A legal fight is taking shape as the agency that’s redeveloping the former Brunswick Naval Air Station seeks to exempt one of its tenants from paying property taxes.
The Midcoast Regional Redevelopment Authority has indicated that it may sue the town of Brunswick to ensure that Kestrel Aeroworks, an aviation company that employs 35 people, will be tax exempt. It could also allow the agency to recoup $116,700 in taxes it will pay on Kestrel’s behalf this year.
The authority also has approached Gov. Paul LePage’s administration about proposing legislation to ensure that Kestrel will be tax-exempt.
The tax issue is the latest disagreement between the redevelopment authority and the town as it seeks greater involvement in the future of the 3,300-acre base, now called Brunswick Landing.
Steve Levesque, the authority’s executive director, said Tuesday that taxing Kestrel could make Brunswick Landing less attractive to prospective aeronautical tenants and complicate the authority’s effort to replace the estimated 4,800 jobs and $330 million in annual income that left the region when the Navy left last year.
But Brunswick officials say the authority promised Kestrel that it wouldn’t pay taxes despite early warnings from the town that Kestrel’s operations were taxable.
They also say the authority and its tenants are cutting deals that deny town officials a say in the redevelopment efforts and deprive Brunswick residents of property tax relief.
“I think MRRA may have represented to Kestrel, and may be representing to other businesses, what their tax status is without checking with us,” said Ben Tucker, vice chairman of the Brunswick Town Council. “And that may explain why MRRA is now paying Kestrel’s taxes.”
Kestrel Aeroworks is among the redevelopment authority’s 21 tenants at the former Navy base. In January, the startup aircraft manufacturer moved most of its operations — including its highly touted but prospective 600 manufacturing jobs — to Wisconsin after securing a financing deal that trumped Maine’s offer.
The company still employs about 35 people in Brunswick through a 20-year lease with the redevelopment authority, which receives about $85,000 a year in rent from Kestrel.
Town records show that the first half of Kestrel’s annual tax bill came due Oct. 15. The authority paid the taxes, but it’s now taking steps to get its money back and ensure that Kestrel is tax-exempt.
Memos between the authority’s legal counsel and the town’s attorney have set the stage for a court battle.
Levesque said the authority has not decided to sue Brunswick, and its 11-member board has not authorized him to do so.
“It’s one of the options we’re looking at it,” he said.
Brunswick Town Manager Gary Brown said Tuesday that Levesque indicated in September, after the tax bills for real estate and personal property were issued, that a lawsuit may be filed.
But, he said, Levesque shouldn’t be surprised by the town’s position.
He said he informed Levesque by email in June 2010, well before Kestrel’s deal was signed, that Brunswick planned to tax the operation.
“The other thing that bears some scrutiny here is that MRRA appears to have made financial obligations to Kestrel without ever telling them about the town’s position,” Brown said.
Levesque said he didn’t recall that email but the authority’s position has been made clear to the town all along.
Kate Dougherty, a spokeswoman for Kestrel, said the company supports the position of the redevelopment authority.
“As far as we’re concerned, it’s a matter of being competitive, not just in the region but all of Maine,” she said.
Asked whether Kestrel would leave Brunswick if it had to pay taxes, Dougherty said, “I wouldn’t venture to go there.”
“We don’t believe in making decisions based on theoretical or future outcomes,” she said. “When something happens, we act and do so quickly.”
Levesque said the redevelopment authority will pay Kestrel’s tax bills until the issue is settled. He said the lease agreement includes a provision that will require Kestrel to reimburse the authority if a court rules that the operation is taxable.
“We protected ourselves,” Levesque said.
The town’s case is backed by its legal counsel and an opinion by the Maine Municipal Association. Additionally, Maine Revenue Services referred Brunswick to a 1956 ruling by the Maine Supreme Judicial Court that upheld the town of Owls Head’s decision to tax certain buildings at Rockland Municipal Airport.
That decision hinged on the state law’s definition of public use for municipal corporations that lease airport buildings to private companies for non-public uses. Brunswick contends that a court would interpret the Kestrel case similarly because the redevelopment authority, a quasi-public corporation, is leasing space to Kestrel for private operations.
The authority says that interpretation is inconsistent with other tax-exempt properties at other airports.
The LePage administration hasn’t committed to proposing legislation to ensure a tax exemption for Kestrel.
George Gervais, commissioner of the Department of Economic and Community Development, said in a written statement that the administration is considering “clarifying legislation.”
He said the law is being applied inconsistently.
“It should be applied fairly throughout the state,” said Gervais, who declined through a spokesman to further explain the intent or reason for the legislation unless, and until, it’s submitted to the Legislature.
Tucker, with the Town Council, said, “If they’re saying that they need to change the law, that proves our point that Kestrel is taxable. … It also shows that they think they have a weak case in court.”
He said it’s another example of the redevelopment authority and the LePage administration carving Brunswick out of the redevelopment process.
The trend, as Tucker described it, came to a head in April, when the administration inserted legislation into LePage’s budget proposal seeking to require Brunswick to authorize tax increment financing that would return $20 million in property taxes to the redevelopment authority.
Brunswick didn’t learn about the provision until a work session on the budget. Gervais later said the administration wasn’t “trying to do anything sneaky.”
The proposal was never adopted, but Brunswick has been wary of the redevelopment authority and the administration ever since.
“What needs to stop is back-room dealings between Levesque and the governor’s office,” Tucker said.
He said the best way to repair the relationship between the town and the authority is to give Brunswick a seat on the authority’s board.
The legislation that created the authority empowers the governor to appoint 10 of the 11 members, plus the commissioner of the Department of Economic and Community Development.
Tucker said the setup is flawed and unlike other base redevelopment agencies, like the one for the former Pease Air Force Base in New Hampshire, which includes the city manager of Portsmouth.
“The town needs to be able to have a say,” Tucker said. “It doesn’t mean that they’ll have control. It just means they’ll have a seat at the table.”
Levesque said his agency is caught in the middle.
“I work with the board that is appointed,” he said. “We’re just trying to redevelop the base. It’s been a bit of a political football.”
Staff Writer Steve Mistler can be contacted at 791-6345 or at: