A bill to extend the life of a sometimes-controversial program that has created hundreds of tax havens for businesses in Maine is gaining traction in the Legislature.

The measure, which keeps Pine Tree Development Zones in place for at least the next three years, was endorsed Tuesday by the Labor, Commerce, Research and Economic Development Committee, but it will face additional votes in the Legislature before possibly going to Gov. Paul LePage for his signature.

The bill would scale back a request from LePage’s labor commissioner, George Gervais, to extend the program for five years. It also contains additional reporting requirements for the estimated 200 businesses that benefit from the program statewide.

The underlying law, first put in place under Democratic Gov. John Baldacci, provides qualifying businesses with tax benefits, including income tax credits and sales tax exemptions on the purchase of business equipment, in exchange for the promise of new jobs. It is set to expire at the end of 2018.

The program was also the subject of a 2017 review by the Office of Program Evaluation and Government Accountability, the Legislature’s watchdog agency. OPEGA was directed to conduct the review by the Government Oversight Committee.

Last August, OPEGA told the committee that it could not determine exactly how many jobs, if any, the 14-year-old tax-break program had created. The tax breaks cost the state about $12 million a year in lost revenue.

“But we can tell you, unequivocally, that the design does not guarantee that a vast number of jobs will be created,” Jennifer Henderson, a senior analyst with OPEGA, told lawmakers at the time.

REPORT: COSTS OUTWEIGH BENEFITS

That OPEGA report followed another independent review of the program conducted in 2014 by Massachusetts-based Investment Consulting Associates, or ICA, which found in one scenario that the program’s costs exceed its benefits. Specifically, the ICA report said the program delivered total direct benefits to the state of $358 million in 2012, in terms of people employed and salaries and total sales in the state. The program, however, had $457 million in total direct costs related to lost taxes, administration, overhead and other expenses.

In three other scenarios, the program’s benefits exceeded costs.

“While the Pine Tree Development Zone (PTDZ) program received significant praise from public and private sector interviews, preliminary cost-benefit analysis shows the program is very costly to the state of Maine,” the 2014 report said.

BILL CALLS FOR MORE REPORTING

The bill voted out by the committee Tuesday would require more reporting by businesses, as well as the release of more comprehensive data so the state can fully assess what jobs were created.

“Whenever the Legislature directs taxpayer dollars toward incentives for businesses to create jobs, it’s incredibly important we demand transparency, accountability and benchmarks to make sure the tax breaks are doing what they’re supposed to do,” Rep. Ryan Fecteau, D-Biddeford and the House chair of the committee, said in a prepared statement. “Pine Tree Development Zones are important for many rural Maine communities and I’m proud of committee members for working together to strengthen accountability before voting to renew the program.”

PROGRAM ALLOWS TAX SAVINGS

Established by the Legislature in 2003, the program allows eligible businesses the chance to significantly reduce or eliminate state taxes for up to 10 years while creating quality jobs in certain professions or by moving existing jobs in qualifying industries to Maine. Under the law, quality jobs are defined as those that meet certain income thresholds and offer health care coverage and access to retirement plans, among other provisions.

Industries eligible to participate in the program include biotechnology, aquaculture and marine technology, composite materials technology, environmental technology, advanced technologies for forestry and agriculture, manufacturing and precision manufacturing, information technology and financial services.

Critics of the program have said it amounts to “corporate welfare,” but supporters have said it helps Maine compete for businesses that may be inclined to relocate to states with more business-friendly environments.

Scott Thistle can be contacted at 713-6720 or at:

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Correction: This story was updated at 2:30 p.m. July 11, 2018, to clarify the results of the Investment Consulting Associates’ report on the costs of the Pine Tree Development Zone program.

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