Are Pine Tree Development Zones unmonitored corporate welfare?

In 2003, Governor John Baldacci worked with the Legislature to create Pine Tree Development Zones. The idea was to help rural pockets of Maine’s economically deprived counties attract new businesses and expand employment.

A package of up to 10 incentives, grants, tax credits, sales tax exemptions, income tax reimbursements, corporate income tax credits, as well as exclusion from certain tax limitations, discounts on electricity, plus access to conservation programs from the Efficiency Maine Trust expanded the program to cover all but Maine’s most prosperous southern counties.

Unfortunately, oversight and audit were not part of the package. There were no mandated tools to monitor the success or employment expansion anticipated by the program.

A damning report recently completed by the Legislature’s Office of Program Evaluation and Government Accountability (OPEGA) tells the sorry story: “The PTDZ [Pine Tree Development Zones] program’s design does not adequately support achievement of any of the program’s desired goals or ensure benefits flow only to businesses that add qualifying jobs.”

The primary intent of PTDZ was to create additional jobs in depressed economic sectors of Maine. The OPEGA committee — six senators and six representatives from both parties — goes on to report that PTDZ benefits are shared with businesses that might have hired only a single new employee, and in some cases, no new employees at all.

In 2012, a New York Times study found that state and local governments were doling out $80 billion a year in “business incentives” via grants, income tax credits, sales tax exemptions, property tax deferments, low-cost loans and free training programs for employees. Besides creating an uneven playing field and picking winners — and creating losers — these programs all use taxpayer funds. Many of these business development programs are redundant.

This same study revealed that Maine was spending $500 million in 2012 for similar incentives in direct and indirect business programs. From the available data from 2010-2013, Maine’s PTDZ program spent $159,000 for each new job created.

Given the millions of dollars invested in PTDZ business participants, one would expect a measurement that proves these benefits are offset by improved tax revenues. Forget it. According to the OPEGA report, “there is nothing in the program’s design that ensures the program will meet its desired outcomes of improving and broadening the tax base and improving the general economy of the state.”

PTDZ participants can receive incentives and benefits for up to 10 years. Last year, over $12.2 million in direct costs were associated with PTDZ — without counting the various incentives that have no audit trail. Again, OPEGA states, “we could not reasonably estimate the broader fiscal and economic impacts of the PTDZ program with data readily available”.

Proponents of maintaining PTDZ beyond the December 2018 sunset provision want to believe that the businesses that successfully availed themselves of these taxpayer-funded incentives deserve further support. Opponents decry the continued corporate welfare.

The original intent of PTDZ to create thousands of new jobs is not being met. The program is not being monitored and its oversight is severely lacking. There are no guidelines to ensure that Maine-based businesses and goods are sourced, there is no data to prove business tax gains. Nor are Maine’s most economically distressed communities being assisted. With several business incentive programs available, the Legislature needs to better define guidelines for handing out taxpayer funds and how they are managed. Lawmakers should require quantified results. The OPEGA report cites PTDZ specifically, but other giveaway programs are begging for scrutiny, revision or, in the case of Pine Tree Zones, termination.

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