Cate Street must pay property taxes to get $25M loan guarantee for Millinocket pellet mill, FAME official says

Posted March 20, 2014, at 7:11 p.m.

MILLINOCKET, Maine — The New Hampshire investment firm proposing to build a $140 million pellet mill in Millinocket must pay $3 million in delinquent property taxes in the region before state officials can issue a state loan guarantee critical to the project, officials said Thursday.

A Finance Authority of Maine spokesman said that tax nonpayment freezes the $25 million loan guarantee approved in October that Cate Street needs to complete its pellet mill financing. Cate Street must pay Millinocket $2.3 million and East Millinocket $657,900 in outstanding property taxes as “ a specifi c condition of our approval,” Christopher Roney, FAME’s general counsel, said Thursday.

Gov. Paul LePage will meet with Cate Street leaders in Augusta on Friday, his spokeswoman Adrienne Bennett confirmed. She declined to divulge the agenda. LePage and his administration’s top economic development leaders have not responded to several requests from the Bangor Daily News to discuss Cate Street’s tax nonpayment.

Pressure on East Millinocket and Millinocket officials has been steadily building since Cate Street’s second-half annual tax payments came due in February.

“It is frustrating. I have never been in a town where a major taxpayer has not paid a tax for the majority of the year,” said Millinocket Town Manager Peggy Daigle. “It causes hesitation and causes the elected officials a little bit of heartburn in making the decisions they need to make. It’s just a fragile situation.”

FAME is due to review Cate Street’s introduction of new pellet-cooking technology to its Millinocket project on April 17, Roney said.

If all goes well, the October approval of the bond will be reaffirmed at that meeting, with the bond closing date sometime shortly thereafter, said Daigle, who expects Cate Street would pay its taxes to get the bond guarantee.

“We hope they close sooner than later,” Daigle said.

East Millinocket officials said they laid off a police sergeant, police officer and two Public Works Department employees last week due to Cate Street’s nonpayment. Millinocket officials are just beginning their public budget hearing process, said Daigle, who doesn’t expect to be laying off town workers this year.

Cate Street is the top taxpayer in both towns.

FAME officials briefly updated its board of directors on the project’s status during a meeting Thursday, Roney said. FAME was created by the state Legislature as one of the Maine’s primary economic development agencies, supplementing bank loans with funding to projects deemed worthy.

Cate Street spokesman Scott Tranchemontagne declined to comment on Thursday. He has said Cate Street subsidiary Great Northern Paper Co. LLC is working to restructure operations and restart its East Millinocket paper mill by May 1, “so that we can put hundreds of workers back on the job and address outstanding bills.”

He declined to say whether that meant the tax bills would be paid in May. The company stopped paper production on Jan. 23, and it laid off 212 of 256 workers at the East Millinocket paper mill on Feb. 6.

Tranchemontagne said the Legislature’s passing of LD 1792 is critical to the paper mill’s restart. The bill would force Brookfield Asset Management to share with Cate Street revenues created by Brookfield’s wholesale electricity sales that employ GNP-owned power lines and other equipment. The sales would occur during peak generation times only, a few times a year, he said.

He declined to say whether the mill would restart or pay its taxes if the bill isn’t passed.

Brookfield’s attorney has called the LePage-backed bill unconstitutional. The Legislature’s Joint Standing Committee on Energy, Utilities and Technology, which was due to review the bill on Wednesday, has set it aside to allow Brookfield and Cate Street time to negotiate, said Sen. John Cleveland, D-Androscoggin, a committee co-chairman.

Millinocket will likely face a cash-flow shortage in May if Cate Street doesn’t pay its taxes, Daigle said. Cate Street’s nonpayment of property taxes last year forced the town to mail tax bills early and begin a financial housekeeping process that is ongoing.

 

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