There was music and celebration in Biddeford this afternoon to mark the conversion of a former mill building into new housing units. The Mill at Saco Falls contains 66 apartments, most of them set aside for low-income residents, thanks to some stimulus money and some tax credits. But there is concern about the financial viability of such projects in the future.

The Biddeford High School jazz band competed with the roar of the nearby Saco River as politicians, developers, state officials and local residents gathered to celebrate what they're hailing as a crucial development in the rejuvenation of this historic mill town.

Once upon a time, downtown Biddeford used to hum with activity as the city's textile mills harnessed the power of the river, and provided work for thousands of people.

Now the mill workers are all but gone, but the buildings remain. One of them, known as Laconia Mill number 1 (depicted above), stands newly renovated and ready to become the first of Biddeford's mills to be entirely converted into housing.

For Gov. John Baldacci, it was a proud moment, one that seemed a long way away at the beginning of last year when construction work began, he says. "We have a wonderful opportunity to take and redevelop a site and turn it around and make it a cornerstone of the community and of the region."

The Mill At Saco, as the $14 million development is known, contains one-, two- and three-bedroom apartments. Twenty-six of them will be rented out at so-called "market prices" for just under $800 a month for one-bedroom units, rising to up to almost $1,000 a month for a three-bedroom one.

The remaining 40 units are being set aside for lower-income tenants, with rents typically being about $250 a month less per apartment.

To qualify for those units, household income must be no more than half the median income for the area. Strong support from the city and the state was crucial in making the project possible, says developer Nathan Szanton. From about 1960, he says, the mill building stood vacant, or almost vacant, for many years--a victim of the decline of the Maine textile industry.

"Then in 2008 a really important thing happened in Augusta, and that was, thanks to many of you here, we passed something called LD 262, which was An Act to Expand Maine's Historic Tax Credits," Szanton says.

That bill, he says, greatly raised the number of tax credits available to investors who invest in renovating Maine's historic structures. "And it also gave an extra incentive to developers who provide affordable housing as part of their historic renovation. And without a doubt, LD 262 made this project possible," he says.

He says that tax credit program made $3 million worth of tax credits available for the project. MaineHousing--formerly known as the Maine State Housing Authority--also provided about $1.5 million in subsidies paid for out of the real estate transfer tax, says the organization's director Dale McCormick. Even more important, was federal money.

"This never would have been built had it not been for the Recovery Act, for the American Reinvestment Act, because as you will remember, a year or two ago, there was no bond market, there was no market for anything," McCormick says. "The economy was moribund, and we couldn't sell our tax credits, which is how the federal government has determined we will raise money for affordable housing, there was no market for them."

But McCormick says she's concerned about a potential threat to the funding of future projects. "There is a proposal in President Obama's commission to determine solutions to the debt crisis, that our bonds, which are currently tax exempt would become not tax exempt," she says. "That would hurt affordable housing hugely."

As the governor and others gave their speeches at the formal opening of The Mill at Saco Falls, a number of residents could be seen weaving their way through the crowd into the building--testament to the fact that 55 of the building's 66 apartments are already occupied.