Economic development is one of the results we’ve come to expect from our government ”“ that’s why it’s part of nearly every politician’s platform, and was a big part of Gov. Paul LePage’s pitch for office.
Cities take many approaches to this, with most offering Tax Increment Financing districts that redirect tax revenue from major new developments into infrastructure improvements or areas of the city with more need. Biddeford is even going so far as to sponsor a “Main Street Challenge” that will offer all sorts of freebies and discounts for new businesses looking to give it a go downtown.
It’s no secret that it’s a buyer’s market for those looking to locate a business. Every town and city wants new industry to provide jobs for its residents, so employers have their pick of locations. It makes sense that they will choose an area that offers the most incentives. In some extreme cases, the competition has become so fierce that nearby towns have stolen employers from each other simply by offering “greener grass” on what is almost literally the other side of the fence.
One of the ways states can have a similar advantage in attracting employers is through enterprise zones: Areas designated for development, to which companies are enticed with benefits.
In Maine, one of the most comprehensive incentive programs we offer are Pine Tree Development Zones. The program was instated by Gov. John Baldacci and approved by the Legislature in 2003.
It’s overseen by the Department of Economic and Community Development and businesses that apply must agree to create new jobs and make investments. If they do so, they are granted income and sales tax breaks and lower electric rates for 10 years.
A minimum of five new jobs must be added before most of the benefits kick in, and the more jobs that are added, the better the benefits.
The zones not only serve to make Maine more attractive for business than, say, nearby New Hampshire, but also encourage job growth.
A recent investigation by the Maine Center for Public Interest Reporting found a major flaw with the program, however: It’s been run too loosely to be effectively evaluated ”“ and in the meantime, the state is in a budget crunch and could really use that lost tax revenue. The question, “Is it worth it?” simply can’t be answered with the data that’s been provided so far. Despite the requirement in the law for businesses to show that they would not be able to start or expand the business without the tax breaks, the state does not have any such statements or figures on file for the 337 businesses that currently take advantage of Pine Tree Development Zones, the MCPIR found.
That makes it hard to say whether or not the lost tax revenue is directly responsible for the job growth and investment, and nearly impossible to judge whether or not it’s worth the lost revenue.
Clearly, it’s time for some reform to the PTDZ administration, even if that reform consists only of following the law more closely. Some hard facts and figures should be presented to the state before we start giving money away. If a company is looking to relocate, surely they have done some written comparisons of moving to Maine versus New Hampshire, for example. That paperwork would include what the numbers look like with and without the Pine Tree Development Zone tax breaks and would clearly show what the better option is, cost-wise. It would be clear, then, that the availability of the PTDZ tax break was instrumental in the company’s decision.
For those businesses that are already located in Maine, it’s hard to believe they would apply for this program without doing the math either. It wouldn’t take much to show the state how the figures compare and show the actual fiscal impact of the new jobs versus the amount lost in taxes.
On the surface, it appears that Pine Tree Development Zones can help boost the economy, since new jobs and capital improvements are part of the deal. But we need actual figures from the applicants to figure out if it’s worth all the lost tax revenue. And until that change to adhere more closely to the law is made, the program should be suspended.
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Today’s editorial was written by Managing Editor Kristen Schulze Muszynski on behalf of the Journal Tribune Editorial Board. Questions? Comments? Contact Kristen by calling 282-1535, Ext. 322, or via email at kristenm@journaltribune.com.
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