Pine Tree Development Zone program comes under fire
An independent review of the state's Pine Tree Development Zone program concluded that its current design doesn't support the original goal of encouraging job creation and economic development in distressed areas of the state.
The Office of Program Evaluation and Government Accountability, commonly called OPEGA, also found that inadequate data makes it virtually impossible to determine if the program is working as intended.
Those are not exactly solid endorsements of an economic development program created in 2003 by former Gov. John Baldacci that provides 10 tax and business incentive benefits to 202 PTDZ businesses.
But in a two-page letter to the Legislature's Government Oversight and Taxation committees, Department of Economic and Community Development Commissioner George Gervais cautioned lawmakers that OPEGA's summary statements “could be misleading and steer one to believe a false conclusion.”
“The Pine Tree Development Zone program is the state's go-to program for helping incentivize new private investment and the creation of new quality jobs here in Maine,” Gervais wrote. “In the absence of meaningful tax and energy reform, this program, at the very least, simulates a more competitive business retention, expansion and attraction structure. Private investment goes where it is welcome and stays where it is appreciated. The PTDZ program is unique because it not only helps incentivize new businesses to relocate to Maine, it also helps the growth and expansion of existing Maine businesses.”
The stage seems to be set for an interesting debate over the PTDZ program's structure, and possibly even its future, when the 128th Legislature reconvenes in January. Under its current statute, the PTDZ program will stop issuing new certifications at the end of 2018 — although benefits will extend through Dec. 31, 2028 to certified businesses in most PTZD locations outside of specific areas of Cumberland and York counties.
What OPEGA found
In its 46-page analysis delivered to the Government Oversight and Taxation committees on Aug. 23, OPEGA determined that the PTDZ program will cost the state $12.1 million in 2017, chiefly due to the qualifying businesses receiving these five benefits:
- Expanded employment tax increment financing reimbursements
- Insurance premium tax credits
- Income tax credits
- Sales tax exemptions
- Sales tax reimbursements.
The cost of the remaining five benefits, which include discounted utility rates, are not borne by the state, OPEGA stated.
Much of OPEGA's analysis focused on what it calls “design weaknesses” that it recommends be corrected if lawmakers choose to keep the program alive. Among them:
- Statutory changes that have “reduced the level of quality that new jobs must meet”
- Statutory changes that have “weakened the program's focus on areas of the state with the most significant economic distress, essentially rendering the entire state a Pine Tree Zone. As a result, the program no longer strongly targets economically distressed communities.”
- The program's administration is fragmented among several state agencies, which OPEGA said hampers data collection and oversight to ensure the program is delivering on its promises.
A public hearing on the report will be held in Augusta on Sept. 25 by the Government Oversight Committee prior to it making recommendations to the full Legislature for consideration in the next session.
Gervais, in his letter, encouraged its members to reach out to PTDZ businesses in their districts. “I would encourage you to look past the process, and bureaucratic minutia, and ask these businesses how a more competitive tax structure has helped them invest and grow here in Maine,” he wrote.
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