May 23, 2018
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Public-private partnership or corporate welfare? However you view it, Maine’s prosperity depends on it

By Charles Hastings, Special to the BDN

There is a lot of buzz about public-private partnerships these days.

You might not know it, though. The buzz is largely negative, and the term “corporate welfare” gets thrown around in an often surprising context.

People see a company receiving a grant, loan or subsidy, then immediately respond by calling it “corporate welfare.” Thinking about it more broadly, the term corporate welfare can apply to many things, but I believe many Mainers are largely confusing public-private partnerships and the idea of corporate welfare.

Much of the public investment we see in Maine comes in the form of grants, loans, tax breaks or subsidies in which a public entity, often the state, finances the investment. Many of the loans are low-interest packages designed to stimulate growth without bankrupting the venture before it gets started. In the long run, a few of these ventures will become highly successful and repay their loans. However, some others will not be successful and won’t pay back their loans.

But for the small portion that succeed, Maine reaps significant benefit. The gains come in the form of new investment, jobs and tax revenue for the state.

Further, the most important thing to remember is that creating a solid business foundation will bolster the state’s long-term tax revenue and job base. While many people also qualify tax breaks as “corporate welfare,” these incentives provide a hook to attract new businesses. These tax breaks are important to keep Maine competitive on the business landscape and mostly come with a time horizon that will expire. After the break is gone, then the tax revenue can begin to pour in. This tax revenue is important to fund the same grants, loans and subsidies that help new businesses, thus compounding the initial investment’s overall return.

Beyond the oft-discussed tax breaks and incentive programs, Maine’s public universities, business incubators and the Maine Venture Fund — a state-backed venture capital firm formerly known as the Small Enterprise Growth Fund — are public-private partnerships in another form.

At the University of Maine in Orono, the campus boasts many research programs that work with Maine businesses on up-and-coming technologies and designs. For example, the offshore wind pilot energy project, Maine Aqua Ventus, as well as other structures and composite technologies being developed at the University of Maine are being tested and marketed with involvement by private companies such as Cianbro.

Technically, this relationship is no different than providing a company with money to perform its own research and development. In this case, the university is a subsidized vessel through which private companies can capitalize on new technology to remain competitive and attract new foreign investment.

The University of Maine also boasts a business incubator, the Foster Center for Student Innovation. The center offers students the chance to interact with businesses and help develop business plans, write grants and get real-world business experience. At the same time, startup businesses get free help that allows them to work on the innovations that give them a competitive edge.

The point I’m trying to convey is simple. Using public resources to fuel private investment in Maine is generally a good thing. Yes, many successful businesses in the past grew through mostly private investment, but it is time to realize that this model has changed.

Not all business projects should be funded with public investments or receive public help. Rather, the projects that have merit and a good shot of succeeding should be supported. This includes business already in operation that need to innovate to remain competitive.

Rather than criticize public-private partnerships and dismiss them as corporate welfare, Mainers should embrace and foster them.

Charles Hastings has an MBA from the University of Maine and is currently a graduate student in the University of Maine’s School of Policy and International Affairs.

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