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December 25, 2006

Flashback | Mainebiz rewinds 2006, from the biggest business and economic stories of the year to the ones you may have missed, from the long-running sagas to the ones that are just beginning.

By The Mainebiz Editorial Staff


Blockbusters
Mill town redux
The future looked grim when Atlanta-based Georgia-Pacific shuttered its Old Town mill in March, laying off roughly 400 workers. Despite the steady decline of papermaking in the state — or maybe because of the looming election — Gov. John Baldacci's administration made finding a new tenant for the mill a top priority. But there was no quick fix. Instead, weeks turned into months as state officials negotiated to fill the mill. The 60-day deadline G-P gave the state to find a buyer came and went with no deal. At one point, Montreal-based papermaker Cascades Inc. was a buyer, though that deal apparently fizzled when Georgia-Pacific decided it didn't want a competitor running the mill. In the end, the state couldn't prevent Old Town from becoming another sad chapter in Maine's papermaking history. It did, however, broker a deal to sell the mill to Red Shield Environmental, a group of investors that brought with it a handful of manufacturing and energy tenants. Will the new, multi-use mill succeed? Maybe, maybe not. But at least it's a look toward the future, not Maine's industrial past.

Chain reaction
Are national retail chains and restaurants positive or negative for Maine? Depends on who you ask and, apparently, where you live. Parts of Maine in 2006 rebelled against what was seen as faceless national development. With a certain Arkansas-based retailer reportedly sniffing for locations, at least six midcoast towns, including Damariscotta and Newcastle, declared themselves off-limits to big-box stores. And Portland officials, after learning the Hooters restaurant chain might bring its scantily clad waitresses downtown, banned all franchises from much of the city center. Meanwhile, some Maine cities welcomed retail chains with open arms. Augusta officials gave final approval to a 454,000-square-foot, $40 million shopping center expected to include Target. And folks in Lewiston and Auburn, long concerned retail development was bypassing the Twin Cities, cheered the arrival of national chains such as Best Buy and Linens 'n Things. When it comes to chain stores, there are indeed two Maines.

Harnessing wind and waves
From high prices at the gas pumps to debate over Maine's membership in the New England Power Pool, energy was on many minds this year. Developers, in particular, had their minds on power, with this year bringing energy development proposals that included wind farms large and small, biomass boilers for industrial facilities like the Old Town mill, and underwater turbines to harness the power of Maine's tides. This year also saw construction of the state's first wind farm, Bangor-based Evergreen Wind Power's $55 million project on Mars Hill. Meanwhile, the controversy continued to swirl around Maine Mountain Power's plan to build 30 wind turbines within sight of the Sugarloaf ski area in Carrabassett Valley. And just this month, Calgary-based energy company TransCanada proposed a 132-megawatt wind farm in northern Franklin County. Between the pain of high petroleum prices and the lure of alternatives such as wind- and tide-generated power, 2006 will go down as a key year in shaping the future of Maine's energy mix.

The unfriendly skies
The weather in Maine almost always gives people something to talk about. That was especially true in 2006, when freakish weather had a big economic impact. The year started so balmy that January was the second warmest on record, while the overall winter was sixth warmest. That, of course, was bad news for snow- and cold-dependent businesses; snowmobilers and skiers don't care much for mud. Nor do loggers, who depend on frozen ground to get equipment in and out of the woods. Following that warm winter was a spring that had residents of southern Maine swimming — literally. In some parts of York County, 15 inches of rain fell during a five-day stretch in May, causing flooding, widespread evacuation and at least $10 million in damages. Summer and fall, at least, were relatively normal. But cold-weather industries like the ski sector — which last winter saw a 14% decline in skier visits — had their hopes for the new season dampened by a November that was the warmest on record and a December that featured several 50-degree days in much of the state.

Sleepers
Tax-break city
This year saw heightened interest in restoring historic buildings at the center of Maine's cities. At the Kennebec Arsenal in Augusta and mill complexes in Waterville, Brewer and Saco, developers announced ambitious plans to remake decaying buildings into lively centers of office and residential life. But the developers claimed they could not make the projects happen without tax breaks — and local governments were happy to hand them out. Officials in Saco, for example, agreed to a $35 million deal that will return tax revenue from the Saco Island mill complex for 30 years. City councilors in Waterville and Augusta agreed to similar, although smaller, deals. In each case, city officials expressed confidence that the benefits of reviving long-dormant properties will outweigh the cost to taxpayers. And they were willing to take a risk with a large tax break to get white-elephant properties occupied and once again vibrant.

Closed-door dealings
The national rise in private equity buyouts — in which an investor group buys the shares of publicly traded companies — was the talk of Wall Street in 2006. Nationally, seven of the 10 largest buyout deals in history were inked this year, according to The New York Times, including the $33 billion buyout of the Tennessee hospital chain HCA Inc. and the $19 billion acquisition of Clear Channel Communications by two Boston-based private equity firms. Private equity deals swept up a host of local operations, too, from New York hedge fund Cerberus Capital Management's April acquisition of Windham-based Bushmaster Firearms to Apollo Management's $1.4 billion purchase of International Paper's coated paper division, which includes mills in Jay and Bucksport, in August. The verdict is still out on whether this is good news for Maine. Private equity groups might invest heavily in their new properties, such as aging paper mills. Or, they might demand big cost-cutting initiatives that could leave Maine companies scarred. But since these equity groups usually are looking to flip a company at a profit within a few years, we can be sure such deals will change the local landscape.

Critical mass
Maine is a big state. There's a good bit of distance between, say, Presque Isle and Brunswick, or Machias and Kittery. But over the past year it became clear that great distances don't necessarily mean isolation for Maine businesses. The concept of cluster development — basically, the idea of strength in numbers — became a rallying cry for several sectors. Most notably, the state's boat building and advanced composites industries received a $15 million cluster enhancement grant from the U.S. Department of Labor, which will be used to fund research and development, workforce training and business assistance. The theme continued as the Brookings Institution in October recommended the state create a $20 million cluster development fund to invest in traditional and emerging industries, such as the specialty food sector. In October, 120 specialty food makers gathered at Bowdoin College to discuss more collaboration to attract investment, increase purchasing power and share marketing expenses.

An even grayer Maine
This year brought more discouraging demographic news, delivered by the U.S. Census Bureau: Maine's median age rose by 2.6 years since 2000, to 41.2 years, maintaining the state's dubious distinction of having the nation's oldest population. That milestone was accompanied by a report from the Center for Labor Market Studies at Northeastern University, which says people 55 years and older will comprise 39% of Maine's population by 2030, and that the older population will be the source of all population growth in Maine from 2000 to 2030. The demographic trend is problematic, because experts predict it will cause labor shortages. Retiring workers will have few available replacements, and Maine companies looking to expand likely will struggle to do so. The center says the problem is a dilemma across New England, affecting even college-rich Boston. But the problem is most acute here, a quiet threat to the state's economic future.

Coming attractions

Pharmacy
After nearly a year of indecision, the University of New England this fall finally picked its Westbrook College campus in Portland as the future home of a long-planned pharmacy school. But the real excitement is to come, as UNE faces surprise competition to construct the state's first pharmacy school from Husson College, which in October said it would add such a school to its Bangor campus.

The house party is over
The days of Maine's booming real estate market, with double-digit home price appreciation, officially ended this year. Home sales fell by nearly 10% in October from the previous year, and the median home prices is falling, too. Luxury condo proposals like the proposed Westin Hotel in Portland have already taken a hit, but how steep and long of a decline we're facing is a tale for 2007.

The price of innovation
Cries from Maine's high-tech industries for more state investment in research and development were loud this year, but the chorus will grow in 2007. The Brookings Institution's assessment of Maine's economy recommended a $200 million R&D investment, and a bipartisan panel of legislators recently agreed, bumping the figure to $250 million over the next five years. Expect to see R&D funding on the legislative agenda, but will there be support from two-thirds of the lawmakers to pass a bond package?

Closing credits

Market crash
The Portland Public Market, once seen as an economic boost for the city's Bayside neighborhood, ended its uneven, nine-year run in September after the Libra Foundation sold its Portland properties. Some vendors have kept hope alive by relocating to a site in nearby Monument Square.

Plugging in
Construction on a power line between Orrington and Point Lepreau, New Brunswick, finally got underway this year, after Bangor Hydro-Electric Co. spent three years securing federal and state approval. The Northeast Reliability Interconnect, designed to provide an efficient conduit for electricity to flow between Canada and Maine, could begin operating in fall 2007.

Going once, going twice
The town of Richmond in August finally sold a former Etonic shoe factory to Portland developer David Smaha, who planned to invest $250,000 in the building to attract more business tenants. The town had been trying to sell the property since 2001.

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