Panel debates tax break for Bath Iron Works ahead of council vote

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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.”

Alex Lear can be reached at 781-3661 ext. 113 or alear@theforecaster.net. Follow him on Twitter: @learics.

Sidebar Elements


Brunswick Town Councilor Benet Pols, left, and economist Joel Johnson listen to law professor emeritus Orlando Delogu during a panel discussion Wednesday, Nov. 14, at Bath City Hall about a proposed tax increment financing deal that would return $250,000 a year to Bath Iron Works for 25 years. The City Council will vote on the proposal Nov. 20.

People crowded into the auditorium at Bath City Hall Wednesday evening to hear a panel discussion on Bath Iron Works’s proposed tax increment financing arrangement with the city. Howard Waxman, member of forum host Bath Citizens for Responsible TIF Action, moderated the discussion.

Defense chief to visit BIW; 81 layoffs planned next week

BATH — Defense Secretary Chuck Hagel will visit Bath Iron Works later this month, during his Nov. 22-24 trip to the Halifax International Security Forum.

The announcement came days after the shipyard announced it will lay off 81 shipyard workers effective Nov. 22.

BIW is celebrating its recent launch of the USS Zumwalt, the first of three planned DDG-1000 guided missile destroyers, which Business Insider called “the U.S. Navy’s most intimidating creation yet.” Zumwalt was launched in late October, about five years after construction began. Its patrol is expected to begin in 2015.

Each of the three DDG-1000s will be built in Bath.

Hagel was invited to visit BIW by U.S. Sens. Angus King, an independent, and Susan Collins, a Republican, during his confirmation hearing earlier this year. The senators said they were “delighted” by his decision to tour the shipyard.

Hagel “will have an opportunity to meet its highly skilled, hardworking men and women,” the senators said in a joint statement. “We know the secretary will be impressed by BIW’s talented workforce and the recently launched DDG-1000, both of which are invaluable assets to U.S. national security and the Navy’s mission around the world.”

The company, meanwhile, notified union leadership Nov. 7 that it will lay off 81 workers across multiple trades in order to balance its workforce with the current amount of work at the shipyard, according to spokesman Jim DeMartini.

The layoffs will occur among insulators, outside machinists, preservation techs, shipfitters and metal preparation technicians, DeMartini said.

As of Nov. 1, BIW employed approximately 5,450 people, according to DeMartini.

“This balancing of the workload with the workforce is a constant act we go through,” DeMartini said. “We’re doing everything we can to get more work in the shipyard, but with fewer ships being built and competition being tighter, it complicates the already complicated process of trying to maintain that balance between work and resources.”

He added, “We hate to do this. We know it affects people, especially at this time of year. It’s not pleasant for any of us.”

DeMartini said the company will do everything it can before the layoffs take effect to determine if any of the affected workers have the necessary skills to fill other open positions within the company. However, he didn’t know how many open positions exist at the shipyard, or whether any of the affected workers would be qualified to fill those positions.

The shipyard has had several layoffs over the last few months. It laid off 42 insulators and pipe coverers last month, and on Nov. 1 announced it would lay off 39 pipefitters effective Nov. 18.

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A Maine native and Colby College graduate, Alex has been covering coastal communities since 2001, and currently handles Bath, Topsham, Cumberland, and North Yarmouth. He and his wife, Lauren, live in the Portland area, and Alex recently released his third album of original music.