Investment program seeks rural jobs
Maine Senate Republicans recently announced an increase in the cap to tax credits for certain rural development projects in the state's new $250 million New Markets Capital Investment Program. The program, which could cost taxpayers $95.7 million, was included in last year's budget and modified in this year's supplemental budget. It mirrors the federal New Markets Tax Credit program, but is funded through the state budget.
The state program, established Jan. 1 and administered by the Finance Authority of Maine, allows Community Development Entities to apply for the tax credits, which are awarded on a first-come, first-served basis, provided they meet criteria established in the federal program.
Christopher Roney, FAME general counsel, says FAME opened the application process in January, and by February six CDEs had been approved to reserve credits. Several had lobbied in favor of LD 991 last year, including CEI Capital Management. The $41.7 million in eligible investment they each reserved could translate into as much as $16.3 million in tax credits for each CDE (for more on the recipients, see the sidebar).
No more than $20 million in state tax credits can be paid out in any given fiscal year, and companies receive their credits over a seven-year period. The credit is issued against state taxes, says Roney.
Roney says FAME got the word out about the program through a press release, but the pool of CDEs is small nationally, which led to those lobbying for the program to receive the funding. "Once [the program] got passed, word spread pretty quickly," he says.
Roney says all six CDEs sought the maximum investment level of $62.5 million, so the $250 million allocation was split evenly among the groups. They have two years to find a qualifying project or the funding is lost. "Our program has a two-stage application process," he says. "You have to be a qualified entity to apply. The second stage of the application process involves those entities coming back with actual investment evidence, then we would award the credits."
The program allocates tax credits of up to 39% of eligible investments. Although the largest eligible investment was previously capped at $10 million, the Legislature recently increased the cap to $40 million for qualifying projects — either a manufacturing or value-added production enterprises located in an economically depressed area that would create or retain 200 jobs, whether through direct or indirect employment.
Sen. President Kevin Raye, R-Perry, in a press release touted the change, calling it an award-winning program that would allow the planned redevelopment of the former Katahdin Paper Co. mill in Millinocket to move forward.
Raye submitted a bill for the change, which was then worked into the supplemental budget. Mary Small, Raye's chief of staff, says it's not unusual for a bill to be incorporated into the budget "for expediency," adding, "We do that a lot."
A joint statement issued by Raye, who is running in the GOP District 2 primary against U.S. Sen. Mike Michaud, and Sen. Doug Thomas, R-Ripley, said the increase in the tax credit limit was driven by the needs of Cate Street Capital, which is drafting plans to build a $35 million alternative-fuel plant in Millinocket through subsidiary Thermogen Industries. However, the project has not been submitted to FAME for approval.
Alex Ritchie, Cate Street Capital's managing director of government and community relations, says the company is currently in discussions with several CDEs to receive financing. She expects construction to begin in September, with operations beginning next summer. Ritchie said the company hopes to have financing nailed down in late August.
Last December, New Hampshire-based Cate Street bought the North American rights to manufacture the technology to produce what's known as torrified wood or biocoal, which would replace coal burned at electricity plants. At that time, the company said it wanted to make Millinocket the first of as many as five biocoal mills around the country, and that the wood-derived fuel would be shipped to the United Kingdom.
Although the Senate GOP's press release says the project hinged on receiving a NMCIP tax credit in the amount of $40 million, Ritchie says that is not necessarily the case.
"I wouldn't say it's dependent one way or the other [on the NMCIP]," says Ritchie. "The project would have gone forth regardless of this [increased] cap happening or not. But this is a tool to strengthen our financing for the Thermogen project."
Ritchie says that, in addition to the 25 jobs that will be directly associated with Thermogen, the project will sustain forestry jobs, since biomass is needed to produce the pellets; truckers and rail workers, since the product must be moved to and from Millinocket; and Port of Eastport workers, who will ship the product overseas.
"It's a project that is going to create far more indirect jobs that direct jobs, but the multiplying factor for each direct job is quite large," she says, adding the company expects to exceed the 200-job mark.
Both Ritchie and Small, Raye's chief of staff, say the increased limit on tax credits only made sense, since a $10 million limit on eligible investments means that 25 qualifying projects would have had to come forward within the next two years, which is unlikely in a small state like Maine. "It allows the state to implement the full $250 million in tax credits into the state versus having the 24-month period end and losing the allocation," says Ritchie.
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