Tax breaks offered under Pine Tree Zones, created by Gov. John Baldacci to spur economic development in high-unemployment and low-income areas of the state, will now be given to manufacturers that expand anywhere in Maine.

Opponents say the move will hurt rural Maine and benefit more affluent Cumberland and York counties. Those who support the new benefit say manufacturing as a business segment needs help everywhere in Maine because of out-of-state and international competitors.

“The administration realized the manufacturing base was under assault by world-wide competition. There had to be a decision made by the governor to invest and maintain a manufacturing base in Maine,” said John Richardson, Economic Development commissioner.

Just how much the expansion will cost the state in lost tax revenue is difficult to tell, since there is no good tracking mechanism in place to determine what the benefit is worth even for those 126 businesses already enrolled in the existing Pine Tree Zone program.

The legislation that expanded the benefits took a circuitous route this past session. A bill that would have offered breaks to any in-state manufacturer investing $2 million and employing an additional 20 people was actually usurped by the governor and put into his two-year state budget. That expansion went into effect on June 6.

The Legislature then passed a bill in the last week of the session that lowers the threshold for the tax break, requiring an existing manufacturer to invest at least $225,000 and create four new jobs. It will go into effect on Sept. 20. Both expansions are only open for enrollment until December 2009, although benefits extend for up to 10 years once a company is accepted into the program.

Sen. Lynn Bromley, D-Cumberland County, who chairs the Business, Research and Economic Development Committee, voted against the expansion when it was in her committee because she thought it went against the original intention of the tax incentive, which was to help lower-income areas attract new business.

After the governor included it in his budget, however, she supported the late-filed legislation to give the same tax break to smaller manufacturers that couldn’t afford a $2 million investment.

“Having it available in Cumberland and York counties is pretty much the end of the Pine Tree Zone as it was designed,” Bromley said, but given the governor already had extended the program in his budget to larger manufacturers statewide, “I wanted to make sure that small businesses benefited as well.”

The new benefit is available to only those manufacturing companies that have been in the state for three years. Traditional Pine Tree benefits are for both expansions and new businesses.

The Pine Tree Zone benefits include a 100 percent sales tax break on personal and real property purchased as part of the expansion of the business; a corporate income tax credit on business income related to the expansion; and a return of 80 percent of the state withholding taxes paid for new employees related to the expansion once that number hits five new hires. New equipment for manufacturers already is exempt from the sales tax in Maine, but the Pine Tree Zone designation extends that benefit to other goods, like building materials or even supplies.

The withholding tax refund is one incentive that is tracked annually, and for 2006 the Maine Revenue Service gave back $1.9 million to 32 companies for 1,651 employees.

Harvey Rosenfeld, head of the Scarborough Economic Development Corporation, which works to attract business to the town, said expanding the benefits was overdue.

“I think it’s about time,” Rosenfeld said, adding that excluding most of Cumberland County was unfair given that neighboring areas “that were not in that bad of shape” were allowed to participate in the Pine Tree incentives.

“We’ll certainly try and use it. I wish we could use it to attract new business to Maine as well,” he said, referring to the stipulation that only manufacturers already in the state are eligible.

The original Pine Tree Zones were established in 2004 based on the criteria that the areas included had above average unemployment and low wages when compared to the rest of the state. The zones are limited to 5,000 acres each and businesses have to show they are producing jobs that meet or exceed the per capita income for the county of employment. Employers must also give employees access to a health care and retirement plan, although employer contributions are not required.

The original zones were Aroostook County; Androscoggin Valley; Down East; Kennebec Valley; Midcoast; Penobscot Valley; Penobscot/Piscataquis; and Southern Maine. In 2005, land owned by Maine’s Indian tribes was added to the list.

Last year, Richardson, then the speaker of the House, got a bill through that gave a Pine Tree designation to the area affected by the closure of the Brunswick Naval Air Station. Another bill, sponsored by Rep. Tim Driscoll, D-Westbrook, expanded the incentives to certain industrial sites that have lost workers – a proposal aimed at the Sappi paper mill..