Economic development's Maine advantage
Published Saturday July 18th, 2009
Incentives Pine Tree Zone program has helped lure business to Maine
Before launching a state-of-the-art manufacturing company five years ago, Duane Hallowell looked at the incentives for businesses in jurisdictions across New England.
What clinched the deal to set up his heating- and cooling-system company in Bangor, however, was an innovative economic development program that could hold clues for luring business to New Brunswick.
The Pine Tree Zone program, launched by the state of Maine in 2003, provides incentives such as payroll rebates, income tax refunds and lower utility rates for businesses that create jobs and invest in the state.
"When we were shopping for locations to start our company, the program made a huge difference," said Hallowell, president of Hallowell International LLC, from the company's headquarters in Bangor. "From a tax standpoint it's very advantageous for us to be here."
Two weeks ago, Governor John Baldacci expanded the Pine Tree Zone program - first rolled out only in economically depressed areas to encourage growth - to the entire state of Maine.
"The program has resulted in more opportunities for Maine workers and businesses," Baldacci told reporters. "During these difficult economic times, it's vital that we continue to take aggressive steps to encourage business growth and job creation."
The program's tax breaks are substantial, with eligible new and expanded businesses receiving a 100 percent income tax credit for five years, followed by a 50 percent credit for an additional five years. For companies that invest in equipment and building materials, sales tax can be waived altogether. And with the co-operation of utility companies, businesses can apply for reduced electricity rates.
Since 2003, the government of Maine has reimbursed $2.7 million for 2,418 jobs - roughly a $1,200 investment for each job. At the end of last year, more than 200 businesses in Maine had taken advantage of the Pine Tree Zone program.
But only 'quality' jobs are eligible for the tax break. The jobs must be full-time positions with a salary equal to or above the county average, with access to group health insurance and a qualified life insurance plan.
"When looking at the income plus benefits package, it's a significant threshold for businesses to meet," said Brian Hodges Maine's director of tax incentive programs. "These jobs create a real and lasting boost to Maine's overall economy."
The Pine Tree program is performance-based so companies only receive tax breaks once the investments have been made or jobs have been created.
"There is nothing up-front," Hodges said. "Businesses have to perform to realize any of the benefits of the program. This is not corporate welfare."
Hallowell International has invested millions and hired nearly 40 employees in Bangor, a city of about 30,000. The company's sales have increased year over year, with a 600 per cent jump last year alone.
"Last year we couldn't keep up with the growth," Hallowell said. "We went from a company with $2 million in sales to $12 million almost overnight."
The company manufactures a heating and cooling system called the Acadia, which uses a cutting-edge green technology to pump warm air from outside into homes during the winter or cool air during the summer.
It outperforms conventional fossil fuel-based heating systems such as oil-powered furnaces and can save nearly 50 per cent off heating costs, Hallowell said.
"It's an energy-efficient and eco-friendly way to heat or cool a home," he said. "Our innovative designs allow air source heat pumps to operate in temperatures as low as minus 30 degrees below zero."
The company sells about 3,000 heating and cooling units a year, which have an average installed cost of between $10,000 and $14,000.
Although Hallowell International likely would have been successful in any New England state, Hodges said the Pine Tree Zone program can help companies expand more quickly and take advantage of market opportunities.
"This incentive program becomes a piece of the puzzle for companies," Hodges said. "It's one of the tools in the tool kit to get business investing in the state."
The Pine Tree program's eligible sectors include manufacturing, financial services, biotechnology, aquaculture, advanced technologies in forestry and agriculture and information technology.
James McConnon, a University of Maine economist, said the Pine Tree program has become an important economic development tool.
"This particular tool coupled with other incentives provides an attractive package for businesses on the fence in terms of whether to expand or locate in Maine," he said.
"In recessionary times, helping defray labour or capital costs can go a long way for companies."
The idea of identifying enterprise zones - areas that require greater economic development initiatives - has been around for about 20 years, he said.
In 1999, Pennsylvania launched the Keystone Opportunity Zone program, which provides reduced local and state taxes for businesses in the rust belt. The Empowerment Zone Program, managed by the United States Department of Agriculture, the Department of Housing and Urban Development and local communities, was developed in 1994 to provide "highly distressed" urban and rural areas with grants, tax credits and other benefits.
Next year, the program returns to the original areas - Aroostook County, the Penobscot Valley, the Androscoggin Valley and Washington County-Downeast.
"The one-time window for the entire state is designed as Maine's own economic stimulus plan," said a recent Bangor Daily News editorial. "For the next six months, statewide business booster groups and others should pull out all the stops promoting this program in the New England region and beyond."
Disabled
Search Articles
More CE Network Sites & Partners:
