MILLINOCKET – Great Northern Paper Inc. will receive a tax break on its $170 million paper mill modernization project.

By a 5-2 vote, the Town Council during a marathon meeting on Thursday approved a Tax Increment Financing program for the paper company. Councilors Scott Gonya and Gordon McCauslin opposed it.

“We are pleased,” said Eldon Doody, GNP’s president, after the meeting. “Some people have erroneously painted a TIF as a gift, however, approval of a TIF makes available additional money to fund capital investments in the Millinocket mill. Further investments are necessary to make it a viable business long term.”

The town will give Great Northern a tax break by creating a TIF program for the new investments the company makes in its Millinocket paper mill modernization project. In exchange, Great Northern will drop its pending tax abatements of $4.7 million. The company will not dispute its tax bills during the term of the agreement, with only a few minor exceptions.

In the agreement, the town will receive 15 percent of the tax revenues from the company’s new investments. GNP will retain 85 percent of the new tax revenues from its investments for 12 years, but only if the company, its subsidiaries and the new paper filler plant continue to employ 630 full-time people. Current employment levels are about 730. If employment levels drop below 630, the percentage of GNP’s TIF will drop by 2 percent for every 10 jobs that are lost down to 50 percent.

The TIF will apply only to new investments. The company will continue to pay 100 percent of the taxes on its existing property and equipment.

The TIF includes a provision allowing it to be transferred to another company with Town Council approval, should the company be sold in the future. The issue has generated much debate by local and international union officials, who expressed concern about protecting the integrity of the existing labor contracts.

Earlier, the town and company included new language essentially limiting the transfer of the TIF to a new mill owner only if a future sale involved selling shares of the company as opposed to a sale of its assets. But, Patrick McTeague, a Topsham attorney representing hundreds of GNP workers in a pending pension suit against former owner Bowater, said the language was not adequate and asked it be modified further.

The town and company made additional changes, but many of the nearly 25 union officials, who attended Wednesday’s hearing, said the changes were not strong enough to protect workers and asked the provision be modified further.

Union officials said they supported the town giving Great Northern a TIF, but without language changes, union officials said the TIF would only make the company more desirable to a potential buyer, who through threats of plant closings, could impose more concessions on workers.

“If the TIF passed as it exists right now, my organization sees it as a threat to our membership and we will do everything we can to bring it to a referendum,” said Stephen Perry, the senior representative of the New England Carpenters Union during Wednesday’s hearing. “These foreign corporations, who have moved into the state, don’t give a damn about the people of the state of Maine. We do. You should.”

The town and company came back with new language before the council’s vote on Thursday. It reads, “In the event of a sale of the company in whole or in part by asset purchase, the transfer of the agreement … shall only be approved if the buyer agrees to be bound by the then existing collective bargaining agreements.”

Responding to requests for further revisions, Chairman Gail Fanjoy said the agreement had been negotiated by both parties and could not unilaterally be changed by the council without more talks with the company.

Union officials also expressed concern about the company being penalized after it cuts 100 jobs. Company officials said any job cuts would be market driven.

Some residents warned that without revisions to the TIF, the council’s vote could be challenged with a petition.

Councilor Scott Gonya recommended the proposal be voted down and renegotiated. He said 17 years was too long and 85 percent was too high. He said the town did not owe GNP a tax abatement because the town had undervalued the company by more than $30 million, which translated into a tax revenue loss of $714,300.

Gonya said giving the company an 85 percent TIF kept an additional $100 million from being added to the town’s tax base.

“Sheltering this value from the tax base shifts the tax burden to the other taxpayers for 17 years,” said Gonya. He expressed concern about the company being able to cut 100 jobs without being penalized. “Changing the job level in a renegotiated TIF proposal from 630 to 730 with a 2 percent reduction in the TIF benefit for every 10 jobs reduced down from 730 is what the council should be demanding,” Gonya said.

McCauslin echoed several of Gonya’s points. “The abatement is a clear case of extortion and coercion,” said McCauslin. “It [the TIF] is too much, too big and too long. I don’t like someone holding a club over my head.”

Fanjoy and other councilors, who supported the TIF, said the TIF would settle the pending tax abatement case along with an abatement-proof environment for 17 years; provided a stable tax base for the town; and encouraged continued employment and increased investment in the paper mill.

“The TIF provides strong language for any entity who wants to own all or part of the assets … in that they will not get a tax break from this town if they don’t protect the work force from further wage and benefit concessions,” said Fanjoy. “Without a TIF, we face an uncertain future.”