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 canderson@pressherald.com
Staff Writer

(Continued from page 1)

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.

He said the central question is whether the subsidy is necessary to convince General Dynamics, which reported a $650 million profit in the third quarter, to build the BIW expansion.

“General Dynamics has made over $12 billion in the last six years,” Provencher said.

He noted that the proposed expansion is not expected to create any additional jobs, and that BIW is far too heavily invested in Bath to relocate elsewhere. “There’s no way that they could move,” he said.

Provencher said Bath already has forfeited nearly $49 million in property tax revenue as a result of the two existing BIW districts.

It is impossible to predict whether denying the tax subsidy would help or hurt the Bath community in the long run, he said. “The question before the council really is based on speculation,” Provencher said.

Bath Citizens for Responsible TIF Action plans to host a panel discussion Nov. 13 on the BIW proposal. One of the confirmed panelists is Joel Johnson, an economist with the Maine Center for Economic Policy, a nonpartisan think tank based in Augusta.

Johnson took a neutral position on the proposed subsidy, saying it is a complex issue that deserves more public discussion. Still, he said the arguments should not be boiled down to whether BIW would build the expansion without the tax break.

“If these improvements are made, that’s one thing,” Johnson said. “But the question becomes, ‘How much are the improvements costing Bath Iron Works, and how is that affecting their competitive position?’ ”

BIW Vice President and General Counsel Jon Fitzgerald estimated that if the Wing Farm amendment is approved, the total tax savings to BIW for all three districts would be about $68 million over their respective 25-year terms.

However, Fitzgerald noted that the city stands to receive $100 million in property tax revenue from BIW during that same period. That amount would be less if the expansion were scrapped because the City Council voted against a tax break.

“We tried to do it in 2010 without a break ... but financially we couldn’t make it work,” he said.

BIW faces intensifying competition from its chief rival, Huntington Ingalls Industries in Mississippi, Fitzgerald said.

In June, BIW lost to Huntington Ingalls in a key competition to build a series of DDG-51 destroyers for the U.S. Navy.

Huntington Ingalls was awarded a $3.3 billion contract to design and build five destroyers at its shipyard in Pascagoula, Miss., while BIW was awarded a $2.8 billion contract to build four of the ships, with an option for a fifth.

Fitzgerald said Huntington Ingalls was able to bid a lower price for the contract, in part because it is receiving huge state and federal subsidies that BIW does not receive. Approval of the tax district amendment would help keep BIW more competitive, he said.

The proposed outfitting hall expansion would add a third bay to BIW’s “Ultra Hall,” where huge cross-sections of ships under construction are outfitted with pumps, ventilation ducts, motor-operated valves, bunks, lockers, electrical cable, power panels, consoles, light fixtures, motors and sensors.

Doing that work in a controlled setting would allow BIW to build ships more inexpensively, Fitzgerald said.

“I don’t think what we’re proposing is a raw deal,” he said. “We think it’s a fair proposal that lets us invest in an uncertain time.”

J. Craig Anderson can be contacted at 207-791-6390 or:canderson@pressherald.comTwitter: @jcraiganderson

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