A bill proposed by Maine State Sen. Chris Johnson would ensure that companies receiving tax breaks create decent paying jobs and are held accountable for their actions. Maine LD 1287 was written following the Great Northern Paper Mill debacle, wherein the company received $16 million in tax credits and then closed its doors without repercussion.
A recent two-part series in The Maine Sunday Telegram detailed how the mill’s parent company, New Hampshire-based Cate Street Capital, used the Maine New Markets Capital program to receive the $16 million, but used none of the money to invest in the mill.
During a hearing of the state legislature’s taxation committee last week, Sen. Johnson argued that his bill would have kept Cate Street Capital from qualifying for the tax credits in the first place. Under Johnson’s bill, businesses looking to participate in three separate tax programs — the New Markets program, Seed Capital Investment Credit, and Pine Tree Development Zones — would need to show that the jobs created through the investments pay at least 80 percent of the state’s prevailing wage or 120 percent of Maine’s statewide average wage. During testimony an official with the Maine Department of Labor estimated that 120 percent of the statewide average would be $19.55 an hour.
“Without minimum expectations and reporting and penalties,” Sen. Johnson said during testimony, “these programs will continue to be subject to abuse and unwise taxpayer investments – activities with little to no benefit to the people of Maine.”
The Maine Sunday Telegram investigative report revealed that “sophisticated financiers used a Maine investment program they devised to wring millions of dollars in risk-free returns at the taxpayers expense.” The second part of the report, “Shrewd Financiers exploit unsophisticated Maine legislators on taxpayer’s dime,” details how Cate Street took advantage of legislators’ naivete regarding the tax credits. Sadly, there is no legal standing for the state to pursue the $16 million it squandered:
Roger Katz, a Republican senator from Augusta and co-chairman of the Government Oversight Committee, said in retrospect he’s sorry he voted for the bill to create the program.
“Collectively all the various parties involved in this ought to get an F for what happened, and that certainly includes the Legislature,” he said, adding that the oversight committee is now considering holding a public hearing to start a process to make sure it doesn’t happen again.
Sen. Johnson’s legislation is a good start and wage standards are a strong anchor for tax credit participation. Joel Johnson, an economist with the liberal Maine Center for Economic Policy, spoke to The Portland Press Herald and estimated that the three tax programs included in the bill will add up to more than $30 million in tax breaks in fiscal year 2017.
“I think this bill is a good step forward,” he said. “This (is) about fiscal responsibility and about ensuring that public dollars are spent wisely. It would bring transparency, accountability and enforcement mechanisms to large economic development incentive programs here in the state.”