AUGUSTA — Business groups squared off against progressive organizations Thursday over legislation that would require businesses receiving an estimated $30 million in tax breaks to meet minimum standards for employee pay, benefits and scheduling.
To supporters, the bill is an attempt to hold businesses accountable for creating “quality jobs” or else run the risk of having to repay tax credits offered through several programs. Business groups warned, however, that the bill would only make it more difficult to recruit new businesses to the state and could harm existing businesses by changing program rules “midstream.”
“Forty-nine other states don’t require this … so why would they consider doing business here if we were to enact this type of legislation?” said Peter Gore, vice president of the Maine State Chamber of Commerce.
The discussion came days after a Maine Sunday Telegram investigation revealed that the state’s taxpayers are on the hook for $16 million in tax refunds to the investors at the now-closed Great Northern Paper mill in East Millinocket. The mill’s owners, New Hampshire-based Cate Street Capital, used the Maine New Markets Capital Investment program to receive the tax credits. But none of the money was invested in the mill, which closed and filed for bankruptcy last year.
It was unclear at Thursday’s public hearing whether the bill as written would have required Cate Street to repay any money because the legislation deals primarily with ensuring that employers pay higher wages and offer adequate benefits to workers. Lawmakers are separately weighing changes to the New Markets tax credit program – including potential repayment or “clawback” provisions – in light of the Great Northern case.
Sen. Chris Johnson, D-Somerville, said that if the bill he is sponsoring had been in place at the time Cate Street applied for the New Markets program, the company would not have qualified for a tax break under the criteria for community benefits or jobs created. If it ultimately qualified, Cate Street would have been required to report on whether it was meeting prescribed goals or else face clawback penalties, he said.
The East Millinocket mill came up repeatedly during Thursday’s hearing before the Legislature’s Taxation Committee. Johnson said he hoped committee members “are as angered by Cate Street’s rip-off of Maine taxpayers as I am” and that the situation should serve as “the foremost lesson learned.”
“Without minimum expectations and reporting and penalties, these programs will continue to be subject to abuse and unwise taxpayer investments – activities with little to no benefit to the people of Maine,” he said.
Johnson’s bill would require businesses that participate in three tax credit programs – the New Markets program, Seed Capital Investment Credit and Pine Tree Development Zones – to show that jobs associated with the tax break pay at least 80 percent of the state’s prevailing wage or 120 percent of Maine’s statewide average wage. A Maine Department of Labor official, who testified in opposition to the bill, estimated that 120 percent of the statewide average would be $19.55 an hour.
The bill, L.D. 1287, also would require employers to offer health benefits to 95 percent of their workers and provide them with predictable schedules. Businesses would be required to report employment data for positions created with the help of tax credits and could be required to repay all or part of the tax breaks if they do not live up to initial promises.
Under the bill, businesses participating in the New Markets tax credit program would have the alternative of creating a “community benefits agreement” that spells out expectations for “high-quality job creation,” environmentally sustainable construction standards or other goals.
Joel Johnson, an economist with the liberal Maine Center for Economic Policy, estimated that the three tax programs included in the bill will add up to more than $30 million in tax breaks in fiscal year 2017.
“I think this bill is a good step forward,” he said. “This (is) about fiscal responsibility and about ensuring that public dollars are spent wisely. It would bring transparency, accountability and enforcement mechanisms to large economic development incentive programs here in the state.”
Representatives of several business groups acknowledged that fixes are needed to avoid a repeat of the situation in East Millinocket in which none of the $16 million in tax refunds flowed back into the mill. But they said L.D. 1287 – with its rigid wage and benefit requirements – is the wrong way to attempt to add accountability to the programs.
Curtis Picard of the Retail Association of Maine, a trade group that represents retail businesses at the State House, said the bill’s “one-size-fits-all” approach to worker scheduling is not realistic in Maine.
As an example, Picard pointed to last winter when businesses were forced to close because of snowstorms or were able to reopen after storms didn’t materialize. Likewise, Picard said shops in Portland and Bar Harbor must often make quick staffing changes depending on when cruise ships loaded with thousands of passengers actually arrive in port.
“To mandate changes like this would be disruptive,” Picard said.
Critics also said much of the bill is based on model legislation that has been introduced in legislatures across the country, but has yet to be implemented anywhere other than in San Francisco.
Chris Johnson’s bill is unlikely to pass the Legislature in light of the strong opposition from business groups and the administration of Republican Gov. Paul LePage. But there appears to be bipartisan support for tightening up the New Markets investment program amid the outrage over Cate Street’s use of the tax breaks for the Great Northern Paper mill.
Members of the Legislature’s Labor, Commerce, Research and Economic Development Committee had initially given unanimous support for a bill to double the program’s investment cap to $500 million and to disallow a type of same-day loan used by Cate Street. But the committee is holding onto the bill as other changes are considered.
Several members of the Taxation Committee also noted that the state’s watchdog agency, the Office of Program Evaluation and Government Accountability, or OPEGA, already plans to evaluate the effectiveness of tax credit programs.
But Chris Johnson, who serves on the Government Oversight Committee that directs OPEGA, said the Legislature needs to do more.
“(OPEGA is) not going to be able to tell you how to fix it,” he said. “They’re just going to be telling you whether (the tax credit programs) are giving you a good return for what you are spending. This bill is trying to look at programs where there is no assurance of a good return.”
Kevin Miller can be contacted at 791-6312 or at:
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