PORTLAND, Maine — The Finance Authority of Maine voted Thursday to limit the types of transactions that can qualify for economic development incentives under the state’s New Markets Tax Credit program.

The rule change takes aim specifically at transactions referred to as “one-day loans,” in which money used for refinancing or other transactions was allowed to qualify as investments under the state program.

A Maine Sunday Telegram investigation published in April shed light on “one-day loans” used under the program, in five of 10 FAME-approved deals that qualified financiers to receive annual payments from the state.

FAME spokesman Bill Norbert confirmed Thursday that the new rule won approval from the state finance authority’s board.

Cate Street Capital’s deal to refinance debt related to its restart of the Great Northern Paper mill was the largest such deal, approved with a structure that FAME CEO Bruce Wagner said in August would not pass muster under the new rule.

FAME board memos written before approval of the Cate Street deal show that staff members were conflicted about approving deals with those terms at the time, under the state incentive program created in 2011.

“No funds are actually used to purchase additional goods or services, or to construct additional facilities,” FAME staff wrote in a Dec. 18, 2012, memo about the GNP deal. “Existing assets are changing hands among related entities.

“Staff is not comfortable that the mere shifting of assets among related companies constitutes expending investment in a low-income community,” FAME staff wrote in the memo.

Approval of the new rule follows an emergency rule put in place in August by the FAME board. It had put a hold on new applications for the tax credit program until the rules were in place, according to Wagner.

Wagner said FAME passed the emergency amendment to its rules after the Maine Senate killed a bill dealing with one-day loans, in a 19-15 vote.

The program allows investors in projects in economically depressed areas of the state to receive payments amounting to 39 percent of the total investment over the course of seven years.

The financing program has been used by other projects in the state, including St. Croix Tissue in Baileyville, the Portland Press Hotel, Portland-based veterinary pharmaceutical company Putney, Athens Energy’s biomass plant in Athens, Quoddy Shoe Manufacturing in Lewiston and Washington County and Molnlycke Manufacturing in Brunswick. Those deals did not involve one-day loans.

Deals that did involve such transactions were with JSI Store Fixtures in Milo, Nova Seafood in Portland, a Topsham development firm Priority Group’s project to build a school for children with autism at Brunswick Landing and the Farnsworth Art Museum.

The New Markets program has the authority to issue another $20 million in tax credits, which would be given out against about another $50 million in qualifying investments.

Darren Fishell

Darren is a Portland-based reporter for the Bangor Daily News writing about the Maine economy and business. He's interested in putting economic data in context and finding the stories behind the numbers.