November 14, 2013

City debates proposed tax subsidy for Bath Iron Works

Officials should consider whether their decision would make or break the company’s future in Bath, according to an economist.

By J. Craig Anderson
Staff Writer

When voting next week on a proposed tax subsidy for Bath Iron Works, City Council members should consider whether their decision would enhance or damage the company’s future in Bath, an economist said Wednesday during a panel discussion devoted to the issue.

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Gabe Souza/Staff Photographer This September 2011 file photo shows Bath Iron Works in Bath, Maine. A proposed tax for BIW, which the city council is scheduled to vote on next Wednesday, is valued at more than $6 million.

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Speakers and attendees at the community-organized panel discussion and town hall-style meeting also called for greater transparency from BIW about its finances and expressed disappointment that the company chose not to participate in the meeting.

The panel discussion was organized by a group of residents who oppose the tax rebate. The three-member panel featured Brunswick City Councilor Benet Pols, who spoke in favor of the deal, neutral panelist and economist Joel Johnson, and University of Maine law professor emeritus Orlando Delogu, who argued against the subsidy.

The proposed property tax rebate, which the council is scheduled to vote on next Wednesday, is valued at more than $6 million.

Officials at BIW, a subsidiary of Virginia-based defense and aerospace firm General Dynamics, have said it is possible that if the proposed tax break is denied, they might not be able to go ahead with construction of a $32 million outfitting hall that they said is necessary to keep the company competitive.

Opponents say Bath needs the estimated rebate of $250,000 a year for 25 years more than BIW does, since its parent company is making billions of dollars in profits each year.

During Wednesday’s meeting, Johnson, of the non-partisan Maine Center for Economic Policy, said the central question councilors should consider is whether the proposed tax rebate would be significant enough to influence BIW’s continued success, financial stability and economic contributions to Bath.

“It’s up to you to decide whether it is worth it to your community,” he said. “It’s a very difficult question to answer.”

Delogu argued that the proposed subsidy, in the form of a “credit enhancement” amendment to the city’s Wing Farm tax increment financing district, is merely “chump change” to a company such as General Dynamics, which has generated an average of $2.5 billion in annual profits over the past five years.

“The fact is, you shouldn’t give them a dime,” he said. “They pay their top five executives $38 million a year in salaries.”

Delogu said BIW is doing great with billions of dollars in future work lined up, and that the city should keep all of the estimated $500,000 a year in additional property tax revenue that the proposed assembly hall expansion would generate.

Pols offered a different perspective, noting that Brunswick officials are all too aware of the potential impermanence of major employers, such as those associated with the former Naval Air Station Brunswick, which closed in 2011.

“Trust me, it is not impossible for a big business to close and leave town,” he said.

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 have said, adding that such a move would be less hazardous, more comfortable for workers and greatly improve efficiency.

Most importantly, it would allow BIW to be more competitive when bidding against its chief rival, Huntington Ingalls Industries in Mississippi, for U.S. Navy contracts, they said.

Opposition group leaders have said they do not believe BIW would walk away from the proposed expansion if the town council denies the tax rebate.

BIW officials chose not to send a representative to be part of the panel, citing the organizer’s stated opposition to the proposed tax break.

The company already has existing tax subsidies for previous improvements to the shipyard stemming from two tax increment financing districts approved in 1997.

Johnson said it is impossible to know whether denial of those subsidies would have caused BIW to cut more jobs over the years.

“We’re all trapped in this kind of prisoner’s dilemma,” he said. “We . . . don’t know what would have happened.”

J. Craig Anderson can be contacted at 207-791-6390 or:

Twitter: @jcraiganderson

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