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March 7, 2018

BIW's $60M tax break bill passes key hurdle

Courtesy / Bath Iron Works
Courtesy / Bath Iron Works
An aerial view of BIW shows the Land Level Transfer Facility (foreground) the Outfitting Hall (left) and drydock (left foreground), elements of the roughly $500 million in facility investments made in the shipyard during the current tax incentive program that expires at the end of this year. A bill that would extend $60 million in additional tax credits over the next 20 years, so long as the shipyard met employment and investment targets, passed a key hurdle Tuesday with the Taxation Committee voting 8-2 to recommend passage of the bill by the full Legislature.

The Legislature's Taxation Committee voted 8-2 on Tuesday to support a bill that would provide $60 million in tax breaks for Bath Iron Works over the next 20 years.

The bill, LD 1781, "An Act To Encourage New Major Investments in Shipbuilding Facilities and the Preservation of Jobs," specifies that the shipyard would be eligible to receive up to $3.5 million in annual tax credits contingent on investing at least $200 million in its facilities and maintaining a minimum employment level of 5,000 workers.

"If the shipbuilding facility employs at least 5,250 employees, the facility is entitled to an amount equal to 110% of the credit," according to the proposed bill. "The facility may employ fewer than 5,000 employees in two separate years within the 20-year period and still qualify for the credit, but at a prorated reduction."

An amendment submitted earlier by the bill's sponsor, state Rep. Jennifer DeChant, D-Bath, proposes splitting the tax credits over two 10-year periods, with BIW being eligible for a $30 million tax credit from the state spread over 10 years contingent on $100 million being invested, and a second $30 million tax credit for the following 10 years if it agreed to make an additional $100 million investment.

DeChant's amendment also calls for the shipyard to report in greater detail its employment metrics during the period of receiving the tax credit, including average and median salaries, the increase or decrease in employees, statewide economic impact and the impact on Maine businesses.

The Bangor Daily News reported that DeChant's bill also has been amended to include a provision requiring the Legislature to reconsider the program's benefit to the state after 15 years.

Critics of the bill, who include former state Rep. Cushman Anthony of Yarmouth and Orlando Delogu of Portland, an emeritus professor of law at the University of Maine School of Law, say BIW's parent company, General Dynamics Corp. doesn't need any tax breaks, adding that the money would be better spent addressing Maine's other pressing needs.

Falls Church, Va.-based General Dynamics, a global aerospace and defense company that with nearly 100,000 employees worldwide, reported $3.1 billion in earnings in 2016 (on revenue of $31.35 billion), the highest earnings in its history, an operating margin of 13.7% and a company-wide backlog of work of $59.8 billion, according to its 2017 proxy statement to its shareholders. It also owns an ordnance-and-tactical systems site in Saco.

BIW has 5,700 employees, a payroll in excess of $350 million a year and spends $45 million annually for goods and services from Maine companies, including $30 million to small businesses.

The BDN reported that all of the Taxation Committee's Republicans and all but two Democrats voted to recommend the send the bill to the full Legislature for passage, with the two dissenting lawmakers being allowed to submit a minority report against it if they choose.

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