BANGOR – The city is applying to create a downtown district that would in essence allow tax revenue created by new development to be reinvested there, a project that city leaders say would harness the economic potential of its waterfront.

The Business and Economic Development Committee recommended Wednesday to the City Council that the city create a tax increment financing district to help lure developers to the waterfront.

The council will consider the TIF application at its Monday, Feb. 27 regular meeting, but the plan would need approval by the state Department of Economic and Community Development. Still, city leaders said the application is a step toward making the area more viable for developers.

“We anticipate a lot of new development on the waterfront and the Main Street corridor,” Rod McKay, Bangor’s community and economic development director, said Wednesday. “And the new tax revenues coming out of the district would go toward improvements in infrastructure within the district.”

McKay said those improvements would include road repairs, creating additional parking and preserving open space, but the revenue also likely would help finance a replacement for the Bangor Civic Center and Auditorium.

A TIF in essence shelters the increased tax valuation of a property for a specific period of years, in this case, 20 years. Half of the increased taxation would go back to the city, and half would be returned to the developer. Because a TIF property is not recognized by the state as part of the city’s valuation, it also would keep the city’s county taxes, state education aid, and state revenue sharing stable.

“Any individual property owner [in the district] would not see any changes in taxes,” City Manager Edward Barrett said.

If the state approves a TIF for a designated downtown district, there would be no size restrictions, which means the city could tap into more than 300 acres from Interstate 395 to Cedar Street.

“We’re probably a little ahead of the curve on this,” Barrett said, referring to the fact that not many other Maine communities have explored this type of development option. “But I think this is what TIF is intended for, to create a district that can benefit many projects rather than being project specific.”

The TIF district could pave the way for a waterfront hotel project, which has long been the centerpiece of Bangor’s plan to redevelop the waterfront. The city already has received interest from at least two developers for a hotel and conference center across Main Street from Shaw’s supermarket.

How much the city would contribute to a hotel project still isn’t clear, but McKay said, “The city has always put more resources into the downtown than it gets back in tax revenue, this [TIF] would make the downtown more self-sufficient.”