Corporate Welfare Watch: King-BIW deal resurfaces during tax-incentive scrutiny

Published on thePhoenix.com

Bath Iron Works staff subsidize their own jobs as a result of a 15-year-old deal now coming under criticism from a national watchdog group. In 1997, Bath Iron Works threatened to leave Maine in search of greener pastures. In exchange for staying — and agreeing to invest $200 million in its shipyard here — lawmakers and then-governor Angus King agreed to pay BIW as much as $60 million over the years between then and 2018.

The payment comes even more directly from state coffers than if Augusta sent BIW a check. The company deducts state income tax from workers' paychecks, but from July 1 to the end of each year, BIW pockets the money, rather than the usual practice of turning it over to the state treasury.

Six years before that deal ends, it has been pinpointed as one of the biggest such handouts by Good Jobs First, a national watchdog group studying economic-development incentives. A recent report says the BIW tax break is the 14th-largest nationwide case of workers subsidizing their own corporations.

BIW is the only recipient of the state's custom-made Shipbuilding Facility Tax Credit, which is capped at $3.5 million per company per year. Nearly 100 other Maine companies take advantage of similar deals, under Employment Tax Increment Financing arrangements, which this year are slated to let companies keep $7.1 million of their workers' tax withholdings.

Maine is one of 16 states that has such a program (and one of six that has two), projected to cost Mainers $10.2 million in tax revenue this year alone — cash that would ordinarily be sent to the treasury but instead is kept by companies.

Good Jobs First research director Philip Mattera admits that it's "kind of an abstract issue" his group is worried about in this study. In other studies, he observes, "We're critical of a lot of these subsidy programs in general. They often go to companies that don't need them." He calls the tax-withholding rebates "even worse" than other kinds of corporate welfare because it opens up the opportunity for even more, and larger subsidies; states get much more money from income-tax withholding than from corporate taxes, and so have more cash to hand out if they can tap that source before it ever arrives in the state treasury.

He says the structure of the tax break — requiring specific investment over a specific timetable, and expanding or contracting the annual amount of the rebate depending on actual employment levels — means it's better than it might be, but is still too closely linked to workers' earnings for his group to be comfortable.

Jay Wadleigh, vice-president of Local S6, the biggest union operating at BIW, says workers are well aware of the arrangement. "We lobbied with (the company) to get it," he recalls. "What (lawmakers) did helped the shipyard," promoting investment and saving jobs. He notes that BIW's chief competitor, Ingalls Shipbuilding in Mississippi, also gets state subsidies.

He observed that while Good Jobs Now criticizes the form of the tax break, Maine could have given BIW the same amount by collecting all the workers' taxes and then sending a check from Augusta, and workers wouldn't object then, either.

Todd Gabe, an economics professor at the University of Maine who studies economic development, says business leaders care less about taxes than politicians often think, and says studies of government-subsidy programs are "mixed" as far as effectiveness.

The BIW and ETIF credits are the only corporate handouts in Maine that are actually tied to employment numbers and salaries. State officials have for years given loan guarantees, tax rebates, and other financial incentives to companies without promises of new jobs or decent wages.

The biggest such program, the Business Equipment Tax Reimbursement plan, is designed to reward investment by refunding from state coffers money companies pay in local property taxes for their equipment and machinery. In 2011, BETR gave companies a total of $55,263,656. Eleven companies got more than $1 million each in refunds from the state; of those, only LL Bean ($1 million) is headquartered in Maine. Six are out-of-state, including the biggest winner, Verso Paper ($4.3 million), BIW ($3.2 million), and Walmart ($1 million). The remaining four are owned by companies in other countries, like Nestle Waters North America (owner of Poland Spring; $1.9 million).

And these are hardly the only handouts the state offers. There are dozens of tax breaks on the books in Maine, all detailed in Maine Revenue Services reports (issued every other year, most recently in 2011). Lance Tapley analyzed the first such report on these so-called "tax expenditures" for the Portland Phoenix in 2008 (see "Tax Break Heaven") and found that of the state's $3.4 billion in tax breaks that year (an amount almost exactly the size of the state's actual spending), companies got $682 million, and wealthy Mainers got $808 million. Poor people got $157 million in tax breaks, and the middle class saw about half the total tax-break benefit, or $1.7 billion.

Press Releases: More questions, some answers

Published in the Portland Phoenix; additional info published at thePhoenix.com

We know a lot more now about the deal that handed Donald Sussman, the hedge-fund mogul, progressive philanthropist, and husband of Chellie Pingree, 75 percent of thePortland Press Herald and its siblings.

First, we know HOW THE DEAL CHANGED, in less than two months, from a $3.3-million loan worth five percent of the company into a $3.3-million cash purchase of three-quarters of the equity. Greg Kesich, a columnist for the Press Herald who is the vice-president of the Portland Newspaper Guild and holds one of two union seats on the company's board of directors, says Sussman's proposal for a loan "didn't work for the private-equity investors," who wanted "a lot of guarantees about how they were going to get out." So the company diluted existing shares — including the employees who own part of the company. "We're part of the 25 percent that just shrunk, that used to be 100 percent," Kesich says. How come? Easy: "Everybody's betting that a smaller share of something is better than a big share of nothing."

Second, we know THE BUSINESS PLAN HAS NOT CHANGED. While union president Tom Bell was dismissive of a proposed takeover plan by Chris Harte, a former PPHpresident and heir to the Harte-Hanks media fortune, because it was "too reliant on print" and didn't include enough investment in new technology. (Also, it would have required crushing concessions from the union.) It's clear the existing model isn't working: circulation and ad revenue have declined for years. Kesich says the company will invest the new cash in a major technology upgrade that union president Tom Bell has described as integrating online and in-print publishing, as well as modern software for advertising sales and accounting. Bell suggests the move will take the company from running way behind in the media industry to being in front of the pack.

Third, UNION-SOUGHT EMPLOYEE RAISES HAVE NOT YET BEEN NEGOTIATED. Wage increases were tabled until this year in the contract approved last year. Kesich says they'll come up in the middle of this year. The rest of the contract is still in force as well, Kesich says, until its original expiration date in June 2013.

Fourth, we can be reasonably sure SUSSMAN ISN'T DOING THIS TO CONTROL A MESSAGE or push a political agenda. (Seriously, as has been noted by others, if he wanted to push a political message, would he buy a newspaper or ads on television?) "He says that he's investing in a community asset and he considers journalism to be a public good, as well as a business," Kesich says. "It benefits everybody whether they read it or not." (So declining circulation shouldn't bother Sussman.) In fact, Kesich suggests, "this is more a philanthropic move" than a business one, though he says Sussman wants the paper to be "self-sustaining."

• That's a lot of good info, but questions remain:

The Bangor Daily News has reported that CRG Partners Group, a Boston-based firm "specializing in restructuring troubled companies," was brought in to reorganize in the wake of Connor's departure, and was looking for $10 million in investments to pay off debt, and an additional $5 million for operating cash. SUSSMAN'S CONTRIBUTION IS TINY compared with those goals. (Not to mention a pending lawsuit over $125,000 in allegedly unpaid bills for paper.) Will $3.3 million be enough to turn a struggling company into a successful one?

While we take Sussman at his word that he'll stay out of editorial decisions, Kesich says "he's going to have a hand in making business decisions." WHAT HAPPENS WHEN BUSINESS CHOICES IMPACT EDITORIAL coverage? That's unclear — while Sussman has said in a written statement that he'll trust the editors and managers hired by the previous owners, at some point they'll leave and he'll hire their replacements. Kesich asks skeptics to "look at what we do and evaluate what we do."

Read this story online to learn more questions — some with answers.

Jeff Inglis can be reached at  jinglis@phx.com.

Addendum

My column this week has some questions — and some answers — about the new incarnation of MaineToday Media, the owner of the Portland Press Herald/Maine Sunday Telegram, the Kennebec Journal, and the Central Maine Morning Sentinel.

I ran out of room in the paper to give you all the info I had, so here’s an addendum. (Also, I’m attempting to get an interview with Donald Sussman; fingers crossed on that!)

There’s been a lot of talk about EDITORIAL INTEGRITY as a result of this deal, in which Donald Sussman has bought 75 percent of the company for $3.3 million. We take Sussman at his word that he won’t get involved in the editorial board and daily news operations; if he proves us wrong, we’ll let you know. Also, Greg Kesich, the union veep and PPH columnist I spoke to this week promises, as union prez Tom Bell has in other interviews, that the union will advocate for journalistic principles if issues arise.

On that note, we already know that SUSSMAN WILL BE IN THE NEWS A LOT MORE than he is used to, as a result of this deal. He’s normally just a good-guy character, donating millions to progressive and community causes around the state. Now he’s opening himself to criticism, ridicule, and general widespread attention. The paper is looking at how best to handle DISCLOSURES ABOUT HIS OWNERSHIP when dealing with stories that might relate to him or his interests — or his wife and her political career. While under Richard Connor, that sort of owner-disclosure was rare (“we were told not to do it,” Kesich says), but since Sussman has gotten involved, that information has been regularly inserted in stories about Pingree.

What does the purchase price mean for THE COMPANY’S TOTAL VALUATION? Probably very little. It’s definitely not as simple as saying if $3.3 million equals three-fourths of the company, then the whole thing is worth $4.4 million. For one thing, the company owns land and a building in South Portland, valued by that city at $12.1 million (despite that number, it sold in 2009 for $7 million as part of the Blethens’ exit). The building is home to a printing press and other equipment valued at $6.8 million. And there are subscriber and advertiser databases, which are worth money to marketers, as well as the archival records, which are worth something to collectors and libraries. In the end, though, any company — like a home — is actually worth what it can be sold for, at the future date when it actually sells. So any calculation is unclear at best.

SUSSMAN HASN’T BEEN TO THE PRESS HERALD OFFICES yet. “He hasn’t set foot in the office yet,” Kesich said Friday. “I’m hoping that he will,” because employees whose jobs he saved want to meet him.
Say what you will about Richard Connor (we’ve sure said a lot here) and no-longer-prospective owner Chris Harte: both are extremely experienced at running profitable news operations. Their plans (Connor’s as implemented; Harte’s as proposed) included major changes that reduced the power, scope, and financial commitment to the union and its members. Which means they either saw NO WAY TO PROFITABILITY WITHOUT CUTTING union-related costs, or saw other ways but chose extended combat with the union as the easiest. Sussman has no experience managing a media company; will he find a way to preserve the union that the other guys, with decades more experience, couldn’t?

And lastly, WILL RICHARD CONNOR GET AWAY WITH HIS PLUNDER? He purchased the company for cheap, sold off almost all its real-estate, cut costs, allegedly rearranged the books to his own advantage, and then left town. Does he have personal — or criminal — liability for changes at the paper that slashed jobs, the salaries of those remaining, the paper’s reputation, and ultimately the community’s well-being?

Kids on film: Big top on the small screen

Published in the Portland Phoenix

Circus Smirkus, the Vermont-based youth circus that visits Maine every summer, will appear on Maine televisions in a documentary highlighting both the performances and the struggles — physical and financial — of a small traveling show.

Circus Dreams will be shown in two versions — the 90-minute full-length film and an edit of that footage down to one hour — on the Maine Public Broadcasting Network's television stations this month.

Signe Taylor, a producer for PBS's Zoom, has put together her second child-related documentary (the first was about the Iraq war's effect on Iraqi families), following the 2006 summer season of the circus from auditions through training, and on to 70 performances over seven weeks. The twist of this circus is that performers are between the ages of 10 and 18, which obviously improves the show's appeal to children, and is part of the draw to its annual performances in Freeport and Kennebunkport (this year August 6-7 and 9-10, respectively) as well as elsewhere around New England.

None of what's shown is truly startling or eye-opening; the film is simply a view into a world where teenagers put on makeup and costumes and run around a show ring trying to get other people to enjoy themselves. Which is very much like simply being a teenager.

As you might expect in a story about teenagers, there are a goodly amount of clichés. Some lines, for example, have likely been spoken by anyone who ever went to camp as a teen and really connected with the people who were there: "It's kind of relaxing to know that there are other people in the world who are as strange as you," says trouper Jacob Tischler of his first summer with the circus. And there are tears at the finale as the performers part ways at summer's end and return to places where they again feel like outcasts.

It's worth checking out this weekend, but in truth, the better version to see is the longer one (both feature cameos by Maine's Fritz Grobe, of Eepybird). The shorter version (which I watched first, as people who watch both showings on MPBN will do) feels rushed. Even just the extra 30 minutes in the full-length piece allows significantly greater depth and insight.

It introduces more of the performers as characters, shows more of the backstory behind these kids and their summer-long run-away-to-the-circus exploits. It also spends more time with the adults, paying attention to things like casting, logistics, and finance — but the central drama is really just the kids challenging themselves.

There is a subplot showing the financial tenterhooks by which the company clings to existence, but it seems added in an attempt to inject dramatic tension into this otherwise heartwarming, smiley film.

Circus Dreams | by Signe Taylor | one-hour version on MPBN's regular TV stations: April 5 @ 10 pm, April 7 @ 11 am | 90-minute version on MPBN's World channel (10.3 on the digital spectrum and TimeWarner channel 173 in Cumberland and York counties; see mpbn.net for channel information elsewhere): April 24 and 25, times TBD | mpbn.net | circusdreams.net

The Church on Marriage: Over two thousand years, an argument against same-sex matrimony has been built. We break it down.

Published in Out In Maine


It may surprise you to know that the Catholic Church teaches that marriage isn’t actually about the two people who are “joined in holy matrimony” on their wedding day.

Nope — it’s about their offspring. This is perhaps some of the common ground the Church has found with theological apostates (evangelical Protestants and Mormons) with which it has allied in the past decade, spending immense amounts of capital — moral, political, and financial — to block the incoming tide of same-sex marriage.

Nevertheless, it’s worth exploring the reasoning behind the Church’s objections to same-sex marriage. Partly this may count as what political operatives call “opposition research” — a Sun Tzu-inspired attempt to truly understand the opponent, the more easily to emerge victorious. But more than that, the Catholic Church has been talking about marriage longer than just about anyone. Its arguments have been ground by the ages, sharpened by insights of thousands of scholars, and honed into a fine edge by experience. Let’s see what that effort has produced.

Appealing to tradition
Brian Souchet, director of the Office for the Protection and Defense of Marriage with the Roman Catholic Diocese of Portland (which covers the entire state of Maine) opens what will become a nearly two-hour interview by enumerating the social ills that the Church sees in the modern world: high cohabitation without marriage, single parenting, kids without involved fathers, kids born out of wedlock. He calls these all “results of a breakdown in marriage,” by which he means the modern American societal tendency to “ignore the fact as men and women that [marriage is] not just about us men and women.”

In one sense he’s right. Despite Church teachings to the contrary, the divorce rate is as high as ever; couplehood, pregnancy, and childrearing are happening outside married male-female couples all the time.
Beyond the possibly self-evident reason that not everyone believes what the Church teaches, not even all Catholics do, it turns out.

“If the faithful don’t understand the significance of marriage . . . that’s where we need to start,” Souchet says, beginning to lay out the history of the Church’s teachings on marriage. In sum, they are that “love and commitment is necessary but not sufficient” for marriage. What’s required are a man and a woman together permanently, with “openness to bringing new life into the world,” he says.

He correctly observes that Catholic teaching has expressed this view since almost the very beginning, and refers me to Pope Pius XI’s 1930 encyclical Casti Connubii — which itself refers to an 1880 encyclical by Pope Leo XIII, a 1789 letter of Pope Pius VI, the decisions of the 16th-century Council of Trent, and to Saint Augustine’s writings in the fourth and fifth centuries.

The contribution of Souchet’s own employer, Bishop Richard Malone, to this 1600-plus-year history is a pastoral letter entitled “Marriage: Yesterday — Today — Always” in which Malone argues that marriage is defined in the universal “natural law” as between a man and a woman, and expresses concern that people are trying to change that.

“We can look throughout antiquity and see marriage as between a man and a woman,” Souchet says — and he’s right. Here again, though, he — and Catholic doctrine — chooses not to observe the same-sex relationships that were present “throughout antiquity,” though admittedly those couplehoods may have lacked the specific label of “marriage.”

Following the thread
Souchet claims that “the true test” of same-sex marriage is: “Can this new notion of marriage . . . stand up on its own without being forced on people by the law?” Same-sex attractions and relationships have endured and recurred through the ages, despite being outlawed for most of the last two millennia. The answer to his question is “Yes.”

Bishop Malone’s pastoral letter also asserts that marriage has always been about children. He cites as evidence “the writings of the third-century jurist of the Roman Empire, Modestinus, who captured the common understanding of marriage with the following definition: ‘Marriage is the union of a man and a woman, a consortium for the whole of life involving the communication of divine and human rights.’ ” No mention of children there.

Then Malone cherry-picks United Nations proclamations to his advantage. He cites the United Nations Convention on the Rights of the Child to support his claim that children are “meant to have a mother and a father.” (In fact, the Convention mentions only “parents.”)

Malone goes on to claim that marriage “is not a ‘right’ that can be given or denied.” That ignores another UN document, the Universal Declaration of Human Rights, which states clearly: “Men and women . . . have the right to marry.” (The Declaration says nothing about same-sex marriage, but its inclusive intent is obvious, since it confers the marriage right “without any limitation due to race, nationality or religion.”)

Malone also formally declares what most people already know — that biological ability to procreate is not, in fact, a precondition for marriage. This is in keeping with longtime Church teachings, but undermines the notion that a marriage can only be between two partners whose sexual intercourse can fertilize an egg. “An infertile couple continues to manifest” the full blessings of marriage, he writes, including being able to care for children by adoption or volunteering.

Why does the Church care this much about marriage? There is a worldly reason in addition to the holy ones, and it’s self-perpetuation of the Church itself. Pope Pius XI makes this clear in Casti Connubii:

“God wishes men to be born not only that they should live and fill the earth, but much more that they may be worshippers of God,” he writes, going on to say that children are “a talent committed to [parents] by God . . . to be restored to God with interest on the day of reckoning.” (It’s worth noting that Casti Connubii also puts the Church squarely in support of a living wage, redistribution of wealth from the rich to the poor, and government programs to help the needy.)

Idealism versus realism
Beyond its logical failings, though, the fundamental flaw in the argument espoused by the Church (and Souchet) is that their ideal of marriage is substantially different from how marriage is actually entered into, carried out, and experienced in the world today.

For example, Souchet says, offering a quaint picture unreflective of an America in which even a large majority of Catholic women use some form of birth control, “given enough time, a male-female relationship will produce children.”

Certainly the Church is entitled to teach that its followers adhere to a certain standard, real, ideal, or otherwise — and to deny membership to dissenters.

The problems arise when that standard is applied to civil law. The Church is well aware that this distinction exists, and hasn’t objected though (to choose an example relating to marriage) civil law lets non-Catholics be just as married as Catholics, despite Church teaching to the contrary.

In writing about Church law and civil law, Malone writes that both descend — independently — from what philosophers have long called “natural law,” the unwritten Way Things Actually Are. He says our best clues about what natural law truly is are in Church law and civil law, noting that both have evolved — separately — toward what their respective leaders have come to believe are more perfect reflections of universal truths.

That’s when he gets his wires crossed. While the Church hierarchy gets to set policy in its realm, the people of a democracy are where that system’s power lies.

A reader can almost hear Malone thundering as he winds down his letter: “Those who would attempt to redefine marriage to include or be made analogous with any other kind of human relationship are suggesting that the permanent union of husband and wife, the unique pattern of spousal and familial love, and the generation of new life are now only of relative importance rather than being fundamental to the existence and well-being of society as a whole.”

In reality, society has the power to, and may well in November, decide at the ballot box that there are, in fact, other relationships that are of equal significance to marriages recognized by the Catholic Church.
Souchet argues that such a decision would move Maine law farther away from natural law. So I ask: Did the Church — and civil law — get the natural law wrong?

“We sure had a long time to get it right,” Souchet laughs. He pauses. “If we did, we’ve been getting the natural law wrong for millennia.”

Half-lives: Mad Horse's cutting choice of Zindel's Gamma Rays

Published in the Portland Phoenix

When a group of tender seeds are exposed to toxic radiation, the ones receiving the smallest dose develop normally; those that are moderately exposed mutate into larger-than-life oddities, and the ones getting the heaviest dose wither and die. That's the finding of the science experiment that gives The Effect of Gamma Rays on Man-in-the-Moon Marigolds its title.

It is also the heartbreakingly human lesson imparted by watching Paul Zindel's Pulitzer and Obie-winning play, produced by Mad Horse Theatre Company at Lucid Stage, under the direction of Chris Horton.

In an intricately run-down apartment converted from a former market (designed by Stacey Koloski), Beatrice (Christine Louise Marshall) is raising her two teenage daughters — shrinking-violet Tillie (Veronica Druchniak) and her older sister, the mercurial Ruth (Ruth Gray) — with an attitude that could easily be called radioactive. Self-absorbed, neglectful, and angry at the world, Beatrice is also mocking and belittling of her daughters — and, as written, even more darkly menacing when she's been drinking.

She blames her daughters for her life not turning out how she hoped: widowed, unemployed, and forced to take in elderly boarders on the brink of death for the pittance of cash it earns, Beatrice goes so far as to call her children "two stones around her neck."

In a play that is as allegorical as it is expository, it is the radioactive Beatrice herself who lives a self-professed "half-life," and condemns her daughters to the same. She cuts them in half with her mockery; she keeps the bright, science-fascinated Tillie home from school; she allows Ruth to discover one of the boarders dead — a trauma that gives Ruth recurring convulsions.

When Tillie is announced as a finalist in the school science fair, Ruth becomes her biggest cheerleader, berating her mother with excitement about the family's sole success. The revelation also ignites a spark of pride in Beatrice, brightening her countenance — until her past returns to haunt her, extinguishing the flame and sending the family into a deeper spiral as the play ends.

The contrast between Beatrice's moods, however, is not as sharp as it could be; Marshall's character is too upbeat at the beginning — and not in the "killing with kindness" sort of way that would end up making her creepier. She's also not dark enough in the middle and the end, leaving the menacing shifts largely in the audience's interpretation of the language, rather than in the emotional energy coming from the stage.

When Nanny (Muriel Kenderdine) appears, serving the play only as an early target for Beatrice's scorn and derision — the role has no lines, and only a couple of facial expressions: blankness, and a smile (twice) — Marshall's tone and face are too friendly to give weight to her biting threats and scorn. And a laugh line about murdering the family pet and causing Ruth more convulsions got some chuckles, but carried none of the sinister intimidation it should have dripped with.

Marshall has been darkly menacing to great effect many times on Portland stages; the choice to moderate her character's extremism has another casualty, too: flattening the performance of the only experienced actor on the stage for most of the play. Druchniak and Gray are high-school students, and talented ones: Druchniak's ability to utterly disappear on stage borders on Cheshire-like; Gray's flip-flopping moods seem very genuine teenager. While their characters have some irregularity written in, their inexperience accounts for some additional unevenness.

Mad Horse has chosen a play that is both strong and deep enough to make the production powerful, and the final scene, just after the dread moment arrives when the effects of the toxic radiation truly begin to blossom, is both poignant and pitiful — leaving the audience to ponder, after the blackout, what in fact remains of these half-lives.

THE EFFECT OF GAMMA RAYS ON MAN-IN-THE-MOON MARIGOLDS | by Paul Zindel | directed by Chris Horton | produced by Mad Horse Theatre Company | at Lucid Stage, in Portland | through April 1 | 207.899.3993