PORTLAND – Maietta Construction, a 42-year-old company owned by a prominent family, filed for Chapter 11 bankruptcy protection this week, citing heavy debts and profit margins squeezed by high fuel costs and the recession.

Sales for the Scarborough-based company went from $12 million a year from 2004 to 2008 down to $8 million last year, according to documents filed in U.S. Bankruptcy Court on Wednesday. The company’s assets are estimated at $8.2 million, based on the most recent book value, and liabilities are $7.5 million.

Maietta Construction will continue to operate and pay its employees as it negotiates the reorganization of its debt, which is expected to take six months or less, said Robert J. Keach, a lawyer with Bernstein Shur who is representing the company.

“What Chapter 11 is designed to do is give everybody a breathing spell,” he said.

The company was founded by Louis Maietta Sr., who now owns it with his seven sons. The family is well known in South Portland, where Louis Jr. and Thomas served on the City Council. Louis Jr. also represented the city in the Legislature.

Court documents describe a company that underestimated the duration and severity of the recession that began in late 2007. A couple of the company’s unusual practices — retaining workers year-round and buying, rather than leasing, its heavy equipment — hurt its finances.

According to the company’s court filing, Maietta responded to its troubles by cutting its work force, selling equipment and stopping salary payments to six family members. Still, the company was not able to pay all of its bills.

Two large and problematic projects added to the difficulties:

n Unstable soil at a sewer and water project on Warren Avenue in Portland added costs that weren’t reimbursed by the state.

n The company also maintains that it was wrongfully terminated from the Veterans Cemetery project in Springvale. The termination prompted a bonding company to declare the business in default and made it nearly impossible for Maietta Construction to bid on public projects.

The company is down to about 30 employees, from about 60 before layoffs began in the fall, said Vinny Maietta, an owner. No more layoffs are anticipated.

“We’re expecting to hire more people after the reorganization,” he said. “This is actually a good thing for us — not a bad thing. Once we get this reorganization done, it will make us a stronger, better company.”

The company said it expects to be profitable as the economy improves, financing becomes more available and demand — and therefore, prices — for projects increases.

A lack of work in the industry means that construction employees are getting fewer hours than they normally would in the peak summer season, said John J. O’Dea, chief executive officer of Associated General Contractors of Maine.

And work is very cheap, as jobs that once would have drawn only a handful of bidders now get more than a dozen, he said.

Manufacturing, construction and retail are the economic sectors hit hardest by the recession. Construction employment in Maine fell to 25,177 people last year, compared with 31,315 in 2006, according to figures from the state Department of Labor.

“There’s a little bit of signs of life here and there, but there’s nothing you can point to saying this is a sector coming back in a robust way,” said John Dorrer, director of the department’s Center for Workforce Research and Information.

Staff Writer Ann S. Kim can be contacted at 791-6383 or at:

akim@pressherald.com