AUGUSTA, Maine — Lawmakers in the House of Representatives gave initial approval to a bill that would install strict safeguards over public funds loaned in the New Markets Capital Investment Program.
The bill, LD 297, originally sought to double the cap on loans from the program to an aggregate of $250 million to $500 million. However, the bill morphed considerably during the committee process, in no small part because of revelations reported by the Portland Press Herald that millions of dollars of funds taken from the program by Cate Street Capital and other firms were what was known as “sham transactions” by the U.S. Internal Revenue Service.
New Hampshire-based private equity firm Cate Street Capital, which owned the Great Northern Paper mill in East Millinocket, used the New Markets program to help lower the taxes it paid on a $40 million investment at the mill. The company promised jobs and continued papermaking, but after a year, the company filed for bankruptcy and laid off 200 workers.
“Bad actors have compromised the integrity of this program. They have poisoned the well,” said Rep. Erin Herbig, D-Belfast, who co-chairs the Legislature’s Labor Committee. “It’s not fair to taxpayers and it’s not fair to the good actors who followed the rules.”
The bill provides stronger protections by eliminating the one-day loan scheme used by Cate Street Capital. It also requests that the Government Oversight Committee conduct a review of the program.