Panel debates tax break for Bath Iron Works ahead of council vote
BATH — With the City Council due next week to decide whether to grant Bath Iron Works a new tax subsidy, a group opposing the deal held a forum on the issue Wednesday.
The meeting , organized by Bath Citizens for Responsible TIF Action, packed the City Hall auditorium for a panel discussion that ran about 90 minutes.
The group, and later members of the audience, submitted questions to three experts on tax increment financing: Orlando Delogu, University of Maine law professor emeritus, who opposes the TIF; Joel Johnson, a neutral economist with the independent Maine Center for Economic Policy; and Benet Pols, a Brunswick town councilor who supported a TIF credit enhancement agreement in that community and opposed another.
BIW, which did not participate in the discussion, wants to build a more than 51,000-square-foot addition to the south end of its existing Ultra Hall, and to construct a two-bay blast/paint building and a combined boiler/compressor building.
The shipyard, which has site plan approvals from the Planning Board for the projects, and received second and final contract rezoning approval from the City Council Nov. 6 for the addition, seeks a 25-year TIF that would have the shipyard and city equally share tax revenues generated by the project.
The City Council is due to vote on the TIF Wednesday, Nov. 20.
According to a BIW fact sheet presented last week, the shipbuilder plans to invest $32 million into the Ultra Hall, which the company projects could generate about $500,000 in new taxes each year. Through a "credit enhancement agreement," BIW's tax obligation on the facility would be reduced by $250,000 each year for the life of the TIF, while the city would get the remainder.
TIFs "shelter" new values from Bath's state-determined valuation.
Pols noted that a TIF is a tool through which a municipality can dedicate new tax revenues from a previously undeveloped area for a specific purpose. The city benefits from the new tax revenue being sheltered from consideration in certain county and state tax formulas, he explained.
If the town's overall valuation increases, its state subsidy for education decreases, "so if you can shelter the increased valuation from that formula, your education funding doesn't take the big hit," Pols said.
He noted that a municipality must be careful when giving back money to a company, because if too much is given, "you reach a certain point where you lose the benefit of sheltering the money from the state tax formulas. In Brunswick, we generally consider (that) if you're giving away more than 45 percent, you're giving away too much."
"You do need to be conscious of giving away more than the benefit that you get" from the sheltering formula, Pols added.
Delogu, who is also a columnist for The Forecaster, said the term "credit enhancement" was developed "so that those who sought these benefits could avoid the term 'subsidy.'"
"Let's call a spade a spade," he added. "I am not a fan of TIF because I think they do not work to do the fundamental thing that we suggest they'll do, which is to increase employment, and/or to maintain a level of employment over a future period of time."
BIW had about 7,700 employees when it received its first TIFs, but now has closer to 5,000, Delogu said.
Asked why Bath should settle for getting less than 100 percent of taxes it is due, Johnson noted that the city should do so "not if you're scared that BIW is going to lose business or shut down or become uncompetitive, but if you believe that this particular tax break that you're offering, and willing to forgo 100 percent of the taxes due, will make the difference to them in their competitiveness and in their bids to get contracts."
He advocated more corporate transparency, disclosure and accountability where such tax breaks are concerned.
A BIW fact sheet presented at a City Council meeting Nov. 6 said the issue is "about building ships in Bath, Maine, and whether BIW can competitively bid for future Navy and Coast Guard work against Ingalls Shipbuilding in Mississippi, which benefits from many state, county and municipal financial incentives that lower its cost. In addition, BIW must overcome higher costs for energy, health care, taxes and insurance."
It adds that "ships are awarded on the basis of lowest cost and BIW must do everything it can to be the low cost provider in order to win work that will secure our collective future in shipbuilding in the City of Bath."