Main Street in Rockland is seen in this 2018 file photo.

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ROCKLAND, Maine ― In an unprecedented move, the city is creating a $200,000 loan program for small businesses using a combination of taxpayer dollars and funds from a downtown tax increment financing account.

City councilors waffled on whether this was an appropriate use of taxpayer money, but ultimately decided to move forward with the loan program to help businesses that are struggling after months of closures and restrictions due to the COVID-19 pandemic.

“It is their money, [businesses] have paid [taxes] let’s give it back to them and keep their business going for another couple months so hopefully things can normalize,” City Councilor and downtown business co-owner Ben Dorr said. “Right now is the crisis moment, right now is the trauma moment, right now is the moment to give businesses $5,000.”

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City councilors approved the loan program in a 4-1 vote Wednesday night. City Councilor Ed Glaser voted against the proposal after it was amended to include $100,000 from the city’s undesignated fund, which is made up of surplus tax dollars paid by property owners.

Rockland is one of only a handful of Maine municipalities that has proposed lending financial support directly to businesses and residents since the economic fallout from the pandemic began, according to Maine Municipal Association Communications and Educations Services Director Eric Conrad.

Bucksport recently launched its own stimulus program that is providing food vouchers to residents and $500 grants to businesses. However, Conrad expects more towns and cities will follow suit, he said.

“Out of 480 plus municipalities [in Maine], there are only 10 or so that are starting to do that. But that kind of buzz is happening around municipal leaders in terms of ‘What can we do in addition to what the federal and state government has been doing,’” Conrad said.

Initially Rockland’s loan program was only going to be accessible to businesses in the downtown district, since the funding was coming from a downtown-focused tax increment financing district account. The money in this fund is generated from taxes paid by downtown property owners and, as outlined in the wording of the TIF agreement, can only be used for loans going to downtown businesses, according to Community Development Director Julie Hashem.

To make the assistance equitable, however, some city councilors wanted funding available for a citywide loan program.

With about $2.5 million in the city’s surplus, City Manager Tom Luttrell suggested taking $100,000 from those reserves to provide loans of up to $5,000 for businesses outside of the downtown district. The downtown loans, also up to $5,000 each, will still be funded by the downtown TIF funds.

The no-interest unsecured loans can be used for payroll, rent and mortgage payments and other business expenses. A loan committee, which will be made up of Luttrell, Hashem and the city’s finance director, will oversee and administer the loans.

To qualify, a business must be locally owned, have 10 or fewer employees and have seen a revenue loss of 50 percent or more in the past three months compared with the previous year.

Borrowers can either defer loan repayments until the property is sold, at which time the loan must be repaid in full, or make monthly payments over a five-year period beginning one year after the loan funds are dispersed.

If a business folds before the loan is repaid, the city will have no way to recoup the money.

That risk, coupled with the extra work it would create for city employees during an already stressful time, is why Glaser voted against the loan program.

“I don’t know that lending money with the possibility that we may never get it back is really something that most taxpayers would support,” Glaser said.

In the past, the city has used state-sponsored community development funds to provide loans for businesses, but this is the first time that local taxpayer dollars have been used to bail out businesses.

Dorr argued that business owners ― either directly or through rent payments made to landlords ― have paid into the system and deserve to get some of that money back to help them through an unprecedented time. Keeping businesses open would be a benefit to the entire community, he said.

“Whatever that thing is that could close them because they’re in crisis, we have the opportunity to use their money to help get them through a really difficult time as a small business. I think that has real value for our community,” Dorr said. “It is a small risk for potentially a really large gain for a lot of people.”

Dorr’s business would be eligible to apply for a city-funded loan, according to Luttrell, since he is not involved in the application or approval process on the city’s end.