Old Town mill closes; Municipality faces loss of 400 jobs; 34% of tax base

This story was published on March 17, 2006 on Page A1 in all editions of the Bangor Daily News

OLD TOWN – Potential buyers of the Georgia-Pacific Corp. mill are expected to meet today with state officials in an attempt to save more than 400 jobs at the facility, which is facing permanent closure once again.

The Old Town pulp and tissue mill ceased production Thursday, and employees began the shutdown process.

G-P officials told employees Thursday morning that the pulp and tissue paper manufacturing and associated tissue shipping operations would stop immediately.

“The mill’s tissue and pulp manufacturing assets are no longer required to service our customer base,” Ted Sapoznik, G-P vice president of consumer products manufacturing, said Thursday.

Sapoznik, along with Gov. John Baldacci and state Economic Development Commissioner Jack Cashman, appeared at a press conference at the mill’s training facility in Old Town to announce the closure.

In addition to the closure of the Old Town site, wood chip mills in Costigan, Milo, Portage and Houlton that supply raw material to the mill also were shut down Thursday. The chip mills employed approximately 30 people.

This is the first pulp and paper facility that G-P has closed since it began evaluating its assets when the company was sold in December 2005 to Koch Industries Inc. of Wichita, Kan., for $21 billion.

The only other facility G-P has closed since the sale is a wood products company in the Midwest, Sapoznik said.

G-P has owned and run the mill since acquiring it from Fort James Corp. in December 2000.

Although Koch owns the mill, G-P remains a stand-alone company.

As part of the announcement to close, the G-P owners have agreed to work with state officials to help identify a buyer for the mill in the next 60 days, and to maintain the mill for that period.

“At the end of the 60-day period, if the mill isn’t sold, Georgia-Pacific will complete the closure,” Sapoznik said.

The announcement didn’t seem to come as a surprise to many in the Old Town area.

“Since 1985, the paper industry’s been in a downturn,” Old Town City Manager Peggy Daigle said. “To say that it’s a shock would be a false statement, but facing the reality of the shutdown is [not] diminished because it’s a horrible feeling knowing that people who live in a community are in this situation.”

Paul Randall, president of the Local 80 papermakers union, said Thursday night that the announcement “comes with a sense of relief.”

“It’s been rumored for months, so every time you go to work you think today’s the day,” Randall said. “At least now we know what to work on, and we need to work on getting a buyer.”

A history of uncertainty

While Gov. John Baldacci said he remains optimistic that a new buyer will be found and sticks to his belief that the facility is viable, this isn’t the first time the mill has been faced with closure.

The mill was faced with a shutdown in 2003 but remained open because of a deal arranged by the state.

At that time, the Legislature passed a resolve authorizing the state to purchase the West Old Town Landfill, now the Juniper Ridge Landfill, from G-P for $26 million and select an operator to run the facility. Using money from the sale and additional money provided by G-P, the mill made an effort to cut energy costs by purchasing a used biomass boiler that it has updated at a cost of $29 million.

In a Feb. 6, 2004, statement, the governor had warned: “Without the landfill sale, jobs will be at stake at Georgia-Pacific.”

As part of the landfill deal, Casella Waste Systems Inc., the state’s chosen landfill operator, provides the mill with the necessary fuel for the boiler at a reduced cost.

Despite the deal, energy costs remain high at G-P because a decision on regulations regarding the use of wood from construction and demolition debris as fuel is held up in the Legislature and state environmental agencies.

Although the biomass boiler is permitted and operational, the mill continues to burn clean wood until a final decision is made on the regulations for using waste wood. Casella provides the mill with green wood chips for $9 a ton, while waste wood would cost $4 a ton.

When the facility was sold late last year, Baldacci remained confident during an interview with the Bangor Daily News that the mill would remain open.

There is “no preconceived notion about closing facilities” at this point, Baldacci said at the time of the 2005 sale. “They’re very interested in pulp,” he said, referring to Koch.

In the same interview, Baldacci restated a comment made to him by G-P’s chief executive, A.D. “Pete” Correll, who has Maine ties.

“He said to me, ‘They bought this company to grow it,'” Baldacci said.

More recently, 50 employees were laid off at the mill, but that move wasn’t related to the Koch sale, according to G-P officials.

Despite rumors last week and a public comment made by first lady Karen Baldacci that the mill was going to close, Gov. Baldacci stated numerous times that he wasn’t aware of such a decision.

“No final decision has been made,” Baldacci said last Wednesday regarding the mill.

The governor and Cashman prepared a plan and pitched it to G-P representatives last week that was designed to make the Old Town mill a viable asset to its parent company.

The plan that Cashman and Baldacci created is designed to reduce operating costs at the mill by about $5 million a year. The primary reduction would come from a decrease in energy costs.

Neither official would comment on the specifics of the proposal, but they said that it involves other private companies.

They said Thursday that the plan still is on the table as the state looks for a new buyer.

Finding a buyer

Four parties from both in and out of state are interested in purchasing the mill, according to Baldacci and Cashman.

Each potential buyer is scheduled to meet with state officials over the next few working days and visit the Old Town site.

State officials wouldn’t release the potential buyers’ names Thursday.

“We’re looking at several options,” Cashman said during the press conference, adding that the majority of the interested buyers are from the paper industry.

Political response

Maine’s state and federal legislators expressed their disappointment at Thursday’s shutdown, but said they remain optimistic that a new buyer will be found.

“This is a huge blow to Old Town and many other outlying communities, and I am extremely disappointed by the decision to close the G-P Old Town mill,” U.S. Sen. Olympia Snowe said Thursday in a press release.

Snowe and U.S. Sen. Susan Collins both said they are committed to assisting workers and their families.

“These cuts will hurt many, many households, and the effects could ripple through the economy of Penobscot County and our entire state. The affected workers are dedicated, talented and hardworking Mainers who have given their all,” U.S. Rep. Michael Michaud said Thursday in a press release.

State Rep. Dick Blanchard, D-Old Town, is urging employees to take advantage of the Maine Department of Labor programs that retrain workers, help them find new jobs and assist in managing issues that may come up as a result of job loss.

“This is a lot of jobs, and it’s going to hurt a lot of families as well as change the dynamic of our local economy,” Blanchard said Thursday in a press release.

Economic ripple effect

While Old Town is likely to feel the most impact from the closure, its effect reaches far beyond the city limits.

The mill provides 34 percent of the city’s tax base, and the city assessor now is looking into what the valuation of the idled mill will be.

“It’s anticipated that it will be less than it would be if it were up and running,” Old Town City Manager Daigle said.

The city was in the process of creating a tax increment finance package for the mill, but tabled the item at Thursday night’s council meeting.

“We want to hold off so when something goes in there, we will be able to work with the new company,” Daigle said.

She explained that tabling the item indefinitely would allow the city to create a fair and valuable plan geared to whoever takes over the facility.

One concern was whether the water treatment facility of the mill would remain open.

A very small fraction of what the mill treats at the plant is leachate from Juniper Ridge Landfill.

While G-P officials from Atlanta said they weren’t aware of the process, Daigle said she has been assured that the treatment portion of the facility will remain open.

“I’ve been given every indication that it’s going to continue,” Daigle said.

As for people moving away, Daigle said she’s not worried about that yet.

“I think that there’s going to be an economic multiplier,” Daigle said. “People will probably change their spending habits and their entertainment habits. Their disposable income will be guarded a little bit closer than it is now.”

The change in spending habits likely will be felt throughout the county and the state.

“What’s happening here has regional implications,” Daigle said.

But surrounding communities also are anxiously watching for the impact of the mill’s closing on their own economies. Bangor is a regional business and shopping center frequented by millworkers and their families.

“It’s definitely hard to say right now because I don’t know what the mill’s buying patterns are, but I know there undoubtedly are companies in Bangor that the mill buys goods and services from,” Bangor City Manager Edward Barrett said Thursday.

“There also is the purchasing power that the mill’s employees exercise in the region,” he added. “Obviously, we hope they are successful in finding a buyer for the mill.”

A painful way

In Portage, where one of the shut down chip mills is located, town officials were reeling from the news.

“I was shocked,” Town Manager Rita Sinclair said Thursday. “We had heard rumors, but, no, we really didn’t expect this … I was totally taken aback by the news because Georgia-Pacific just purchased the E.J. Carrier chip mill [in Portage] last year.”

The town received $40,049 in personal property taxes last year from the company. The taxes were based, in part, on the equipment in and around the building.

“We’re not sure what’s going to be there April 1,” Sinclair said. “The taxes will be on whatever’s there as of April 1.”

A bigger concern for the town, though, is that the personal property is valued at about $2.5 million.

“How it’s going to affect our tax base, I’m not sure,” she said, “but I have to maintain a positive outlook.”

Sinclair said she did not know how many people were employed at the Portage chip mill but understood that most of the employees were from the Ashland area.

An official with the Portage chip mill wouldn’t answer questions and referred all inquiries to the G-P corporate office in Atlanta. He declined to say how many employees were affected by the Portage facility’s closure.

In Houlton, plant manager Darren Bailey confirmed that five employees worked at the mill but referred all other questions to corporate officials in Old Town.

“I’m not at liberty to talk about what’s going on,” he said.

Matthew Cox, who served as plant manager in Houlton for about 10 years, said Thursday that he left the position in August to start his own business because he felt the future of the mill was uncertain.

Cox said that the mill in Houlton experienced a three-year shutdown when Georgia-Pacific bought it and that it “just started running again” last May.

He said the impact this time wouldn’t be as great as four years ago, but that “it’s always an impact, plus the trickle-down effect will hit more people.” Cox said that when he worked at the mill last year, about 50 small and large contractors in the area – loggers, cutters and haulers – were feeding the mill.

While the closing is a “big deal” to many local workers, some of the Houlton employees were expecting it, Cox said, and ultimately, the move “could be a good thing for the whole system.”

“Hopefully, someone will buy it,” he said. “It would be better for the area in the long run. It’ll be interesting to see how it all plays out.”

Milo treasures jobs

The Milo chip mill closure resulted in seven lost jobs, according to Milo Town Manager Jane Jones.

“We treasure each job given the kind of economic blow that this area has sustained over the last 10 years,” Jones said. “It is obviously an impact to our local economy.”

The area has been through the closure of the Dexter Shoe factory and the closing and reopening of the East Millinocket, Millinocket, and Lincoln mills in recent years.

There have been some success stories since the facilities were closed.

For example, JSI Store Fixtures took over the Dexter Shoe building, and the company now employs as many people as the shoe factory did when it closed. Lincoln Paper & Tissue LLC, Katahdin Paper Co. in Millinocket and East Millinocket remain operational.

“To us, seven jobs represents so much more than it might represent to a Bangor, Brewer, Portland or Augusta,” Jones said. “What to them is a statistically minor impact, to us we’ve learned, and we’ve learned in a painful way, that each and every job you lose you have to work that much harder to get it back.”

In addition, the job losses will have immense impact on individual families.

“In a small community of 2,400, the chances are that each community member has some connection to someone who is losing their job,” Jones said.

The town manager said Thursday that she’s hopeful a new buyer will show interest in the chip mill.

“We will be working with any potential new buyer to make the situation as attractive as we possibly can,” Jones said. “[We’ll do] whatever is within the municipal means.”

The chip mill has close to a $1 million tax valuation, with the vast majority of that value coming from personal property tax on the equipment in the mill.

“It really doesn’t matter where the value comes from, it still has a potential significant impact on the local valuation base,” Jones said.

BDN writers Rachel Rice and Dawn Gagnon contributed to this report.

A1 for Friday, March 17, 2006

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