Question 1 and Tax Expenditures
Today (November 3rd), Maine’s voters will determine the fate of ballot question number 1 which, if enacted, would expand and provide additional funding for Maine’s “clean elections” law.
The funding mechanism for the additional estimated $3 million per year in State expenditures for clean election candidate campaigns is not described in the official ballot question. However, the final section of the proposed legislation relies on elimination of certain “corporate tax expenditures” as the bill’s funding source:
- Elimination of certain tax expendituresNo later than 45 days after the effective date of this section the committee shall report out to the Legislature legislation to permanently eliminate corporate tax expenditures totaling $6,000,000 per biennium, prioritizing for elimination low performing, unaccountable tax expenditures with little or no demonstrated economic development benefit as determined by the Office of Program Evaluation and Government Accountability established in Title 3, section 991.
Because the additional funding for the clean elections law would be provided solely from State sources, the term “corporate tax expenditures” for this purpose does not appear to include Maine’s local tax increment financing statute, which is based entirely on and affects only municipal property taxes. However, some writers have suggested that related State programs, such as Maine employment TIF statute (“E-TIF”) and Pine Tree Zones program should be high on the list for OPEGA’s scrutiny.
In contrast to some of Maine’s State-level tax incentive programs, Maine’s local tax increment financing program has done a generally good job of delivering promised economic development benefits. The following partial list Maine businesses that have been assisted by various Maine tax incentive programs comes from my own 25+ years of practice as a municipal and economic development attorney. Nearly all of the projects listed below include a local TIF district designation, with a partial refund of new local property taxes paid by the project to the project developer, under a TIF “credit enhancement agreement”. In a few cases, a local TIF development program has funded important public infrastructure improvements needed by the project, without a direct tax refund to the project developer. Try to imagine our region and the State of Maine without the jobs created and supported by these businesses and projects:
- GE Bangor
- Eldur Corp., Bangor
- Shaw’s Supermarket (Bangor Gas Works redevelopment), Bangor
- Freese’s building redevelopment, Bangor
- Cianbro module facility (Eastern Fine Paper redevelopment), Brewer
- Emera, Hampden operations facility
- Dennis Paper & Food Service, Hampden
- Labree’s Bakery, Old Town
- Johnson Outdoors (formerly Old Town Canoe), Old Town
- JSI Store Fixtures, Milo
- Elaine’s Bakery, Milo
- Pleasant River Lumber Company, Dover-Foxcroft
- Moosehead Mill redevelopment, Dover-Foxcroft
- Moose River Lumber Company, Jackman / Moose River
- Stratton Lumber Company, Eustis
- Robbins Lumber Company, Searsmont
- Smith & Wesson, Houlton
- Poland Springs (Nestle Waters), Kingfield
- Pine State Trading Company, Gardiner
- Molnycke Health Care U.S., Brunswick & Wiscasset
- PPSA OV, Searsport
- Tasman Industries, Hartland
- Lockwood Mills redevelopment, Waterville
- Dragon Products Co., Thomaston
I have been involved as an attorney in all but one of these projects, representing the host municipalities on a majority of them. TIF reimbursements and other tax incentives have helped fund construction of new manufacturing and retail facilities (e.g., Cianbro; Molnlycke’s Brunswick plant; Emera Hampden; Poland Springs; Shaw’s), expansions (e.g., GE Bangor; Molnlycke’s Wiscasset facility) and/or modernization projects (e.g., lumber mill TIFs; Dragon Products). My rough, back-of-the envelope estimate is that these projects collectively have added more than 2,000 new, full-time jobs to Maine’s economy, in addition to jobs preserved through the upgrade and modernization of existing facilities and jobs supported in other industry sectors or service businesses.
In a few cases (e.g. Lockwood Mills), realization of the benefits promised by developers at the time TIF incentives were negotiated was delayed, due to loss of other financing or the 2008 economic downturn. For the large majority of the listed projects however, the project ultimately delivered everything that was promised to obtain the tax incentive, and more.
I have written on our law firm’s website about the need for a well-drafted development agreement to nail down the promised project benefits at the time a tax incentive is negotiated (View that page). The State of Maine, over a number of administrations, has not been particularly good at doing this. Municipalities, when properly advised, tend to do a better job. One reason is that Maine’s local TIF statute lends itself to detailed financial negotiations between municipalities and project developers, in part because of a required statutory approval process that includes an advertised public hearing and local voter approval. Tax incentive programs at the State level generally do not have a similar approval process.
There sometimes is a tendency among State legislators and others in Augusta, to regard State government as the sole possessor of competence and expertise on a wide variety of public issues. However, in the area of economic development tax incentives, we see, if anything, the opposite. Maine’s local municipal officials and town meetings, over time, have demonstrated a higher level of efficiency and effectiveness in administering Maine’s local TIF program, than is the case with a number of State-level tax incentive programs.