PORTLAND, Maine — The rise and fall of Great Northern Paper Co. will cost Maine taxpayers about $15.9 million in tax credits allocated to investors in the project’s restart, a figure for which independent gubernatorial candidate Eliot Cutler chided political leaders.
For the mill, which employed 256 people and now has a skeleton crew to manage the resources, that amounts to about $62,100 in tax credits per job added at the mill for a period of almost two years.
Christopher Roney, attorney for the Finance Authority of Maine, confirmed Tuesday that the agency had approved about $40 million in investment in the mill for a state-level New Markets Capital Investment Program, which returns 39 percent of the investment over seven years. That means $15.9 million in tax credits will be paid to investors Enhanced Capital New Market Development Fund X LLC and Stonehenge Community Development for their support of the project.
“[It’s] corporate welfare and crony capitalism at its worst,” Cutler said.
The refundable credits are returned to investors as a payment, not a rebate on taxes paid as with the federal version of the New Markets Tax Credit program.
The news conference from the Cutler campaign put political pressure on the issue, which George Gervais, commissioner of the Department of Economic and Community Development, said is not helping efforts to find a new investor for the mill.
“Politics are getting in the way of progress here,” Gervais said. “Today’s actions did nothing but hurt that region.”
Cutler on Tuesday retold the story of Cate Street Capital’s entry to Maine, acquisition of state support, influence on the state’s tax credit programs that it later used and its eventual decline, blaming Gov. Paul LePage for supporting the company that managed the now-bankrupt Great Northern Paper mill in East Millinocket.
Alex Willette, spokesman for LePage’s re-election campaign, fired back at Cutler for making the mill’s bankruptcy and Cate Street’s legal entanglements a political issue. He added that Democrats and Republicans in the Legislature supported bills to accommodate Cate Street in restarting the mill, so pinning blame squarely on LePage for supporting the project is inaccurate.
Democratic gubernatorial candidate Mike Michaud also criticized Cutler for making the plight of the mill a campaign issue.
“It’s a shame to see my opponent politicizing the bankruptcy of Great Northern,” Michaud said in a written statement. “Finger pointing and casting blame is not going to get the mill back up and running, and it certainly is not going to give my friends, neighbors and former co-workers in my community hope for the future.”
After the Cate Street-managed Great Northern Paper shut down in January, it laid off 212 of 256 workers. Some of those employees continue to work through the company’s bankruptcy to maintain the facility and a wastewater treatment plant that serves about 800 homes in East Millinocket.
Cutler said that as governor he would have performed a background check of sorts into Cate Street’s corporate structure and the company’s leadership, a search that in 2011 would have uncovered a lawsuit against the company’s CEO but not other lawsuits involving Cate Street or its subsidiaries filed in 2013 or later.
Cutler said the eventual state support of the company he previously has referred to as “ snake oil salesmen” was a product of mismanagement.
Gervais said that the details highlighted by Cutler Tuesday ignore the company’s investment for almost two years that he said kept the mill operating at a time when a number of other investors stepped away from the project.
“The assets in East Millinocket would not be there today for us to speak about were it not for the efforts of the LePage administration in 2011,” Gervais said. “Brookfield Asset Management was prepared to scrap that mill.”
He said the company paid out about $40 million in payroll with a total economic impact for the region of about $200 million.
LePage, who gave full support to the company when it in 2011 spent $1 to buy the former mills in Millinocket and East Millinocket, since has criticized the company and lamented during a recent meeting with mill union members that Cate Street was a “third-tier investor” but was at the time “the only game in town.”
While Cate Street kept the East Millinocket mill running, it did auction off the No. 11 paper machine and other papermaking equipment at the former Millinocket mill after an unsuccessful search for an investment partner to take over that operation.
Both Cutler and LePage have visited East Millinocket recently to speak with workers since the mill was shut down. Michaud lives in nearby Medway and worked at the mill under previous ownership for decades. Michaud campaign spokeswoman Lizzy Reinholt said the congressman hasn’t had a formal meeting with millworkers for that reason.
“This is Mike’s home and these are his co-workers,” Reinholt said. “For [Michaud] this is their life and their future, not a photo-op.”
Cutler said he would plan special visits to the Katahdin region if elected to help develop an economic development plan.
Before the mill’s most recent downfall, Cutler said its management wasn’t questioned hard enough through its requests for state tax credits and other support.
Gervais said the mill’s bankruptcy doesn’t call for revising the due diligence procedures that FAME has in place for reviewing applications for financing.
“I think FAME has a very vigorous due diligence process there and I don’t see a need for it to change,” Gervais said.
Pursuit of the mill reopening in East Millinocket and a startup wood pellet project in Millinocket involved numerous lobbying efforts at the state level. Both projects received state tax credit support to the tune of $40 million, a maximum that was raised by the Legislature shortly before the company applied for tax credits for that amount.
Cate Street was the first project with investment at that level to qualify for the state New Markets tax credit program. The limit was $10 million before May 2012, when a state law expanded the amount of qualifying investment to $40 million. Roney said three other projects since have qualified for tax credits under that higher amount, including Athens Energy in Athens and St. Croix Tissue in Baileyville.
A later change to the law allowed the company to pursue tax credits in the same amount for its Thermogen subsidiary, a project that also qualified for a $16 million bond through FAME’s Major Business Expansion Program. That bond or the New Markets tax credits for Cate Street’s Thermogen project never were delivered because the company did not make the $140 million investment in its wood pellet plant.
Gervais said completion of the Thermogen project in Millinocket is still possible. Company officials have not responded to several request for comment on whether the bankruptcy of Great Northern Paper affects Thermogen Industries.
Cutler said Tuesday that he’s only met with Cate Street leaders once, during a lunch meeting in the first quarter of the year. He said he was asked by Robert Baldacci, a business consultant, former chairman of FAME and brother of former Democratic governor John Baldacci, about investing in Thermogen.
“I said ‘no thank you,’” Cutler said.