AUGUSTA – The Maine House voted Tuesday to approve a bill that would provide Bath Iron Works with $45 million in tax incentives over 15 years if the shipyard meets investment and employment goals.
The 117-31 vote followed roughly 50 minutes of debate on a bill that BIW officials say is needed to compete for contracts but that opponents decry as a state handout to a company at no risk of failing. BIW officials are pushing lawmakers to complete work on the controversial bill this week, before the company submits its latest bids for Navy shipbuilding contracts.
As originally proposed, the bill would have provided $60 million in tax credits to BIW over 20 years – or $3 million a year – as long as the company invested $100 million in the shipyard and employed at least 5,000 workers. The altered version now pending with lawmakers caps the tax incentives at $45 million spread over 15 years but requires BIW to invest $200 million on “construction, improvement, modernization or expansion” at the shipyard while maintaining employment at 5,500 workers.
With roughly 5,600 employees, BIW was Maine’s fourth-largest private employer and the state’s largest manufacturer last year.
Bill sponsor Rep. Jennifer DeChant, D-Bath, pointed out that BIW has an annual payroll of $350 million, draws employees from all 16 Maine counties and contracts with more than 300 other companies in the state.
“There is no denying, Madam Speaker, that BIW is a statewide economic driver,” DeChant said during floor debate on the bill, L.D. 1781.
But as they did during the committee process, opponents sought to undercut claims that a shipyard owned by a multi-billion dollar defense contractor, General Dynamics, needs $45 million from Maine taxpayers to survive. Their comments echoed concerns raised by a vocal group of peace activists who dismissed the incentives as little more than “corporate welfare” for the parent company.
“We have a shameless request for 100th of 1 percent of the operating revenues of General Dynamics to be paid through this tax break from the taxpayers of the state of Maine,” said Rep. Ralph Chapman, G-Brooksville.
Rep. Janice Cooper, a Yarmouth Democrat who serves on the Taxation Committee that reviewed the bill, accused BIW of failing to provide detailed financial information showing that they were at risk or struggling to compete for contracts. Instead, Maine needs to spend that money on other priorities, Cooper said.
“I believe it is poor tax policy to give a tax incentive which amounts to a bailout for an entity that is not failing,” Cooper said.
But BIW officials said the Navy is increasingly focused on reducing per-ship costs. And Taxation Committee member Rep. Bruce Bickford, R-Auburn, said the bill is aimed at supporting Maine workers at a local shipyard that happens to be a small part of General Dynamics.
Bickford also pointed out that Mississippi lawmakers are poised to grant BIW’s only competitor for Navy destroyer contracts – Ingalls Shipbuilding in Pascagoula, Miss. – $45 million in bonds for improvements at the shipyard, which is located on state-owned land. That is on top of the more than $200 million in state assistance Ingalls has received from Mississippi since 2004.
“This is what BIW competes with,” Bickford said. “What we’re doing today doesn’t even come close to what Mississippi does for Ingalls shipyard.”
BIW and Ingalls are currently bidding for contracts to build the next round of Arleigh Burke-class guided-missile destroyers included in the Navy’s next 10-ship contract. While the Navy is expected to divide those contracts between to the two shipyards, Navy officials have reportedly told the companies that it may not be an even split this year. Each Arleigh Burke-class destroyer costs in excess of $1.5 billion to build and represents years of work for the shipyards.
The bill now goes to the Senate, where it is expected to pass easily.
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