LEWISTON — City officials this week approved an amended tax increment financing district for the $340 million hydropower converter station after the state said the initial proposal would have put Lewiston over the limit in the amount of value that municipalities can shelter.

A TIF agreement is is used by municipalities to capture new property taxes generated by a specific project within a defined geographic district. The revenue is typically used toward public improvements. In Lewiston’s case for the converter station, it will be used to fund economic development staff and projects.

The City Council initially approved a TIF for the converter station project in February, but was told by state officials recently that the TIF would put Lewiston out of compliance with state rules.

Nate Libby, director of economic and community development, said the state caps the amount of value municipalities can capture using TIFs at 5% of a city’s total assessed value.

He said city staff attempted to utilize an exemption that would have kept Lewiston under the threshold, but was denied. In response, Libby on Thursday presented the amended TIF proposal to the council, which approved it unanimously.

The new TIF district scales back the size and value of the original district, but will result in virtually the same revenue for economic development and same amount of tax value for the annual budget, Libby said.

The TIF district has been reduced to 11 acres assessed at $83.8 million, down from the initial 40-acre district worth $186.5 million. The TIF approved Thursday will shelter 98% of the value from the 11 acres, while the original deal would have sheltered 55% of the much larger area.

Libby said the amended TIF will mean Lewiston’s 18 TIF districts capture 4.69% of the city’s total assessed value, just under the 5% cap.

While some councilors appeared concerned about running up against the cap in the future, Libby said it will change based on Lewiston’s assessed value, which he said will increase next month, and is also likely to change dramatically once a citywide revaluation and the converter station project are complete.

He believes Lewiston will soon be around the 4% mark, but he also told the council, “If at some point we are at the 5% cap, I think it’s worth celebrating, because we’re maximizing the benefit of this powerful tool the state has given us.”

Once the project is complete, it’s estimated that the TIF will provide $1.42 million in annual revenue beginning in fiscal 2027. The TIF would run for 30 years, until fiscal year 2055. No part of the tax revenue will be reimbursed back to the project developer in the form of a credit enhancement agreement.

The converter station for the 145-mile New England Clean Energy Connect corridor is made up of four transformers off outer Main Street, which will receive direct current power from Canadian hydropower stations and convert it to alternating current power suitable for residential and commercial needs.

The converter station is expected to be complete by mid-2026.