Meriturn seeking Katahdin paper mill tax breaks

Posted Feb. 28, 2011, at 1:40 p.m.
Last modified March 01, 2011, at 1:20 p.m.

Meriturn Partners LLC officials explained their plans and sought tax breaks for the two Katahdin region paper mills they hope to buy when they met with town and union leaders on Monday, participants said.

Mark Scally, chairman of East Millinocket’s Board of Selectmen, said the tax breaks sought by Lee C. Hansen, a leading partner in Meriturn, would be difficult to grant. Hansen, who met with the Millinocket Town Council and East Millinocket’s selectmen in closed-door sessions,  also seeks state tax breaks that he has said are crucial to the mills’ plans.

“I certainly don’t want to get into any particulars, but I would say that he [Hansen] laid out his vision for the future,” said Duane Lugdon, Maine’s United Steelworkers Union international representative of the 320 USW members at the East Millinocket plant, which employs about 450.

Union members worried that the San Francisco-based investment firm would adopt an uncompromising stance, but Hansen displayed some flexibility, Lugdon said.

“I think it’s significant that he hasn’t drawn any lines in the sand or said that anything has to be ‘my way or the highway.’ All he has done is laid out his vision for the future,” he said. “Nothing is carved in stone.”

The decisions facing the union, town and state leaders are hugely significant to the region, a cradle of papermaking for more than 100 years. The two mills represent the area’s biggest single source of employment with as many as 650 jobs — 450 at the East Millinocket mill and the possibility of about 200 being hired at the Millinocket mill, which closed in 2008 due to its profit-killing need for heating oil to fire steam generators that help make paper.

The Millinocket mill produced paper for catalogs, magazines and retail industry fliers. The East Millinocket mill is an integrated pulp and paper facility that can produce 250,000 tons a year of uncoated groundwood papers for directory, catalog, book, insert and newsprint.

Under the letter of intent Meriturn signed with Brookfield on Feb. 11 to buy the mills for an as-yet undisclosed price, the industrial site redeveloper has until April 29 to close the deal. Brookfield announced on Feb. 22 that it would close the East Millinocket plant on April 22 due to its unprofitability, though company officials said they could be flexible if the deal were still in the works.

Deal conditions include arrangements to establish a biomass cogeneration facility at the Millinocket mill to relieve the mill of its oil dependence; set property taxes — and seek tax breaks — with municipalities; set union contracts; and finish environmental and commercial reviews begun in December, Brookfield officials have said.

Scally hinted Monday that Meriturn’s initial offer would ask a great deal of taxpayers, especially with the shortfalls expected in state and federal government funding to municipalities and schools and, in East Millinocket, with Brookfield, the town’s top taxpayer, appealing its 2009 town tax commitment and not having yet paid its 2010 taxes.

“We’re between a rock and a hard place,” Scally said. “I have a hunch they would tell all of us the same thing. I will be curious what they will be telling the unions. We are taking the approach to listen to what they have to say and mull it over.”

Millinocket leaders have the same approach, Millinocket Town Manager Eugene Conlogue said.

“We do not know what the results of today’s meeting will be, but it is most likely that the council will take this under advisement for a period of time,” Conlogue said Monday morning.

Meriturn officials “already said there will be pain, there will have to be concessions on the town level, the union level, and the environmental level, so we will have them elaborate on that,” Scally said. “We don’t know how much we have to give. Is there wiggle room? Yes, there is, but at this point I have to hear them out before I say anything else.”

Scally said councilors and selectmen will meet in executive session on Tuesday to compare notes. East Millinocket also will hold a town meeting at Schenck High School of East Millinocket on March 7 or 8 at which selectmen will brief residents on the negotiations, Scally said.

“We will spell out the different scenarios and try to the best of our abilities to explain what each will entail,” Scally said. “I expect they boil down to, ‘Either you allow the mills to close or you go with the offer from Meriturn,’ and we will explain the advantages and disadvantages of both, or maybe I should say just the disadvantages.”

Maine’s congressional delegation and Gov. Paul LePage have said that securing both mills’ futures is a top priority.

The stakes involved in the negotiations demand that all sides remain cool, analytical and responsible to the region’s families, Lugdon said.

“We have an idea what’s on his mind at this point. Now we need to get down to brass tacks and bargain a labor agreement that both parties can live with,” Lugdon said. “It was a responsible setting. The local union officials there expressed some concerns. I expressed some concerns on behalf of the folks I represent.”

“It would be easy to let emotions carry us away, but it would be irresponsible to do that. We need to do this in a smart way and make sure we take care of those families in the Katahdin Valley,” he added.

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