November 4, 2013

Group fights tax break for expansion of BIW

Opponents say the project will be built anyway and won’t add jobs. The company says it needs the deal to stay competitive.

By J. Craig Anderson
Staff Writer

A group of Bath residents is objecting to a proposed tax rebate for a major expansion of Bath Iron Works, saying the subsidy is corporate welfare and that BIW is certain to expand regardless of whether it gets a tax break.

click image to enlarge

The existing BIW hall has two outfitting bays.

Courtesy BIW

An artist’s rendering shows the same location with a proposed third bay that would cost about $32 million. BIW is seeking a property tax break of $250,000 a year for 25 years from the city of Bath in order to build the new facility.

Officials at BIW, a subsidiary of the Virginia-based defense and aerospace firm General Dynamics, said it’s possible that if the proposed tax break is denied, they might not be able to expand the facility at all, putting local jobs at risk. The expansion would make the company more competitive and improve worker safety, they said.

The proposed expansion includes a $32 million outfitting hall that company officials say would help secure the future of shipbuilding in Bath. The company is seeking a 25-year city property tax subsidy of about $250,000 a year for the proposed expansion.

The Bath City Council is scheduled to vote Nov. 20 on the subsidy, in the form of a proposed amendment to the city’s Wing Farm tax increment financing district. A discussion and public hearing on the upcoming vote is scheduled for 6 p.m. Wednesday at Bath City Hall.

The Wing Farm district is at the south end of the shipyard, where the proposed outfitting hall would be built.

The outfitting hall would allow many BIW employees who currently work outdoors to move their operations into a climate-controlled facility, company officials said. Such a move would be less hazardous, more comfortable for workers and greatly improve efficiency, they said.

Bath created the Wing Farm district in 2008 to protect the city from losing its existing share of state revenue as a result of BIW’s most recent expansion, which included the addition of its two-bay Ultra Hall outfitting facility.

Normally, when the value of property within a municipality goes up, the amount of state shared revenue that the municipality receives goes down. Establishing a tax increment financing district shields the municipality from losing state money because of property value increases within the district.

Such a district most often is used as a vehicle to provide a tax subsidy on private development within the district, such as a new shopping center or housing complex. The municipality gets to keep its slice of state revenue sharing, and the private developer gets refunded a portion of its yearly municipal tax bill.

Still, the net result of most tax increment financing districts is that the municipality receives less tax revenue than it otherwise would if the development had occurred outside the district. Districts nearly always benefit the property owner and often are used as an incentive to lure new development to the area.

The Wing Farm district is an exception. It currently does not provide a tax break to BIW.

Under the proposed amendment, that would change to a 50-50 split between BIW and the city on the improved property’s estimated $500,000 annual tax burden. The tax break, which only applies to new development and not existing structures, would remain in effect for 25 years.

That adds up to a subsidy of nearly $6.3 million over the term of the agreement. It does not affect the amount of property taxes paid by BIW on land and equipment for the majority of the shipyard, which falls outside the Wing Farm district.

The rest of the yard is divided into two additional districts related to previous BIW expansions that already provide property tax breaks to the company. Those districts were established in 1999 and are set to expire in 2024.

Bath resident Jerry Provencher is part of a group called Bath Citizens for Responsible TIF Action, which includes more than two dozen residents who oppose the tax break.

(Continued on page 2)

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