Lemforder closure a ‘heavy’ tax hit to Brewer

Posted Jan. 20, 2009, at 8:13 p.m.

BREWER, Maine — The city was struck on Monday when news that the community’s second-largest taxpayer would close next year, and the news is the most recent of many hits the city has endured in the past year, City Manager Steve Bost said Tuesday.

“There are some hits, some heavy hits,” he said.

Lemforder Corp., with a property value just under $28 million, or about 3.52 percent of the city’s tax base, announced on Monday it would close in mid-2010. The closing of the auto parts manufacturer will lay off the last 127 of 400 original employees, and will result in a drastic drop in tax revenues, he said.

“It’s close to $500,000,” Bost said. “It will have a serious impact on the city’s revenue stream. However, we have met challenges before and we will meet this head-on as well.”

Bost was referring to the closure of Eastern Fine Paper Co. in 2004, which was the city’s second-largest taxpayer at that time, he said.

Finance director Karen Fussell added, “This is not the first time that this has happened. It won’t be easy, but we’ll all get through it.”

The Brewer Lemforder plant was constructed in 1980 in the East-West Industrial Park and was the first North American plant built by parent company German-based ZF Lemforder, a worldwide supplier of drive-line and chassis components. Tie rod ends and ball joints are made at the Brewer plant.

The news about Lemforder’s closing was not a surprise for city staffers, Bost said.

“They have been slowly downsizing for some time, hoping that market conditions would improve as well as other factors,” he said. “They did not. It was as close to a skeleton crew as we’ve seen at Lemforder. If there is a small bright spot, it is that Lemforder appears to have provided most of its employees with time to look elsewhere for employment.”

Congressional leaders say they will help the displaced employees, according to a joint press release from U.S. Sens. Olympia Snowe and Susan Collins.

“We are saddened to learn that ZF Lemforder will be closing its plant in Brewer as a result of our nation’s weakened economy,” the release says. “Our thoughts are with the workers and their families who will be affected by these layoffs. Many of these employees have been working at Lemforder for many years and will lose their jobs through no fault of their own.

“We will do everything we can to help state and local officials find all of the resources necessary to help the laid-off workers through this difficult time,” it says.

Bost said city leaders are “prepared to assist in any way possible,” he said. “We’re hopeful that as many as possible will land on their feet.”

In addition to Lemforder’s pending closure, Brewer is facing a $305,000 drop in tax revenues from the sale of the Cianchette Building on Whiting Hill to Eastern Maine Healthcare Systems, an estimated 10 percent drop in state revenue sharing, an expected drop in state education funding, and a penalty or projected additional costs of joining Regional School Unit 15, the city manager said.

Residents will vote in a Jan. 27 thumbs-up or thumbs-down referendum on whether to join RSU 15, a consolidated district with Orrington, Dedham, SAD 63 and CSD 8.

“If the voters turn the RSU down, there is a [$244,000] penalty,” Bost said. “That penalty will be deducted from next year’s school subsidy,” which means school officials would have to “make cuts or request a portion of that from” taxpayers.

“If the referendum passes, the hit will be far more substantial, and unfortunately will be a moving target,” he said. “We know it will be well over $1 million … but it could go as high as $2 million.

“[The referendum] will have an impact” on taxpayer’s pockets, Bost said.

Lemforder was listed as the largest city taxpayer for years, but was bumped from the spot in 2008 when the new Maritimes & Northeast Pipeline expansion, which includes a new compressor station near the junction of Day and Lambert roads, went on line in April 2008.

Much of the taxes Lemforder paid in 2008 covered property inside the plant, Fussell said.

For 2008, the company paid “$497,000 in taxes,” she said. “About 63 percent of that is the personal property. That will obviously leave when the operation closes.”

The closure has been on the radar screen for three or four years, with company leaders saying it would be cheaper to operate in Southern areas of the United States where utility costs are typically lower, the finance director said.

“We are very sad to see them have to close their doors,” Fussell said. “We’re trying to look at the silver lining, as difficult this is for the community and the families.”

City staffers said they are hopeful that the location can be filled by another industry, and are appreciative of the advanced notice, she said.

Bost said the city has taken “a rather conservative approach to our budget and budget projects” and expects “a combination of belt tightening and efficiency measures until we get a better handle on what the revenues looks like.”

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