positive for both the town and the company, which is purchasing bankrupt Great Northern Paper Inc. “It’s going to help stabilize the tax base and let us move on,” said Mary Morris, the town’s administrative assistant.

Selectmen agreed. Clint Linscott, board chairman, said the agreement provided the town with stability and security.

“Things are moving forward very well,” said Selectman Rick Nicholson.

Brascan will drop several multimillion dollar tax disputes brought against the town in recent years by GNP and will pay the bankrupt paper company’s $3.4 million tax bill owed to the town for 2002.

Last summer, the state Board of Property Tax Review granted GNP a tax abatement of $33.37 million for 1999, or a refund of $557,329 plus interest of 8 percent per year. The town’s appeal of the decision will be dropped as part of the deal. Two other tax disputes for 2000 and 2001 where the company is seeking refunds totaling $3.14 million will be dropped.

In exchange, selectmen will encourage voters to support a tax break in the form of a 20-year Tax Increment Financing Program for the new owner of the East Millinocket paper mill. The company will receive 85 percent of the new tax revenues generated from capital investments made in the next six years and the town will retain 15 percent of those new tax revenues. Officials have yet to discuss the details of specific capital investment projects. The TIF will require approval by residents in a future meeting.

Selectmen also promised to encourage voters to support efforts to consolidate all school and municipal services with the neighboring towns of Millinocket and Medway, with the objective of reducing the overall tax burden. East Millinocket agreed to hire a moderator jointly with the other towns to assist them in developing a consolidation plan within six months and implementing it by July 1, 2004.

Officials said consolidating all municipal services in the three towns did not mean forming one single community. Morris said Millinocket was in the process of seeking a regionalization grant that could help fund the moderator. She said the moderator and area officials would look at each service to decide whether it could be consolidated and made more cost effective for each town. Although selectmen will advocate for consolidation, in the end the final decision rests with the voters.

Linscott said officials are very close to meeting the objective of the agreement, which is to reduce the overall tax burden. Officials said the fiscal 2003 municipal and school budget drafts already have been cut by more than $1.2 million. Linscott and Selectman Dave Nicholson are predicting a significant cut in the town’s tax rate of $23.49 per $1,000 of assessed property value. Linscott estimates the company’s tax bill, which was $3.4 million this year, could be cut by at least $1 million next year.

In the agreement, company and town officials agreed that the total assessed value of the paper mill would be reduced to $120 million for the 2003 tax year. The town values the paper company at $146 million.

“It’s not as bad a figure as some people might think,” said Nicholson. Linscott said the lower value of the paper mill should not pose a serious hardship in light of the spending cuts made by town and school officials.

East Millinocket will ask the state to change the state’s value of the paper mill immediately.