AUGUSTA

Opinions over a $60 million tax credit for Bath Iron Works could not have been more divided Tuesday during a public hearing before the state Legislature’s Taxation Committee.

While proponents repeated claims that the tax credit was necessary for the shipyard to be competitive, a dozen opponents of the bill questioned the necessity of the tax credit and the role of BIW’s parent company, General Dynamics.

“For me, this is about jobs — keeping good manufacturing jobs in our state,” said Rep. Jennifer DeChant, D-Bath, the bill’s sponsor. “As long as our country needs a defense, and as long as that defense includes ships, I want those ships built in Bath.”

The proposed legislation would provide BIW $60 million in tax credits over a 20-year period, effectively renewing a nearly identical bill passed in 1997.

Everybody’s doing it

DeChant noted that other businesses take advantage of tax incentives as well, pointing specifically at Idexx, L.L. Bean and Hannaford.

“These corporations all receive tax incentives,” said DeChant. “Because of confidentiality restrictions and reporting challenges, we may not be aware to what extent, but it is common for states to incentivize large corporations to attract and support businesses.”

Advocates for the tax credit also pointed out that BIW’s competitors take advantage of significant tax incentives as well.

“BIW’s major competitor is Huntington Ingalls in Mississippi,” said Rep. Jeff Pierce, R-Dresden, a cosponsor. “The state Legislature in Mississippi has been constantly (allocating) money to Huntington Ingalls, which they reinvest in their company and allow them to compete with companies like BIW by underbidding our projects … .

“We can’t compete with what Mississippi does for Ingalls,” Pierce added, “but considering how little we do for BIW compared to their main competitor, I don’t think that this bill is too much to ask.”

Al DiMillo, who worked as a chief tax officer for BIW in the late-1980s and early- 1990s, questioned whether tax incentives were necessary to make the shipyard competitive.

“We had all the same competitive disadvantages with Ingalls back then, yet we got no tax breaks. No tax breaks from the city. No tax breaks from the state,” said DiMillo. “Nothing has changed … but apparently now the state’s going to pay for all these disadvantages.

“This is bad tax policy. You do not pass a tax bill for one taxpayer,” he added. “That’s just wrong.”

The corporate elephant in the room

Yet while legislators asked if General Dynamics had the capital to invest without a tax credit, advocates veered away from discussing the financials of BIW’s parent company.

“It is not my role to debate CEO salaries or stockholders or profit caps imposed on Naval contracts,” said DeChant, deferring to BIW representatives.

But when pushed on General Dynamics’ CEO pay, corporate profits and recent stock buybacks, BIW VP and General Counsel Jon Fitzgerald tried to separate the shipyard from the aerospace and defense contractor.

“I definitely am not here and will not speak for General Dynamics,” said Fitzgerald. “They’re our owner. We are a separately held, privately held Maine corporation.”

There was no representative of General Dynamics at the hearing, or anyone who could speak to the company’s financials.

“Why isn’t the financial person here?” asked DiMillo. “Why isn’t the tax person from … General Dynamics … here to explain their tax situation?”

In response, Fitzgerald argued that the company needed to be a net profit-maker for General Dynamics, not a drain. The more General Dynamics has to invest in the shipyard, the less profitable, and attractive, it seems.

Reporting and financials

DeChant noted that the Legislature has been grappling with reporting and evaluation of tax incentives in recent years, and she will be introducing an amendment to her bill to address those concerns.

“As a member of the Government Oversight Committee, I share the concern over accountability for this tax incentive as well as several other tax incentives in our state,” said DeChant. “That’s why I worked so hard on my committee amendment that I will submit to you for work session.”

DeChant emphasized that the deliverables for the company should be that the tax incentive keeps the shipyard competitive and keeps high quality jobs in the state. The amendment is expected to be ready for the committee’s yet to be scheduled work session on the bill.

“Tax incentives should have clear purposes, so it is easier to evaluate the progress,” said DeChant. “I have consulted with OPEGA for recommendations to improve evaluation and reporting.”

But for some opponents of the bill, that’s not good enough. Several individuals argued that there needs to be a more comprehensive evaluation of the prior $60 million tax credit or even an audit of the company to determine whether it needs a new tax credit.

“BIW has provided no evidence that they actually need the money,” said Jerry Provencher of Bath.

“There needs to be a mechanism where you audit this,” said DiMillo, insisting that there needs to be an independent evaluation of BIW’s financial situation. “To do that you need an outside auditor to come in and look at the numbers or a state auditor.

“It may be true,” he added. “They may need this, but they should be able to prove that.”

“The past bill was a great benefit to Bath Iron Works and the state of Maine,” said Fitzgerald, “and I believe we delivered on the value that was hoped for in that bill.”

nstrout@timesrecord.com