Maine is a leader in making sure tax incentive programs live up to their intended purpose, according to a report issued Wednesday.

The report, from the nonpartisan Pew Charitable Trusts, praises Maine’s Office of Program Evaluation and Government Accountability and the Legislature for establishing a system in 2015 to evaluate the effectiveness of tax incentive programs in the state.

It cites as an example the recent OPEGA report on the New Markets Capital Investment Program that followed a Portland Press Herald investigation into investors’ abuse of the program. More OPEGA reports are scheduled to be released in the coming months, starting with an evaluation of the Pine Tree Development Zone incentive program, scheduled for late June or early July.

The Pew report, which examines the status of tax incentive review programs in each of the 50 states, describes Maine as one of the leaders “because it has a well-designed plan to regularly evaluate tax incentives, experience in producing quality evaluations that rigorously measure economic impact, and a process for informing policy choices.”

Maine is one of 10 states that were given the “leading” designation, said Josh Goodman, research officer at Pew. To achieve leading status, a state must have a program in place that regularly evaluates its tax incentive programs, measures the impact of tax incentives and uses the evaluations to inform policy decisions.

“It’s vital for policymakers to know where incentives are working and where they need to be improved,” Goodman said during a media webinar Wednesday. “Tax incentives often have not been part of the conversation. Thankfully, that’s changing.”

Pew does not take a position on whether tax incentives are good or bad as a means to spur economic development. Incentives, which include tax credits, exemptions and reductions, are viewed by some as necessary to compete for business with neighboring states, while others see them as government interference in the free market at taxpayers’ expense.

In Maine, there are more than 200 different state and federal tax incentive programs at play, including New Markets, Employment Tax Increment Financing, Business Equipment Tax Exemption/Reimbursement, Maine Capital Investment Credit, Historic Preservation Tax Incentive and Pine Tree Development Zone.

Thanks to Maine’s 2015 law lauded by Pew, OPEGA is now responsible for evaluating each of the programs on a regular basis to gauge whether it is meeting its intended goals. That’s a pretty tall order, said OPEGA Director Beth Ashcroft.

One reason is the amount of labor required to research the impact of each program, she said. Another is the fact that some incentive programs lack clearly stated goals and objectives.

The latter issue came up during OPEGA’s first evaluation, focused on the New Markets program, which it released in March.

The program was the focus of a 2015 Press Herald investigation, “Payday at the Mill,” that revealed potential abuses, especially in the conveyance of a $40 million investment to Portsmouth, New Hampshire-based Cate Street Capital to support the revitalization of the former Great Northern Paper mill in East Millinocket. Fourteen months after the tax credits were approved, none of the upgrades intended to modernize the mill were made and it closed, displacing hundreds of workers. Yet Maine taxpayers were on the hook for $16 million in tax credit payments. In the months after the investigation, the Finance Authority of Maine, which oversees the New Markets program, initiated changes to prevent certain abuses of the program.

The government watchdog agency said in its report that while the tax credits program has created or retained hundreds of permanent jobs in Maine, it lacks standards to gauge its cost effectiveness. Still, Ashcroft said OPEGA was able to provide some sense of the program’s benefit to the state.

“We were able to get enough information together to estimate the impact that this program has had,” she said.

OPEGA credited the New Markets program with creating or retaining 764 permanent jobs that still existed as of 2016, as well as 781 temporary jobs and 1,034 indirect jobs throughout the supply chain. But while businesses spent $3.39 for every $1 of tax credit, that ratio shrank to $1.19 for every $1 in tax credit when looking at money that was spent within Maine because the program doesn’t require investors to keep the money in-state, OPEGA’s report said.

Ashcroft said OPEGA’s overall goal is to evaluate each of the 30 to 40 biggest incentive programs once every six years, but she said that schedule might prove difficult to maintain. Smaller programs will receive more cursory reviews.

At the very least, OPEGA intends to evaluate each of the major incentive programs on a regular basis in order to give policymakers a better idea of how well each program is working. Pew praised Maine for that effort in its report.

“I feel very good about that,” Ashcroft said.

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

canderson@pressherald.com

Twitter: jcraiganderson

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