AUGUSTA, Maine — For the rest of this year, Gov. John Baldacci says the entire state is a Pine Tree Economic Development Zone. He signed legislation Monday overhauling the program that provides tax breaks to new companies and to those that expand.
“Every one of these mill redevelopments that we have had have been Pine Tree Zones,” Baldacci said in an interview. “Those 400 people that are working in Lincoln, making $50,000 a year with benefits are because we had the Pine Tree Zones in place.”
He said there are examples all over the state where jobs have been created and some saved by use of the zones that provide tax breaks to companies.
He said the Department of Economic and Community Development reports that at the end of 2008, there were 213 Pine Tree Zone-certified businesses in the state with plans to create more than 6,500 jobs and investments totaling $685 million. The program was started in 2003.
“These were first targeted to those areas of the state where we thought the help was most needed,” Baldacci said. “This has worked. Look at the 800 people now working at T-Mobile in Oakland. I can go on and on about the good they have done.”
Rep. Nancy Smith, D-Monmouth, co-chair of the Legislature’s Business, Research and Economic Development Committee, was the lead sponsor on the bill. She said it was a committee effort to craft an updated measure that will still target more aid to poor, rural areas of the state.
“The whole committee deserves credit for this, it was a bipartisan effort,” she said. “This will create a two-tiered system, starting in 2010, that will still allow some benefits anywhere in the state and more benefit in areas where we want to focus our efforts.”
In the first-tier areas, which is the entire state for the rest of 2009, the tax breaks are for 10 years. In 2010 and future years, a new tier of benefits is created providing five years of tax breaks.
The tax benefits include a 100 percent refund of corporate income tax and insurance premium tax for five years and a 50 percent refund for an additional five years for tier one companies. In addition, 80 percent of the state income taxes withheld for net new employees through the Employment Tax Increment Financing mechanism are returned to the company. There is also a total sales tax exemption on equipment purchases and construction materials.
“But the state still benefits from the new jobs and business activity that is created, “Baldacci said.
Sen. Elizabeth Schneider, D-Orono, co-chair of the committee, agreed with Smith and the governor that the legislation was the product of a bipartisan effort on the panel and cooperation with DECD.
“This will send the absolute message that Maine is open for business,” she said. “We want to send that message out that this is an opportunity and we hope that it will be taken advantage of.”
She said the panel believes the package of tax benefits will help provide businesses with the extra incentive they may need to expand in the current recession.
Smith said the importance of the Pine Tree Zones to the state’s economy has not received much attention. She said the state’s economy would be in worse shape today if it were not for the zones.
“I think we would be in worse shape now than we are if we had not had the original Pine Tree Zones legislation in place five years ago,” Smith said. “Every county in the state, every area has benefited from the program.”
DECD Commissioner John Richardson said the expansion of the program would be a great help to his agency. He said in an interview that limiting the benefits to only certain areas sometimes has meant a project did not go forward.
“For too long we have had to look in one direction or another for the Pine Tree Zone benefit when the labor market may just not be there,” he said. “Sometimes we have just not been able to match up the needs of a particular company with where we could offer the benefits.”
Richardson expects the availability of the full tax benefits for the rest of 2009 will trigger some expansions of existing employers and the development of new businesses in the state.