Despite the negative reporting recently, the Maine New Markets Capital Investment Program is a proven success for our state. Because of the strong results it has delivered in terms of new job creation, expanded economic activity, revitalization in economically distressed areas and additional state and local tax revenue, it should be renewed and expanded. As just one example, the program has been an important component of the St. Croix mill expansion that is helping preserve over 300 jobs and create over 80 new jobs in an economically challenged part of our state and in an industry in need of new investment. It also sends a positive signal to potential investors, both inside and outside of our state, that Maine’s Legislature is working now to renew and expand this effective incentive.
A recent Bangor Daily News editorial focused on a report from another paper about a transaction that tried to revitalize the Great Northern Paper mill, preserve its 243 jobs and further expand its operations, creating new opportunities in a severely distressed area of our state. It is a true tragedy, especially for those Mainers who lost their jobs, that we all worked to save the Great Northern Paper mill with the best of intentions, including using the New Market Tax credit program, but, at the end of the day, there was just too much to overcome. The purpose of the transaction was to refinance GNP’s assets in order to provide a degree of financial cushion and free-up cash for operating expenditures that would help give GNP the breathing room it needed to return to viable operations. The particulars of the financing structure, while not representative of all New Markets program investments, were based on solid precedent and were reviewed and preapproved by state regulators at the Finance Authority of Maine. If this had not been done, the mill would have closed at least a year earlier and those who worked there would not have had jobs during that time.
Despite this, the article and subsequent editorial created an inaccurate and, frankly, damaging impression that the Maine New Markets program participants may have done something outside of the program’s rules. These investors came to our state and made preapproved investments in places the state encouraged and which lack conventional sources of capital investment. The characterization of them as wrong-doers is a disservice to the many Mainers whose current and future jobs depend on investors having confidence in Maine as a place to do business.
As with all business financings, there is an element of risk, and business financings assisted by New Markets Tax Credits are no different. In fact, the main public policy purpose of the Maine New Markets Capital Investment Program is to encourage greater investment in distressed communities where it is riskier to do business. Revitalization of the distressed GNP mill had long been a top economic development priority of the state, and the Maine New Markets refinancing provided a fighting chance to save and expand this major job-creator. While the New Markets refinancing helped preserve jobs at the mill for an additional 13 months, despite the best efforts of the state and the good-faith intentions of the New Markets program participants, the GNP mill could not be saved.
Despite the tragic loss of the mill jobs, the program is still a success for Maine. A respected Maine economist, Charlie Colgan, studied the program at the end of last year and found, even without the revival of the GNP mill, it will create a return of $1.56 in tax revenues gained to every $1.00 in incentive claimed, so it delivers a healthy return on investment for our state.
It is a policy choice for legislators whether, going forward, they want to amend the program to eliminate the option of Maine businesses using New Markets to refinance assets to help them recapitalize and grow, which has been referred to as the one-day loan. Not because it was wrong, but because it will hopefully prevent questions about future New Markets projects. The Maine State Chamber supports the renewal and expansion bill, including this amendment, as do a number of participants in the program.
Because so many current and future jobs in our state depend on new investments, we simply cannot afford to put a chilling effect on future investment from in-state and out-of-state investors who want to invest here and follow our rules. The Maine New Markets incentive has delivered on its promise of attracting investment to job-creating businesses throughout our state, and it is helping to retain and create jobs in our economically distressed communities. Now is the best time for us to send a positive signal to the investment community by renewing and expanding this successful incentive.
Dana Connors is president of the Maine State Chamber of Commerce.