May 30, 2020

Power-bill break in ‘development zones’ sought

AUGUSTA – The Baldacci administration wants to give businesses that participate in its new Pine Tree Development Zones a break on their power bills.

Under legislation submitted by the Department of Economic and Community Development, electricity charges for participating businesses would go down – in some cases significantly – through an exemption from paying for so-called stranded costs.

Definitions of stranded costs are complicated and disputed, but in effect they are costs a utility incurred under earlier forms of regulation that can’t be recovered when those regulations or the marketplace change. So utilities are sometimes allowed to “recover” stranded costs through extra charges.

Jack Cashman, the state economic and community development commissioner, said last week that businesses locating in the zones would get a 20 percent to 30 percent reduction in their power costs.

He said the break would vary, depending on the stranded costs the state Public Utilities Commission has allowed for the utility that serves the individual zone.

“The two concerns I hear most from businesses considering coming to Maine are the high tax burden and the utility costs,” Cashman said. The break on stranded costs would not increase the assessment to anyone else, he said. “But it will not spread out that cost any further.”

The Pine Tree Development Zones are designed to provide tax breaks for up to 10 years. Some breaks would provide a full benefit for the first five years and be reduced over the second five years.

That has drawn criticism from some lawmakers.

“If you are going to invest $30 or $40 million, you need a long-term commitment,” said House Republican Leader Joe Bruno of Raymond. “And why is the emphasis on getting new businesses into the state? What about the people I employ? Don’t the businesses that we already have in the state deserve a break?”

Bruno said the Pine Tree zones are a “gimmick” and will not bring in new investment that the state needs. He said the state needs to cut tax rates and bring its tax code into line with federal income tax policy to encourage new investment.

“They are still talking about bringing manufacturing jobs into the state,” Bruno said. “That is not going to happen.”

Cashman said the state is trying to attract all types of jobs, including manufacturing jobs. He said Maine needs a broad mix of jobs and should not rely on growth in a single sector.

Some business developers argue Maine cannot attract manufacturing jobs because of high taxes, high energy costs and high health costs.

Kevin Mattson, president of Winthrop-based Harper’s Development LLC, said last week that the state simply cannot compete for manufacturing jobs.

“I spent six months looking for a manufacturer to use this facility,” he said, standing inside the 7-acre building in Augusta that once housed a circuit-board maker. “No one was interested. No takers.”

That facility cost $50 million to build. Mattson’s company bought the vacant plant for $4.5 million and is developing it as an office park, with private businesses and the state as tenants.

Mattson said the state should focus on its strengths and not try to compete with other states with lower energy costs, lower taxes and lower health costs. He said the reality is Maine is “noncompetitive” when it comes to manufacturing jobs.

“We have some strategic advantages,” Mattson said. “A great work force, a great telecommunications infrastructure, and we have people who want to move here because it is a great place to live. We need to focus on what we have going for us.”

Mattson is a Democrat and once served as executive director of the Maine Democratic Party. “Kevin is right,” Bruno said. “I wish other people in his party would listen to him.”

Gov. John Baldacci strongly defends the Pine Tree zone approach. He said last week that he expects the yet-to-be-chosen zones to be operating by next month.

Each zone will have 5,000 acres in which businesses can locate and receive various tax incentives.

“We have already had towns apply,” the governor said, “and we are already working with businesses that are considering coming here as well as businesses in the state that want to expand.”

Baldacci is also exploring adding a “social or community development” aspect to the measure. He said the details are still being worked out, but would likely be unveiled in his State of the State address next month.

Bruno said what is needed is a fundamental change in state policy. He said giving tax incentives to one business to move to the state is discouraging to existing businesses. He said the state is spending beyond its means and that only a significant tax cut would encourage private investors.

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