BETR, TIF boost economy

A recently released study by the Maine Citizen Leadership Fund (MCLF) questions the value of two of Maine’s key economic development tools: Business Equipment Tax Reimbursement (BETR) and Tax Increment Financing (TIF). The study significantly misrepresents the impact and importance of these two programs.

BETR was created in 1995 for the purpose of offsetting an ill-conceived tax (property tax on machinery and equipment), in order to encourage companies to make capital investments in Maine. By investing in the latest technologies, companies remain competitive and jobs are kept in Maine. Similarly, TIF encourages capital investment by allowing a municipality to freeze a company’s tax base at the pre-investment level, so that a portion of the new taxes can be used to pay for the investment.

Both programs reduce a company’s cost of doing business in Maine, which is key to keeping productive capacity and jobs in Maine.

The MCLF study argues that the state spent a disproportionate amount of tax dollars to generate only a small number of new jobs; it finds that BETR and TIF recipients created only 443 new full-time jobs in 1998 and 1999, thereby costing $144,000 per new job. This limited evaluation of the BETR and TIF programs, however, is seriously flawed. The MCLF study does not accurately measure the impact of BETR and TIF because it fails to recognize the amount of capital investments these programs have generated and the number of jobs they have retained.

According to Maine’s Department of Economic and Community Development (DECD), the 200 companies that filed Summary of Information Documents with the State in 1998 and 1999 received $71,389,731 in BETR and TIF reimbursements. These companies, in turn, invested a total of $1.6 billion in new machinery and equipment, and during this two-year period, created or retained more than 10,000 full-time jobs. Moreover, these same companies invested $81 million in work force training in 1998/1999. Based on these figures, the state and it’s municipalities generated, on average, $22 of new investment for every dollar reimbursed through BETR and TIF, and ‘spent’ approximately $7,139 for every job created or retained. Measured in these terms-a more accurate and comprehensive assessment of their impact-it can only be concluded that the BETR and TIF programs have been highly successful.

One may argue that it is inappropriate to credit BETR and TIF for retaining jobs that already existed. To do so, however, displays a lack of understanding of the competitive nature of today’s global business environment. The decision for Maine companies to invest millions of dollars into new property, plant, and equipment is not made in a vacuum. These firms evaluate not only whether or not the investment will take place-but where. More often than not, Maine is only one of many states (and countries) under consideration.

The crux of this issue is about competition and priorities. Does Maine really want to compete for new business activity? If the answer is yes, then there are some basic requirements in order to successfully compete. Maine must have a skilled, available, and affordable work force; available buildings; adequate infrastructure; a welcoming business climate; and a competitive cost of doing business. Although the weighting of these factors varies by project, by industry, and by company size, the cost of doing business is almost always a significant factor.

If Maine does not desire to be in the mainstream of economic competition, that is fine. But, the implications include reduced job opportunities and reduced income potential. Many people have complained for decades about the “brain drain” issue in Maine and about Mainers forced to live in “exile” because of a lack of business opportunities. How do these issues ever get resolved, or even addressed, without focusing on developing a strong economy?

Maine & Company was formed in 1995 for the purpose of attracting new businesses into the state. Since then, we have learned first hand that companies make highly educated decisions about site location. Most companies, particularly the ones that Maine desires, search across a wide spectrum of locations. Though not always the primary factors, BETR and TIF, in some combination, were necessary tools to keep Maine competitive in virtually every Maine & Company project.

It is critical for Maine to not only maintain the BETR and TIF programs, but to stop the annual assault on them. Program stability is critical. Everything else being equal, a company will not select a location for a long-term investment when some of the key programs are incessantly on legislative roller coaster rides. Let’s stop the interminable assault on business programs and look for new ways to improve Maine’s business climate. After all, what good is all the education, training, and R&D investment without the presence of strong companies to provide economic opportunity.

L. Joseph Wischerath is executive vice president of Maine & Company in Portland