Loring Development Authority faces more than $500,000 shortfall from Maine Military Authority layoffs, other factors

By Lisa Wilcox, Aroostook Republican & News
Posted Nov. 03, 2013, at 4:20 p.m.

LIMESTONE, Maine — Effective Oct. 11 of this year, the Maine Military Authority, located on the former Loring Air Force Base, was forced to lay off approximately 140 employees due to its loss of contracts for equipment maintenance and rebuild with the National Guard Bureau. Those contracts have historically formed the core of the MMA workload.

The layoffs, coupled with other anticipated funding losses, could cost the Loring Development Authority an estimated $531,000 in annual revenue, according to Carl Flora, LDA President and CEO.

Flora told the LDA trustees during the board’s meeting on Oct. 23 that at its peak, MMA employed more than 500 people and occupied nearly 500,000 square feet from LDA, including many of Loring’s larger industrial buildings. LDA’s fiscal year 2014 budget anticipated $658,300 in lease revenue for the multiple buildings. After MMA turns back seven buildings, which it will no longer need, that figure will drop to $350,493, an annual loss of $307,807.

Tim Corbett, CEO of MMA, told Flora that the group is attempting to develop an alternative business line with rebuilding transit buses looking particularly promising. However, the bus rebuild is a pilot program and it is not yet clear how successful it will be or how soon it will happen.

In addition to the loss in MMA lease revenue, LDA also is now faced with the termination of a common area maintenance fee that the Defense Finance and Accounting Services has paid to the association since it began operations on Loring in 1995.

According to Flora, DFAS has disputed the fee, which includes payment for services provided by LDA such as road maintenance, for several years and did not pay the fee from 2003 through 2005. In 2006, the fee was reinstated and is now, for reasons unknown to Flora, back in dispute.

Flora told the board that LDA will seek the fee’s reinstatement yet again, but until then, it will result in an additional $71,000 annual revenue loss.

Deferment of a scheduled $50,000 contribution to the capital reserve account and pending upgrades to Loring’s Applied Technology Center roof and road paving project could reduce the 2014 fiscal year projected loss from its current $339,450 to $76,450, according to Flora. The CEO felt that close management of expenses and other efforts could actually permit LDA to close out the fiscal year breaking even or better. However, Flora found budgets for fiscal year 2015 and beyond more troubling.

“If we are not successful in replacing the lost MMA and DFAS revenue, our difficulties will be compounded by reductions in the Loring Job Increment Financing Fund, together with maintenance costs associated with the additional vacant buildings,” Flora wrote in his report to the board.

The projected loss to the Loring Job Increment Financing Fund revenue attributable to the 140 MMA lost jobs is $152,000. Annual lease revenue loss for MMA buildings totals $308,000. Combine those figures with the $71,000 lost DFAS fee and a projected $50,000 in additional maintenance costs for building inventory, and the worst case scenario adverse annualized impact on LDA revenue totals $531,000.

Flora stressed that the most viable course of action is to attract new businesses to use the former MMA buildings, creating new jobs in the process.

“Nevertheless, until we can secure commitments from new tenants, LDA’s long-term financial viability will depend on our ability to adapt to these adverse circumstances,” Flora said.

Some of the options Flora suggested to help alleviate the shortfall include: restructuring of LDA staff duties to accomplish its mission with fewer employees; dismantling the fire department and EMS service arrangement with Limestone and Crown Ambulance, opting instead to contract coverage with Crown or Caribou; closing additional roads; discontinuing or reducing building heating and maintenance costs; seeking financial assistance from the state of Maine; and seeking a means by which to transfer Loring to one or more local communities for which Loring is most significant economically.

On a positive note for LDA’s budget, Flora reported that the Maine Power Company has approached LDA to begin a Phase 2 solar-voltaic project. Phase 1 solar panels have been in operation for several months and LDA is seeing reduced electricity costs as a result.

Flora explained that the output of the Phase 2 system would be approximately 202 kW, significantly larger than the Phase 1 project at 60 kW. The arrangement is an equipment lease with LDA as the lessee. As the lessee, the group would make lease payments that vary depending on the output of the system for the month. At the end of the initial lease term of six years, LDA would have the option, but not the obligation, to purchase the system for a price to be agreed upon.

The land planned to be used for the project is a “brownfield” site, which has very limited development potential. The lease payment that would be made is equal to 95 percent of what the electricity would otherwise cost through commercial electricity suppliers and utilities, locking in a 5 percent savings. The board unanimously approved Flora proceeding to develop and execute agreements with Maine Power Company.

http://bangordailynews.com/2013/11/03/business/loring-development-authority-faces-more-than-500000-shortfall-from-maine-military-authority-layoffs-other-factors/ printed on July 22, 2014