MILLINOCKET, Maine — The state will withhold about $216,000 in aid from Millinocket because town officials broke an agreement to share Dolby landfill operating costs, Gov. Paul LePage’s spokeswoman said Wednesday.

The spokeswoman, Adrienne Bennett, announced that East Millinocket and Millinocket will each get about $504,000 in Sudden and Severe Impact funds for the significant loss of taxable value the towns suffered with the sale of the two Katahdin region paper mills to the new Great Northern Paper Co. last year.

Millinocket would have received about $720,000, but unlike East Millinocket, officials from Millinocket opted out of their agreement to allocate $50,000 to the landfill, Bennett said. The state agreed to assume ownership of the formerly mill-operated landfill to free potential mill buyers from an enormous liability. It also agreed to pay $250,000 annually for landfill operating costs in exchange for $100,000 each year from both towns, she said.

“Millinocket is not honoring that deal,” Bennett said. “All parties agreed that they were going to pay for the costs associated with Dolby. Is it hardball? Yeah. Did they break a deal? Absolutely.”

State officials have “done everything in our power to keep our word. We expect the same from town officials,” Bennett added.

Millinocket Town Manager Eugene Conlogue denied that town leaders had broken their word.

Conlogue said he believed that the $50,000 would be a one-time payment. He said the state owes Millinocket about $720,000, but denied late Wednesday afternoon that the town had rescinded a Dec. 20 vote to allocate $50,000 to the landfill.

However, the Millinocket Town Council will discuss rescinding the deal during its meeting at 4:30 p.m. Thursday because LePage balked at indemnifying the town of any landfill operational liabilities and has withheld the Sudden and Severe Impact funds, Conlogue said.

“The town has tried to help the state with a landfill it does not own and is not even within the town limits,” Conlogue said in a statement Wednesday. “What the town has not agreed to do is to continue support for the landfill past June 30, 2012. The town has not broken its word on anything related to the landfill issue.”

Bennett said she believed the $50,000 payments for the East Millinocket-based landfill would continue beyond the current fiscal year.

“The agreement was that there would be an ongoing partnership between the two communities and the state regarding the Dolby landfill and the management of it,” Bennett said. “Nothing has changed on the East Millinocket side. Nothing has changed on the state’s end.”

Wednesday’s disagreement is not the first between state and both towns over the landfill. Conlogue accused LePage in late January of withholding state aid over the landfill, and East Millinocket and Millinocket both balked at landfill costs initially.

East Millinocket and Millinocket leaders said their towns were hurt worst by the tax loss and the mills’ shutdown, and that a lack of expertise and equipment would leave them ill-prepared to manage the landfill as state leaders desired.

East Millinocket immediately closed a school and both towns made enormous cuts to their budgets. The delay in releasing Sudden and Severe Impact funds also had both towns’ leaders concerned.

“These funds are desperately needed to pay our bills,” Conlogue said in an email to Rep. Herbert Clark, D-Millinocket, and Sen. Douglas Thomas, R-Ripley, in January.

Clark has a bill pending before the Legislature that would allocate $250,000 annually to landfill operations. Millinocket leaders initially made their $50,000 payment contingent upon LePage’s support of Clark’s bill, but dropped that requirement when LePage declined, Conlogue said.

State officials are also investigating whether a private firm would lease or buy the landfill, which town officials have said might make money for the region as a commercial operation. The state will seek proposals from businesses this week, Bennett said.

On Wednesday, East Millinocket leaders were grateful but wary of news of their $504,000 allocation.

“I am an optimist, but I don’t spend money until it’s in my hand,” Board of Selectmen Chairman Clint Linscott said. “When it is in our hands, I will believe it. I have no animosity towards the state. Whatever they are doing, they are doing.”

“We are just happy that it has been resolved and it has been worked out,” East Millinocket Superintendent of Schools Quenten Clark said. He added that the money was “at least two or three months behind” schedule. State officials told Clark that the first partial payment would be released by month’s end, with allocations coming monthly afterward.

Besides making the $50,000 payment, East Millinocket would have its workers plow the landfill road and handle other maintenance, Bennett said.

She painted Millinocket’s intransigence as a sort of betrayal of LePage, who she said worked hard to secure the mills deal. The restart of the East Millinocket mill last fall restored 216 full-time jobs to the Katahdin region, which saw its unemployment rate balloon to about 21 percent after the mill closed in April.

The mill’s restart dropped the region’s unemployment rate to about 16 percent. Cate Street Capital, owner of the new GNP, also promised to bring more jobs to the region with its plans to install a torrefied wood manufacturing plant at the Millinocket mill site by early next year.

As many as a half-dozen torrefied wood machines could be installed at the Millinocket site if the first machine is successful. The Millinocket mill’s restart will occur if market conditions permit, Cate Street officials have said.

“The governor and state government spent countless hours ensuring that the mills be revived,” Bennett said.

At the request of both towns, state officials also worked with previous mills owner Brookfield Asset Management and improved the revaluation deal the towns eventually secured, Bennett said.

Leaders of both towns praised LePage and state officials for their role in the mills’ revival. LePage drew praise particularly for convincing Brookfield to repeatedly delay the decommissioning of both mills during the lengthy search for a new owner of the mills.

State officials believe that the Millinocket schools and town will continue operating despite the $216,000 loss, and that suing the state over the funding loss would simply cost the town more money in legal costs, Bennett said.

“The school district will make it through the school year without any impact to teachers and students,” Bennett said. “We feel that this is a major concern: to not disrupt any jobs.”

LePage believes the $504,000 allocation to Millinocket is fair because town officials had given that town’s paper mill an unrealistically high assessment. They said the mill was worth $184 million in the years since its August 2009 closure and did not account for depreciation, Bennett said.

“We are in some financially challenging times. We need to be prudent about our resources,” Bennett said, “and if a district can get by on half a million dollars — and we feel that is reasonable — that should be a viable option for them.”