The urban-rural split: What is Maine’s economic development strategy?

AUGUSTA, Maine — Federal data indicating that York, Cumberland and Sagadahoc counties now generate more than half the state’s economic output add new fodder for a “two Maines” concept that perceives a deep divide between prosperous southern population centers and rural northern communities.

The notion of “two Maines” drifting apart economically is not new. In a 1994 Maine Policy Review commentary, Christopher Spruce wrote that “economic fortunes in southern Maine are in ascendancy, while those in northern Maine are either in decline or barely rising. The longer this situation continues to exist, the greater the tension will be between the ‘haves’ in the southern part of the state, and the ‘have-nots’ living north, east and west of Waterville.”

Eighteen years later, economic activity in Maine’s rural areas remains largely stagnant or in decline, challenging public officials to find enough tax revenue to pay for basic services, such as law enforcement and schools. Meanwhile, administrators in urban areas grapple with how to manage growth and meet heightened demands for social services.

Economic development professionals argue that, although some tension between Maine’s rural small towns and service centers exists, the perception of affluent southern Mainers competing against struggling denizens of the North Woods should not shape public policy.

“This isn’t a competition,” said Nancy Smith, executive director of GrowSmart Maine, a Portland-based nonprofit organization created in 2003 to promote sustainable development planning throughout Maine. “Economic strength isn’t about how Greater Portland is doing compared to the rest of the state but how is Maine doing compared to the rest of the region, the country and globally.”

Nevertheless, Maine legislatures dominated by members from rural districts have enacted policies that are disadvantageous to metropolitan areas, according to Jim Damicis, senior vice president of Camoin Associates, a company that helps states and municipalities with economic development projects.

“State policies have historically been anti-Bangor, anti-Portland, anti-Lewiston-Auburn,” he said, citing past rejections of local option sales taxes and transportation spending on farflung road systems rather than public transit.

Service centers also shoulder the burden of providing public assistance because people in need flock to them, and urban property taxpayers foot a bigger bill because tax-exempt entities tend to locate in cities, their advocates assert. A new informal mayors’ alliance makes the case that public policy should reflect Maine’s increased reliance on city governments as a social safety net.

Lawmakers from rural northern communities offer a different perspective. They cite changes in the state’s public education funding formula enacted in 2004 as an example of erosion in state support for the small-town way of life that defines Maine’s character. Former Senate President Kevin Raye, R-Perry, called the 2004 funding mechanism, known as Essential Programs and Services, “an urban formula foisted on a rural state” in advocating for LD 1274, his 2011 bill that tweaked state school funding to the advantage of rural school districts.

The emergence of tax increment financing since the 1990s has helped — primarily metropolitan — communities foster economic development, according to Geoff Herman, director of state and federal relations for the Maine Municipal Association.

However, because TIFs allow communities to shield increased property value created by new developments from county taxes and the state’s education and revenue-sharing calculations, representatives of rural areas sometimes “feel like they’re picking up the tab,” he said. That’s because county taxes pay for rural services, and TIF-sheltered revenue means less money overall for state education aid and revenue sharing.

Herman acknowledged that tension between metropolitan and rural interests factors into the “steady incremental process” that marks economic development policy formation. “The more urbanized folks do look at the Legislature as having more rural influence because of the numbers,” he said. “My observation is that there’s more balance than appears on paper.”

To seek common ground on issues that divide service centers and small towns, the MMA in 2005 established the Service Center-Rural Community Working Group. Ryan Pelletier, who at the time chaired MMA’s legislative policy committee, appointed the 13-member panel. Service center and rural representatives walked away with a better understanding of each other’s challenges, he recalled, but their recommendations gained little traction with state government.

Pelletier, now director of economic and workforce development for the Northern Maine Development Commission, which serves Aroostook and Washington counties, suggests one specific state policy change to promote economic development in northern Maine: Make TIF revenues generated in the Unorganized Territories available to municipalities and business interests within the county. The law now requires that revenue generated by a TIF in the Unorganized Territories remain in the Unorganized Territories.

“That money could be used to do some economic development in rural towns that would benefit the entire state,” he said.

Smaller northern service centers such as Fort Kent and Caribou also merit special attention, Pelletier said, because they experience a double whammy of being far removed from southern Maine’s economic engines and having to provide services to residents of neighboring towns. A voluntary payment in lieu of taxes from tax-exempt entities or user fees that more accurately reflect actual costs would help offset the drain on rural service centers’ municipal coffers, he said.

Pelletier has seen interest within the private sector — exemplified in his region by the Aroostook Partnership for Progress — to promote economic development in Maine’s northernmost counties. The best way state government could support that effort, he said, would be to incentivize regional collaboration rather than mandate change in the manner former Gov. John Baldacci’s administration did with school district consolidation in the late 2000s.

“School consolidation was taken by rural communities as an affront forced down upon us,” Pelletier said. A similar “one-size-fits-all” approach to economic development in rural Maine would thwart regional efforts, he said.

Kevin Bunker, president of GrowSmart Maine’s board and co-founder of Developers Collaborative, which works on economic development projects throughout Maine, agrees.

“Each of the regions that make up Maine has unique assets [and challenges], and our job is not to try to recreate successes achieved elsewhere but to build on what is already there,” he wrote in an email. “What if the folks who are working on ocean renewable power in Eastport or torrefied wood in Millinocket instead were trying to attract office towers full of bankers and lawyers to create jobs? As nonsensical as it sounds, that approach or a version of it has been an economic development paradigm for decades.”

Employment trends reflecting a national shift toward an urban-based service economy support Bunker’s perspective.

“Health care has been the fastest growing job field for more than a decade,” said Glenn Mills, chief economist for the Maine Department of Labor’s Center for Workforce Research. “Hospitals drive growth.”

Law offices, ad agencies and other professional services, most of which locate in urban settings, also fared better during the recession, Mills said.

Instead of assuming that “one size fits all” promotes fairness, state policy should recognize regional differences and allow local groups to capitalize on them, said Ed Cervone, president and CEO of the Maine Development Foundation.

“Fairness is a commitment to do things that work and be honest about the differences around the state,” he said.

Robert Long is a political analyst for the BDN.