BUCKSPORT, Maine — Officials from Verso Paper Corp. made their case to Bucksport councilors Thursday for the creation of a new tax increment financing district for the company’s planned $40.5 million boiler-turbine project at the Bucksport mill.
TIFs are an economic development tool approved by the state which allow a town to provide tax incentives for certain projects.
The TIF concept is not new to the town or the mill. In the past, the two have developed TIF agreements for other improvements at the mill that include upgrades to one of the paper machines in 1997 and the construction of a gas turbine in 2000.
Under those agreements, the town returns a portion of the taxes on the value of those projects to the mill and retains a portion for economic development projects in the town. Last year, according to Town Manager Roger Raymond, the total tax value of the TIF was $701,120. Under a 75-25 percent split outlined in the TIF agreement, the town returned $525,840 to the mill and retained $175,280.
The mill also paid about $3.8 million in taxes on the portion of the mill that was not included in the TIF agreement.
Mill Manager Mike Haws, Verso spokesman Bill Cohen and attorney James Saffian of Pierce Atwood, on Thursday presented to town councilors a two-part proposal to change the existing TIF and to create a new one. The first part of the proposal asks the town to extend by 10 years the existing 20-year agreement. That extension would take the agreement through the 2016-17 fiscal year, maintaining the current 75-25 percent split.
The second part of the mill’s proposal requests a different allocation formula as part of a new 30-year TIF agreement that would cover the improvements to the existing biomass boiler and the installation of a new turbine. Under the proposal, 75 percent of the new taxes would be reimbursed to the mill as a general allocation and the remaining 25 percent also would go back to Verso, but would be earmarked for research and development at the mill.
Based on Verso’s estimates, that would return about $275,926 in TIF funds to Verso annually and more than $8 million over the 30-year life of the TIF. About $2 million of that total would be allocated for research and development.
“Approval of the TIFs will assist the Bucksport mill in making the best business case to Verso’s board for final approval of the project,” Haws said. “This will help Bucksport as a mill and allow it to be competitive in the global market place going forward.”
The town, Saffian pointed out, receives a direct financial benefit from the TIF in that it keeps the new property value from being included in the town’s state valuation. If that value were added to the state valuation, he said, the town would be hit with higher county taxes and lower state aid in education subsidy and municipal revenue sharing.
Councilors raised initial questions about indirect financial benefits to the town and concerns about tracking how the research and development funds were used at the mill. Cohen said the R&D uses would be identified in the TIF agreement.
“Each year, we would have to prove that we had met those requirements,” he said.
Town Manager Roger Raymond stressed that TIFs are a complicated process and that while Verso had made its proposal, the council will have to review the details carefully. He proposed a series of council workshops to discuss the proposals and to make sure councilors understood what the agreement would entail.
“In a TIF, everyone has to benefit,” he said. “We need to go over the details of the TIF and see what’s in it for the town and what’s in it for the mill.”
He noted that if the council accepted Verso’s proposal, the town would not receive any TIF funding from the boiler-turbine project as it has received from previous TIF projects at the mill.
Any TIF agreement also will require approval from the Maine Department of Economic and Community Development, according to Raymond.
The councilors will meet for the first of the TIF workshops at 7 p.m. Tuesday, Oct. 5, at the municipal building conference room. Other workshops will be scheduled as needed.