Changes to a plan to use special taxes to pay for development around the Port of Port Royal would limit how much the school district contributes.

The proposed plan was presented Wednesday at a Port Royal town council work session.

The Port Royal Development Group is poised to purchase and develop 52 acres of the port, and town officials are considering using a tax increment financing district to pay for new roads, parks, stormwater drainage and a promenade. Town officials have said the work and the tax district to pay for it are essential for the success of the project.

The first phase involves $3.625 million in public projects, such as roads. To pay for that work and associated costs, the town is considering taking out a loan of up to $4.5 million. The tax district would let the town use taxes generated by new development and increased property values to pay for the public improvements.

To get the full benefit of the tax district, the Beaufort County School District and Beaufort County must agree to participate.

The county and school system are in a legal struggle over the county's New River tax district, which financed the University of South Carolina Beaufort and the Technical College of the Lowcountry campuses on U.S. 278. The district claimed it has been shorted about $20 million in the past 10 years.

With that situation in mind, town officials have been working carefully with school officials to come to an agreement.

"To the extent possible, we have anticipated issues and worked with the school district attorneys on what I believe will be a plan that makes their attorneys comfortable," said Frannie Heizer, the town's bond attorney.

Among the highlights:

The school district's contribution to the tax district will not include money collected from taxes on owner-occupied homes.

The district will contribute no more than $300,000 annually toward the tax district fund for the first five years.

After five years (in 2018), the district will contribute no more than half the annual costs for paying debt, remaining projects and maintenance.

The school district does not now agree to participate in Phase 2 or Phase 3, which will include additional public work. The town can ask the district to participate, however.

If the other phases begin before 2018, the school district's contribution will automatically drop to half of the debt, project and maintenance costs.

The school district is set to vote on the tax district Tuesday. Council intends to take final votes on the loan and the tax district Wednesday.

Follow reporter Erin Moody at twitter.com/EyeonBeaufort.

Related content:

Port of Port Royal tax district gets initial council nod, Dec. 14, 2011

School district asks County Council for compromise on tax district, Jan. 9, 2012