Skipping BETR payment ‘very difficult pill to swallow’

Testimony went on for hours – and hours – Wednesday as the Appropriations Committee heard from more than 100 local officials, businesses and others affected by the governor’s budget plan, including his proposal to convert property remaining in the BETR program to the BETE program.

“You are making it tough to be a manufacturer in Maine, especially rural Maine, making it tough for out- of-state decision makers to think of Maine as a place to invest,” said Tony Lyons, director of fiber supply and public policy at Rumford Paper Company, a subsidiary of NewPage Corporation.

Donhaue quote blockProbably the most contentious item at Wednesday’s hearing was the provision to suspend revenue-sharing to municipalities, but BETR was a close second.  Although many businesses favored the transition to BETE, because the reimbursement rate is higher, they strongly opposed suspension of BETR payments for one year. That part of the proposal would cost businesses a combined $38.8 million, but would only save the state $11.8 million, according to Maine Revenue Services.

“We don’t see a recovery of those dollars until 2021. That’s a very difficult pill for our company to swallow,” Bill Cohen, Verso’s communications manager, told the committee. “We just finished a $42.5 million program of investment and created 50 new woods jobs. And we would not have done that without the programs that are in place.”

MFPC has expressed its concerns about this approach to the governor’s office and will be providing written testimony to the Appropriations Committee, said Executive Director Patrick Strauch. Maine paper companies are among the heaviest users of the program, according to Maine Revenue Services data, with Verso Paper topping the list with more than $4 million in reimbursement in fiscal year 2012.  (Bath Iron Works was second with $3.4 million and National Semiconductor third with $1.9 million last year.)

“We are at the top of the list under reimbursement because we are at the top of the list for a company that has modernized its mills and tried to remain competitive in a global economy,” Cohen said. “We have invested hundreds of millions of dollars in recent times in our mills. If you take the budget proposal that has been suggested, then we stand to lose up to $5 million, depending on what the towns do, in terms of making up the revenue-sharing loss.”

Cohen asked legislators “to remember that Verso Paper is a job creator and a job retainer,” with mills in Jay and Bucksport that employ 1,500 people directly and have an indirect impact on somewhere between 5,000 and 7,000 jobs.

John Donahue,  vice president of manufacturing at Sappi Fine Paper, was one of many who told legislators that skipping BETR payments would have a chilling effect on business investment in Maine.  Sappi currently has approximately $350 million in capital investment eligible for property tax reimbursement under the BETR program, which has “enabled us to sustain over 1,300 high-paying quality jobs in the state.” The BETR program helps mitigates the impact of the tax disadvantage Maine has compared to

“The skipped payments will cost our company an estimated $1.5 million for the sites in Westbrook and Skowhegan,” Donahue said. “The elimination of BETR penalizes businesses for investing and creating jobs in Maine. As one of the leaders in a very capital intensive industry we followed through on what the BETR program encourages by investing in Maine. Why should the economic burden be shouldered by businesses that employ Maine people but exclude competitors who do business in Maine? We support the proposal that transitions BETR to BETE and we urge alternative solutions to skipping the year’s worth of BETR payments, which were budgeted when we initially made those decisions.”

back to newsletterJohn Williams, president of the Maine Pulp and Paper Association, noted that nine of the 13 pulp and paper companies and paper products manufacturers operating here are in the top 20 list of BETR recipients. Williams compiled data from seven of the nine that are MPPA member companies. He testified that found those seven received $9.8 million in BETR reimbursements in FY 2012, for taxes paid in 2010. That same year (2010) they invested $90 million in their facilities, offered employment to 4,100 Maine men and women, and spent $777 million within Maine. Between 2002 and 2011. Williams said, these seven companies invested more than $1 billion in their facilities.

“Under this proposal Maine’s  businesses stand to lose $38 million in FY 2015, and Maine’s  pulp and paper companies will bear the brunt of that loss,” Williams said.

Among others from the forest products industry who testified in opposition were Keith Van Scotter, CEO of Lincoln Paper and Tissue; Alexandra Ritchie, a managing director with Cate Street Capital, the owner and operator of Great Northern Paper; Tina Laplante, controller, International Paper in Auburn,  and several members of the United Steelworkers, which represents pulp and paperworkers in Maine.

But with 45 recent layoffs at the Rumford Paper Mill, Lyons testimony may have had extra impact. He told legislators that the Rumford Mill is one of Oxford County’s largest employers, paying hourly employees an average wage of just under $28 per hour. But with a 4 percent drop in demand for coated freesheet paper and an 8 percent decline in demand for coated groundwood paper, the mill was forced to eliminate 45 salaried and hourly positions in February. At the full BETR level, Lyons said, the mill pays more than $4.4 million in property taxes annually. A 100 percent BETR payment brings that down by about $1 million to $3.4 million.

“In Rumford, the math is getting simpler for us,” Lyons testified. “We just cannot afford to absorb a skip of a year’s worth of BETR payments, it’s that simple. We can’t pass it on to our customers; it leaves us only two ways to cover that $1 million; we spend less and we reduce our workforce.”