Defense spending foes rally against new tax break for Bath Iron Works

Posted Nov. 13, 2013, at 11:56 a.m.
An artist's rendering shows a new, 51,315-square-foot, 11-story outfitting building proposed by Bath Iron Works pending a new tax increment financing agreement with the city. The $32 million investment would generate approximately $500,000 in new taxes each year, and half of that amount would be returned to BIW. Overall, the city would gain $6.3 million in taxes over the 24-year life of the TIF, and $6.3 million would be returned to BIW, according to city assessor Paul Mateosian.
Courtesy Bath Iron Works
An artist's rendering shows a new, 51,315-square-foot, 11-story outfitting building proposed by Bath Iron Works pending a new tax increment financing agreement with the city. The $32 million investment would generate approximately $500,000 in new taxes each year, and half of that amount would be returned to BIW. Overall, the city would gain $6.3 million in taxes over the 24-year life of the TIF, and $6.3 million would be returned to BIW, according to city assessor Paul Mateosian.
A photo provided by Bath Iron Works shows the existing shipyard. BIW wants to build a new, 51,315-square-foot, 11-story outfitting building pending a new tax increment financing agreement with the city. The $32 million investment would generate approximately $500,000 in new taxes each year, and half of that amount would be returned to BIW. Overall, the city would gain $6.3 million in taxes over the 24-year life of the TIF, and $6.3 million would be returned to BIW, according to city assessor Paul Mateosian.
Courtesy Bath Iron Works
A photo provided by Bath Iron Works shows the existing shipyard. BIW wants to build a new, 51,315-square-foot, 11-story outfitting building pending a new tax increment financing agreement with the city. The $32 million investment would generate approximately $500,000 in new taxes each year, and half of that amount would be returned to BIW. Overall, the city would gain $6.3 million in taxes over the 24-year life of the TIF, and $6.3 million would be returned to BIW, according to city assessor Paul Mateosian.

BATH, Maine — Longtime opponents of defense spending have added an aggressive assault on what they perceive to be corporate welfare for Bath Iron Works to their peace vigils and warship christening protests.

Led by veteran peace activists, a Bath-based group has formed to defeat a new property tax break proposed by the company to allow it to expand the shipyard and — according to BIW officials and a defense industry analyst — remain competitive for U.S. Navy contracts with Huntington Ingalls Shipyard in Mississippi.

In August, Bath Iron Works announced that it would seek to modify an existing tax increment financing agreement (TIF) that the company said would allow it to finance a new, 51,315-square-foot outfitting building, approximately 11 stories tall, and make other major improvements at the yard.

As proposed, the $32 million investment would generate approximately $500,000 in new taxes each year, and half of that amount would be returned to BIW. Overall, the city would gain $6.3 million in taxes over the 24-year life of the TIF, and $6.3 million would be returned to BIW, according to city assessor Paul Mateosian.

City staff has proposed an alternative tax agreement that would return $3.7 million to BIW over the course of the TIF, with $9 million in taxes going to the city.

BIW has two 25-year tax increment financing agreements with the city that return to the company a percentage of property taxes on the original shipyard and the land-level transfer facility completed in 2001.

A third district was created in 2008 when the city built Wing Farm Business Park, which includes BIW’s $40 million Ultra Hall. This area does not return any property tax revenue to BIW.

Bath Iron Works has paid just more than $106.1 million in property taxes since 1998, Mateosian said.

The city refunded approximately $48.3 million in taxes to the company over that period as the result of existing TIF agreements. That money, as well as an additional $12.5 million, was sheltered from a municipal valuation formula the state uses to calculate state aid to public education — effectively increasing the state’s share of school funding.

Opponents of the latest deal formed Bath Citizens for Responsible TIF Action (BCTRA) to argue that General Dynamics, the parent company of Bath Iron Works, is so successful that the TIF is not necessary for the company to expand. They argue that Bath has not benefited from previous TIFs.

Bath resident Bruce Gagnon of the Brunswick-based Global Network Against Weapons & Nuclear Power in Space and member of Veterans for Peace, said that given General Dynamics’ success, BIW should not ask the city to help fund its expansion — particularly because “people don’t feel they’ve put much back into the community.”

In late October, Reuters reported that General Dynamics’ quarterly net earnings rose 8.5 percent to $651 million, while revenues fell 1.7 percent to $7.93 billion. Earnings per share rose 8.2 percent to $1.84 from $1.70.

Gagnon said that despite previous tax breaks from the city, BIW has reduced jobs by the thousands over the last decade — most recently announcing 39 layoffs on Nov. 1 and another 81 a week later.

As of Nov. 1, BIW employed approximately 5,450 people, according to a company spokesman. A 2003 U.S. Department of Transportation report on shipbuilding stated that the shipyard employed about 6,800 people that year.

“Taxpayers are being tapped again to give more corporate welfare to the military industrial complex,” Gagnon said. “The fact of the matter is, this whole profit-making system of building weapons, where you infuse it with corporate profits, necessitates always an endless cycle of competitive advantage when it’s one company versus another.”

“The question you have to ask is, ‘Is there any justification for [the TIF]?’ Any employment? Answer no,” retired University of Southern Maine law professor Orlando Delogu said. “Does the company need the money? Answer no. Have they already been treated generously by the city and state? Answer yes. Does any other taxpayer in the city of Bath … get their capital investments reimbursed? Answer no. The unfairness of it is just mind-boggling.”

DeLogu charged BIW with “fearmongering” aimed at city councilors and employees, who “don’t know how much to believe or not believe about the precarious position of the company.”

Jon Fitzgerald, vice president and general counsel for Bath Iron Works, said the TIF is important to keep the shipyard competitive with Ingalls.

‘We’re obviously not going anywhere,” he said of BIW. “The issue is, is the work going to come here? If we can’t win the work to bring it here to Bath, and can’t build ships in Bath, Maine, guess what? They’re going to be built in Pascagoula, Miss. That’s really what’s at stake here.”

Employment has declined as the Navy has ordered fewer destroyers, adding that BIW “got beat” in June when the Navy awarded Ingalls five destroyers and BIW only four, with the possibility of a fifth.

Fitzgerald said critics of the proposed TIF don’t mention mention “any of the good things that BIW does in the community” including an increased tax base, generating business and charitable contributions.

“Orlando Delogu, as a non-Bath citizen with no stake in this, certainly isn’t going to bring this up,” he said.

Jay Korman, senior Navy analyst with the Washington, D.C.-based consulting firm The Avascent Group, said Friday that Bath Iron Works’ argument that it must increase efficiency to remain competitive is “legitimate.” But he said the Navy would not likely take BIW out of contention for future warships should the Bath shipyard not move forward with the project, because the Navy is “incentivized” to keep two yards building destroyers.

“I don’t think it would be a disaster scenario,” he said.

The BCTRA will hold a forum Wednesday evening with panelists including Delogu and economist Joel Johnson of the Maine Center for Economic Policy. Fitzgerald said a representative of the company will not attend because the forum is “a parallel proceeding” to the City Council’s public hearings, the second of which is scheduled for Nov. 20.

Fitzgerald also argued that Wednesday’s BCTRA forum “started with anything less than a balanced viewpoint,” noting that Delogu and the MCEP have written extensively against TIF financing and other forms of business incentives, and that in 1997, Delogu argued — unsuccessfully — before the Maine Supreme Judicial Court that a past TIF for the shipyard was unconstitutional.

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