BATH

A Bath Iron Works official squared off with residents Wednesday over whether the city should grant another tax-increment financing agreement to the defense contractor.

Why, residents asked, should the city grant such an accord to a company whose employment numbers have dropped significantly over the past two decades?

A BIW attorney countered the company is still the city’s largest employer — one whose property taxes have increased rapidly in the last decade even as it fights tougher competition for defense contracts.

The City Council heard arguments Wednesday for and against a so-called contract zoning amendment that would include the TIF.

BIW wants to amend an existing TIF district covering about 4 acres of the south end of the BIW complex and Wing Farm Park.

Under the proposal, the BIW tract and the Wing Farm tracts would be treated differently.

Currently, both tracts benefit the city only. BIW proposes a 50-50 split between Bath and the shipyard for property tax, and a slightly different split for personal property taxes in the BIW tract.

Under the proposal, Bath would forego business equipment tax from BIW for machinery and other equipment placed into service after April 2008. The state would reimburse the city $128,000 to $162,000 per year over the life of the TIF for the lost tax revenue for business equipment.

Bath would continue to receive all real and personal property taxes for the Wing Farm portion of the TIF district.

BIW is anticipating additional tax revenue of $500,000 for the BIW tract, which would be split 50-50 with the city.

TIF funds are earmarked for business development. In the case of the BIW TIF, however, the city is able to use the funds for road work, which would trigger additional funding from state and federal sources. TIF funds would be used as a matching portion.

Moreover, the city’s valuation would go down in the state’s eyes because — under a TIF — there is less taxable property claimed on the city rolls. That would allow Bath to obtain greater shares of state funds for public schools and other valuation-based state disbursements.

BIW and Bath’s tax attorneys believe Bath can gain $9.4 million over the life of the TIF.

The expansion, the company says, will support current and expected shipbuilding activity within the yard.

In return for the tax abatement, BIW would make an estimated $100,000 in streetscape improvements on the east side of Washington Street and $65,000 in South End improvements.

Already approved by the Planning Board, the plan ostensibly proceeds to a council vote next month, but not before a public hearing on the matter.

Councilor Meadow Rue Merrill suggested the public hearing as the council concluded Wednesday night’s workshop. Councilor David Sinclair urged that the hearing be conducted in City Hall auditorium. The hearing time and place have yet to be finalized.

Residents Jerry Provencher, Bruce Gagnon and Lorry Fleming all expressed doubts.

“In 1989,” Provencher said, reading from a statement, “employment was around 12,000.
“By 1989 it had fallen to 8,300. It has continued to fall past 7,500 to approximately 5,500 today. With our current government sequester, shutdown, calls for major cuts in defense, and the American people’s desire to retire from wars around the world, prospects for an increase in jobs building Navy ships look unlikely.”

Provencher added that parent company General Dynamics has earned $7.2 billion in net profits over the past four years.

Jon Fitzgerald, BIW’s general counsel, told city councilors the company’s property taxes in Bath have risen from $2.3 million to an average of $4.2 million between 2001 and 2012.

“Under the current TIFs negotiated between BIW, Bath and the state of Maine, BIW will receive tax breaks of about $200 million,” Provencher said. “As you may remember from my last visit here, in that same timeframe, my property taxes have gone up 125 percent.”

In 1997, BIW and the city agreed to a TIF that provided for reimbursements of a portion of the property taxes the company paid for 25 years, beginning in 1999.

“One of the purposes of a TIF is to incentivize and attract investment,” Fitzgerald said. “It’s convenient to demonize this as corporate welfare. This TIF is of mutual benefit to Bath Iron Works and the city.”

Gagnon reiterated that the government shutdown “brings the TIF issue home.”

Fitzgerald doesn’t want to discuss the fact, Gagnon said, that the top executive at General Dynamics makes $18 million a year.

“I suggest that you tell General Dynamics that they cut executive compensation first, before they come to the city of Bath for another handout,” he said.

Gagnon said BIW is not promising more jobs from the TIF; rather, the tax breaks will help them purchase machines that replace workers.

Some shipyard workers, in fact, were among the 370 people who signed a petition opposing the TIF, Gagnon said.

Fleming, who has organized Bath Citizens Responsible for TIF action, told the council she and others in the group want more light shed on the issue.

“The argument that you’re keeping jobs here is a weak one, in my view,” Fleming said.

This story was edited from the original version to correct inaccuracies.