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Next week, Gaithersburg will hear from residents on a plan that could extend tax breaks to businesses that move to Olde Towne.

A public hearing on a proposed expansion of the Olde Towne Enterprise Zone, a 300-acre area in which businesses are eligible for property tax credits, income tax credits and waivers from county and utility fees generally assessed before a project can break ground, is scheduled for Tuesday.

Two businesses have benefited from the designation in Olde Towne since 2008.

The city is limited to expanding the zone by 50 percent of the original 300 acres. Also, the enterprise zone can only expand in areas where more than 80 percent of the families make less than 70 percent of median income in the county, which is $93,895, according to 2008 Census Bureau data.

Proponents of the expansion say the city should take advantage of any tax breaks, which are also available to existing businesses that expand. Opponents argue that making the zone too big doesn't entice companies to the exact blocks of Olde Towne that should be targeted for redevelopment.

Olde Towne, which radiates from the intersection of East Diamond and Summit avenues near City Hall, is the city's original downtown.

In place since 2008, the Olde Towne enterprise zone has included just two projects: 201 E. Diamond Ave., where the four-story Slice of Olde Towne Pizza building replaced a one-story office building, and 13 Park Ave., where a 1,500-square-foot office building was demolished. It will be replaced with a 9,000-square-foot office building.

The city certified the Park Avenue building as eligible for enterprise zone benefits, but construction must finish before its developers can apply for the various credits.

Tony Tomasello, deputy city manager, oversees the city's economic and business development programs.

"Since the original formation of the enterprise zone, it has been met with limited success, mostly because of the economy in general," he said.

The city is looking to add planned projects at the periphery of the current zone in the expansion plans. A revitalization of the vacant Summit Center shopping plaza, which could become a 200-unit apartment complex, is included in the expanded area.

Todd Jacobus, with Woodfield Investments, said the company could move forward with rebuilding the Summit Center property more quickly if it is wrapped into the enterprise zone. Jacobus said benefits, like a waiver from Montgomery County's impact tax, could help the company get financing and push the project forward in two to three months. The waiver could save the company about $3 million.

The state deadline for expansion applications is Oct. 15 and the County Council must also approve the expansion plan before the application is sent to the state. If the city misses the state's October deadline and census data is revealed, new income data in the area could throw off the expansion boundaries.

The topic of expansion, which has been discussed for seven areas in the city, has been a major topic of discussion at city council meetings since July 12.

City Councilmember Michael Sesma has said the enterprise zone should focus on bringing development to Summit and Diamond avenues. On July 19, Sesma said growing outward instead of focusing on a core of development was a slippery slope.

Tom Rowse, a member of the city's economic and business development advisory committee, said the council should approve an expansion that first targets three planned apartment complexes on the outskirts of the enterprise zone. Then, it should expand as much as possible — in a smart way.

"It's like a funnel," he said. "If you start on the outskirts — and work in the town center at the same time — you draw people inward."

Rowse said a higher residential density was necessary to draw businesses to the community.

Tomasello agreed.

"Additional housing is the key to get the new retail," he said.

dgaines@gazette.net