Maine’s Business Equipment Tax Reimbursement program aims to encourage business development by reimbursing companies for the local property taxes they pay on industrial equipment. Presumably, for business development to occur, the companies that receive this benefit should be operating — and paying their bills.
Last month, the Great Northern Paper Co. received $831,240 from the state in BETR funds. GNP’s Millinocket mill hasn’t operated since 2008, and the company recently auctioned off much of the industrial equipment remaining at the site. GNP, which is owned by Cate Street Capital, shuttered its East Millinocket mill in January. GNP is behind on property tax payments to both towns.
“I just think that it is wrong for taxpayers to be footing a check of that sort to a company that owes millions of dollars to towns and to the vendors that have supplied services and supplies,” Millinocket Town Manager Peggy Daigle said of the situation.
In May, the town of Millinocket filed a $2.24 million lien against the company. It negotiated with GNP to accept payment from the auction of mill property and revoked the lien. But the company still owes Millinocket $657,700 in unpaid property taxes. It owes about the same amount to East Millinocket. It also owes money to numerous vendors in Maine and other states.
In 2011, the company was the fourth-largest recipient of BETR funds.
Town officials asked the state if Millinocket could get some of the BETR money to offset the taxes it is owed. By law, it can’t. The company paid its property taxes on equipment in 2012-13, and the state reimbursement is for that year.
However, it does seem wrong for the town to receive money from the state on one hand and stiff local taxpayers on the other. The company is also on the hook for federal taxes. The IRS earlier this year also filed liens against GNP for nonpayment of corporate income taxes.
Daigle says she has talked to local lawmakers about amending state law to require that BETR recipients be current on their local and state taxes. Rep. Steve Stanley, D-Medway, says he will propose legislation next year, if he is re-elected. He does not yet know exactly what such legislation will look like, but he said companies shouldn’t get BETR money until they’ve paid any taxes they owe.
“Companies that get this money should be paying their taxes,” he said. In addition, BETR funds shouldn’t go to companies that are defunct, he said.
This is worthy of consideration, especially given the state’s liberal requirements for qualifying for BETR benefits and other tax benefits. Bangor Publishing Co., publisher of the Bangor Daily News, and subsidiary Northeast Publishing Co. in Aroostook County are recipients of BETR funds. They received a $23,374 reimbursement for calendar year 2011.
When large property owners don’t pay their taxes, it puts a big strain on municipal budgets. In Millinocket, the situation is especially dire because the GNP mill there has been permanently closed, leaving the town without its largest taxpayer and employer. That hit to the local economy has resulted in a loss of revenue that has left town officials with the option of huge tax increases or severe cuts to town services and its schools to balance the budget. The lack of property tax payments from GNP adds to the town’s burden.
In July, the local teachers union agreed to accept a one-year wage freeze and the reduction of several positions to help achieve an additional $300,000 school budget cut mandated by town leaders. Overall, $600,000 was cut from the town and school budgets.
As the program is structured, there’s little accountability. Businesses benefiting from BETR have no obligation to show they’re using the reimbursement funds to create or maintain jobs. So, the state has no formal way to determine whether the program is a worthwhile investment in economic development.
Requiring companies to pay all their taxes before they get tax breaks at least adds one measure of accountability.