EAST MILLINOCKET, Maine — Meriturn Partners LLC seeks a total of $48 million in tax breaks from East Millinocket and Millinocket over 10 years for the Katahdin region’s two paper mills and would buy the mills from their present owner for $1, leaders from both towns said Tuesday.
Speaking after a closed-door meeting between the Millinocket Town Council and the East Millinocket Board of Selectmen in the town library, Millinocket Town Manager Eugene Conlogue and East Millinocket board Chairman Mark Scally revealed details of a Meriturn letter outlining the potential purchase of the mill from owner Brookfield Asset Management of Toronto and the tax breaks the San Francisco investors are seeking from the municipalities.
Meriturn signed a letter of intent on Feb. 11 to purchase the mills by April 29 if several conditions are met, including the setting of favorable property tax rates for the mills.
If accepted, the initial offer would force town government layoffs and a vast reduction of services unless the state or federal governments can help the towns offset the reduction in revenues, Scally and Conlogue said.
“It’s a joke,” Scally said Tuesday of the offer, which Meriturn officials allowed to be made public. “It would make a total mockery of our property tax system if we just accepted it.”
Meriturn’s Lee C. Hansen, a partner in the firm, did not return messages left on his cell phone on Tuesday night.
“It would be extremely devastating to all town services,” Conlogue said.
“If we accept this,” Scally said, “why can’t the mall owner down the road say, ‘I have two malls that don’t make any money, so why should I have to pay any property taxes?’”
Yet despite their criticism, neither Conlogue or Scally said their boards would reject the offer, as it is merely the first step in negotiations.
The Katahdin region has been a cradle of papermaking for more than 100 years, and for decades, both mills have represented the area’s biggest single source of tax revenue and employment. They now may account for as many as 650 jobs — 450 at the East Millinocket mill and the possibility of about 200 at the Millinocket mill, which closed in 2008 because of its profit-killing need for heating oil to fire steam generators that help make paper.
Brookfield has announced that it would close the East Millinocket plant on April 22 because of its unprofitability — Brookfield officials said the mill hasn’t made money in years — though company officials said they could grant an extension.
Meriturn’s announcement of its intent to buy the mills came after more than two years of efforts by state officials to revitalize the Millinocket mill and several months to find a buyer for the East Millinocket plant.
The tax break request was part of Meriturn’s initial offer in bargaining that is set to continue next week, Scally said.
“The thing is, this offer could work,” Scally said. “There are some aspects to it that we can accommodate.”
In Meriturn’s proposal, the East Millinocket mill’s tax bill would decline from $2.1 million to about $46,800 starting in the 2011-12 fiscal year, which begins July 1. Millinocket would see a decline from $2.6 million to about $50,000, Conlogue said.
Both tax deals would continue for 10 years. Through their lifetime, Conlogue figured that the tax breaks would amount to about $26 million from Millinocket and $22 million from East Millinocket.
“Essentially, Meriturn is asking the towns to finance a major portion of this business buying the mills,” Conlogue said.
It was unknown Tuesday how much money Meriturn plans to invest in the mills or how the state or federal governments could help make the deal workable for the mill towns.
Town officials will contact Gov. Paul LePage within a few days to discuss Meriturn’s initial offer and see what the state can bring to the table. East Millinocket officials are researching what property tax relief programs are available should the mill close or the deal be accepted, Scally said.
“We will try to hammer out the best deal that we can,” Scally said. “We are not looking for a handout from the rest of the state, but we need something to get us through this.”