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Redevelopment of Millinocket mill has setback, as anchor tenant pulls out

BY Staff

12/19/2018
Photo / Maureen Milliken
Photo / Maureen Milliken
Plans to redevelop the Great Northern Paper mill in Millinocket have been set back by an unresolved federal tax lien against the property. LignaCLT Maine LLC, based in Charlotte, N.C., has scuttled its plans to be the first anchor tenant at the mill, saying it can't wait any longer for the tax lien to be resolved.

The North Carolina company announced in February as the first anchor tenant at the shuttered Great Northern Paper mill in Millinocket has scuttled those plans, saying it cannot wait any longer for the mill’s owners to resolve a federal tax lien against the property.
LignaCLT Maine LLC, based in Charlotte, N.C., had planned to build a 300,000-square-foot manufacturing plant on 35 acres of the 1,400-acre site now owned by Our Katahdin LLC. The company said at the February announcement its $30 million project would bring 100 direct jobs to the Katahdin region in the next five years.
At that time, the company was heralded as the state's first cross-laminated timber manufacturer — although a week later SmartLam, a Montana-based company that is the first CLT manufacturer in the United States, announced its plans to expand operations to the East Coast by opening a new manufacturing facility in Maine. 
The Bangor Daily News reported that Ligna Terra decided it couldn’t wait any longer for Our Katahdin, the grassroots economic development group working to redevelop the shuttered paper mill, to resolve an outstanding $1.4 million federal tax lien imposed on the former owners that Our Katahdin assumed when it bought the mill in January 2017. 
“The tax lien prevents significant improvement to the site, including our project, unless it is resolved,” Brien Walton, chairman and CEO of Acadia Capital Management II Inc., which is helping LignaTerra with its financing, told the BDN.
Walton told the BDN that “LignaTerra was as patient as possible “ — despite the costs of delay — as the company’s owners put the Millinocket “operation on hold for the past 10 months to give Our Katahdin every opportunity to get the site ready for [LignaTerra] to move in.”

In a statement posted Tuesday on Our Katahdin’s website, the nonprofit’s president Sean DeWitt acknowledged that LignaTerra’s decision to pull out was “a setback.” 
“With the IRS lien continuing to block our $6.7 million in infrastructure funds, we have been unable to provide infrastructure needs within required timelines, so LignaTerra has made the business decision to no longer locate their initial manufacturing operations on the Millinocket mill site,” DeWitt stated in an open letter described as written on behalf of the nonprofit’s board. “We have been working hard to get the Millinocket mill site open and ready for business. … In an effort to have transparent and open communication with the community, we regret that we prematurely announced this opportunity [i.e. February’s announcement of LignaTerra as a first tenant]. We pride ourselves in being results-driven and we have struggled to resolve the IRS lien within expected time frames, leading to this unrealized opportunity.”
The board is inviting Katahdin region residents to a town hall meeting on Dec. 27 from 6 p.m. to 7:30 p.m. at the Katahdin Higher Education Center in East Millinocket to discuss the redevelopment challenges and potential solutions.
“Indeed, the IRS lien remains the most prominent barrier to rebuilding the site's infrastructure and in moving forward with the vision of creating a multi-tenant industrial park,” DeWitt stated. “Over the past 18 months, we have submitted offers in compromise to two offices of the IRS. We have been rejected by each office for two primary reasons: (1) we are not preventing the loss of jobs (as those papermaking jobs were lost years before our effort) and it is not clear if creating new jobs fits their criteria, and (2) the IRS is over-valuing our assets since it does not consider the current condition of buildings. We are launching a full appraisal process now to appeal this decision. At the same time, we are seeking sources of finance to pay the debt in full, should our appeal be denied.”
DeWitt said that besides being an impediment for prospective businesses thinking of locating at the mill site, the IRS lien is also blocking Our Katahdin’s ability “to deploy the $6.7 million in infrastructure funds we successfully raised for the Millinocket mill site that will specifically deliver power, water, wastewater, rail, roads and fiber optics to strategic locations on the site.”
The board closed on the hopeful note that cross-laminated timber remained a top priority in redeveloping the Millinocket site.
“We believe the Katahdin region is situated at the perfect intersection between the northern Maine wood basket and the growing Northeast market for CLT,” DeWitt stated. “We continue to actively engage with multiple companies who have selected the Millinocket site as a primary location of interest. These companies include data centers, biorefineries, aquaculture farms and others.”