AUGUSTA – The LePage administration wants to take a lesson from Wisconsin, whose public development authority lured away a planned aircraft manufacturing plant and hundreds of jobs that once were destined for Brunswick.

Maine needs a public agency of its own, perhaps the Finance Authority of Maine, to apply for the same federal tax credits that Wisconsin used to land the Kestrel Aircraft plant, said George Gervais, Maine’s economic development commissioner.

Kestrel announced Monday that it will develop its $100 million project in Superior, Wis., rather than Maine, because Wisconsin offered a better plan to provide the tax credits.

“The goal is to take some action on that and see what we can do to not put ourselves in that position in the future,” Gervais said Tuesday.

Not everyone is sold on the need for such a change.

It would cost money for FAME or another agency to take on the financing program, and private development agencies already are bringing tens of millions of dollars in federal tax credits to Maine each year, some experts say.

Kestrel announced in 2010 that Brunswick Landing would be the site for its new plant, which will make six- to eight-passenger turboprop planes and could employ as many as 600 workers.

The plan was based in part on the New Markets Tax Credit Program, a federally subsidized tax incentive that allows a business to recoup some of its investment.

CEI Capital Management, a branch of Coastal Enterprises Inc., provided a $20 million tax credit to Kestrel. The credit effectively reduced the company’s costs on a first phase of the project by about $5 million.

However, the company’s chairman and chief executive officer, Alan Klapmeier, said he expected additional tax credits that never came through. He began looking for other locations and financing deals in the fall.

The Wisconsin Housing and Economic Development Authority offered Kestrel $30 million in tax credit allocations immediately, a second allocation of $30 million by the end of this year, and a commitment for a third allocation of $30 million in 2013 if the authority has it available.

The initial $30 million in tax credits will come from allocations left over from past years, said Brenda Marquardt, the authority’s marketing director. The authority will work with Kestrel to get the additional tax credits, she said.

Supporters of Kestrel’s project in Maine had no additional tax credits to put into the project.

Coastal Enterprises had used its most recent allocation of credits for other projects in Maine and elsewhere. The Midcoast Regional Redevelopment Authority had applied for $20 million in tax credits to use for the project, but would not have learned until late February if it would be awarded any.

The authority is developing Brunswick Landing, the former Brunswick Naval Air Station.

Maine officials, unlike officials in Wisconsin, didn’t have a public agency to turn to for spare tax credits to lure Kestrel.

“It’s very clear to me that the only thing that was different in our proposals was that,” Gervais said. “What Wisconsin had from the beginning was (the financial support from a dedicated state development authority). We didn’t have that.”

Gov. Paul LePage’s administration wants to develop the financing capacity within a state agency, Gervais said, but hasn’t decided on FAME or any other entity.

“The discussions have not been in detail yet on that because this is so fresh,” he said.

Beth Bordowitz, chief executive officer of FAME, said the administration has not asked it to take on the tax credit program. FAME has never applied for the tax credits because Coastal Enterprises and other private entities have been doing the work, she said.

“We hadn’t really thought there was a particular need for it (at FAME), but it’s something we would look at,” she said.

The agency would have to weigh the cost of handling the program, which involves legal and financial support, Bordowitz said. “There’s a lot of infrastructure to running that program, so it’s something we would consider carefully,” she said.

Charlie Spies, chief executive officer of CEI Capital Management, said the absence of a state agency allocating tax credits in Maine has not been a disadvantage. A federal report last year said Maine was fourth per capita in the country in the use of the tax credits, said Spies, a former chief executive officer of FAME.

“I think our record speaks for itself,” he said.

Coastal Enterprises, the largest provider of tax credits in Maine, has brought more than $220 million worth of credits to the state in the past nine years, he said. It works in other states as well, but about one-third of its tax credits stay in Maine.

While some states, like Wisconsin, have public development agencies doing the work, many leave it to private entities, Spies said.

He said he would work with FAME or any other state agency in an effort to increase Maine’s capacity to land business investments. But simply having a state agency apply for credits wouldn’t mean more Maine projects would win support, he said.

“It’s very competitive nationally,” he said, referring to the tax credits.

Christopher St. John, who is on Coastal Enterprises’ advisory board, said losing the Kestrel deal to Wisconsin doesn’t automatically mean Maine needs more agencies applying for the credits.

“Wisconsin is a much bigger state and probably has bigger capacities,” he said. “I don’t think we should jump to the conclusion that we did anything wrong or that we should bend over further backwards. We already bent over pretty far for this company.”

MaineToday Media State House Writer John Richardson can be contacted at 620-7016 or at:

jrichardson@mainetoday.com

 

Copy the Story Link