A Voice from the People in Maine’s Pine Tree Zone Debate
“Who do you think you are?”, he said, as though I needed to be granted permission from an omnipotent authority to speak my mind freely.
He is over reacting, I thought. I had merely asked his friend if he was the person who works as an analyst for the State of Maine. No answer was forthcoming as the the public conversation was deleted and continued as private messaging commencing with this:
Bad move to expose my friend like that. Please consider using discretion better if you want to remain friends.
I just said OK. His next message began “Thank you”, seemingly interpreting “OK” as agreement that I would behave according to his instructions. I meant- OK, if asking the simple question means he will stop being friends with me, so be it. There was nothing untoward about my question.
In his next response he revealed that there had been a private conversation between the two friends.
On the other hand, as he pointed out privately. Often times issues arise due to sheer incompetence, rather than malicious intent. Anyways, sorry that they rejected your grant.
I was not a fly on the wall so I do not know what this commentary references, but suffice it to say that if there is the possibility that bad behavior is the result of incompetence as opposed to intent, my question is why is the system set up so that “quality jobs” can be filled by incompetent people, especially when “quality job” is defined exclusively as a job that pays higher than average wages and benefits, subsidized by the taxpayer? Is no one to be held responsible in this case?
Nor have I yet applied for a grant. The organizations I wrote about do not have a role in approving the SBIR grant, as I explained in my story, Yes We Can! The SBIR and STTR Grants for American Small Business. Later he would reduce my story to “My issue with the State”, I suppose because I crossed his line by including my story within the story. The style of merging the personal story into a larger context has evolved out of writing for Medium, which invites greater freedom of expression than I feel in Maine. He needs to expand his horizons and see the world as it is now, not the way it was yesterday, when there was not an interactive media, and people did not become brands, and there was only the main stream media. Yes!I can tell my story the way I live it. I can combine analytical research with pop poetry, while narrating my personal journey, if I feel like it. That’s who I think I am!
In an alternate reality, O, an analyst for OPEGA, Maine State Office of Program Evaluation and Government Accountability, might have answered me and have invited me to connect on LinkedIn, but in this reality O insinuated that my research is a conspiracy theory in which I attribute motivations.
I do not know what transpired in a private conversation between two friends but afterward the entirety of the Facebook conversation which had willingly engaged my friend and a few others until the man from OPEGA showed up and the entire conversation was deleted.
I found it inexplicably irrational that I was accused of threatening his friend, whom I shall henceforth call O, and claims that O could lose his job because I asked a question, a job, he said that O had only just taken, and here my friend was answering the question that caused all the uproar, confirming that his friend is the same as the one who has been working for OPEGA since 2016, as stated on O’s LinkedIn Page published by O.
My friend adamantly protected his friend, above all else, as a matter of profound principal, in his own mind, and in the process he turned increasingly abusive toward me. I do not know their relationship and what terms exist between them, only that my friend claimed to have known O for ten years and yet professed not to know that O had been working for OPEGA since 2016. He declared O to be a man of the highest integrity and projected on me that I was impugning the integrity of O. Since none of this made any rational sense, I was left to interpret events intuitively.
I considered that the accusation, that I threatened O, means “O is threatened by me”, passive, not active.There was no active threat made against O in asking O if he is the OPEGA analyst, later confirmed by my friend, who said ”Who do you think you are” when I thanked him for the confirmation.
That’s the bottom line. I have divorced myself from the subject from the moment I deleted that post. Yes, protecting my friend’s job takes priority to me, especially when you are making implied threats such as “thanks for confirming”. Who the fuck do you think you are? I don’t like being threatened. I’m not saying there aren’t problems in the state and the system, but I’m confident my friend isn’t one of them. He’s a man I know to be of the highest integrity.
It is a very strange accusation that I threatened O’s job by asking if O’s job is O’s job, which my friend keeps on confirming is O’s job in his outrage over the fact that I asked-and doubles down by adding that I threatened him as well by saying “Thank you for confirming that O’s job is O’s job” Now I have implicated my friend in the role of unmasking the identity of an analyst working for OPEGA!
Why is such a closely held secret publicly published on the web? And why is the man from OPEGA so threatened by what I produce when I have always considered OPEGA to be working for a common cause. What am I missing here?
A way to make logical sense of this claim is to hypothesize that OPEGA maintains a list of people whom its employees are forbidden to engage, and I am on it, as nothing has actually happened beyond a small online interaction initiated by O. It would be very Un-American for a State accountability office to have such a list, and I scarcely suggest this seriously, but it is true that OPEGA has never answered any correspondence I sent them when I once thought we were on the same side. Indeed we are on the same page in respect to the Pine Tree Zone, discussed in this story, but this OPEGA agent was extremely hostile, portraying my evidentiary work as a conspiracy theory!
What are evidentiary facts?
A fact that makes other facts more probable (i.e., makes certain statements more or less likely to be true). When viewed together at trial, evidentiary facts serve as a basis for concluding whether the ultimate fact has been proven with the required degree of certainty. Google Dictionary
OPEGA works within the state and I am outside of it. To my perspective the State is no longer a constitutional state serving the interests of all the people but functions as a corporation taking from the many to give to the few and serving its own special interests in the manner of a private entity. In that sense OPEGA and I do not share common interests because OPEGA is employed by the corporate state and I am engaged in advancing the cause of the constitutional state. I credit the centralized economy with creating a perverse cultural environment of snobbery on the one side and low self esteem on the other. Perhaps this explains OPEGA’s long history of cold disregard when It seems that we share a common purpose. It seems that many people in this corporate State perceive themselves in terms of where they stand on the corporate State ladder, and relate to others around them in accordance within the artifice of the corporate hierarchical order.
My once-friend kept repeating the theme that I had “stepped over the line” and “didn’t know my boundaries” but those lines and boundaries exist where he dwells, in the realm of those who benefit from the workings of the public private state. I’m not inside that system! I’m out here! Can’t you see, and the media isn’t something singular thing any more, its many voices telling many stories. I’m telling a story within a story, within a story. If I don’t tell my story, who will? And, btw, I have always colored outside the lines!
In contemplating these interactions, the question becomes “by what means am I perceived to be threatening my once friend, and O??” Perhaps they are afraid that I will Taylor Swift them as I am so doing now. They have become part of my story as Taylor Swift would make them part of her song. It’s your own fault, boys. If you hadn’t acted so bizaarly, I would not be writing you into this story! It’s anecdotal but it is also data. The OPEGA position draws a line between anecdote and data but when you do that, it creates a homogenized picture like the demographic categories data compilers contrive, which soon become very boring to read. To say that data is only bits of information is so old school physics!
Initially before O entered the picture, my friend was taking an interest in my reporting but now he cursed and raged. On both their parts, their reaction appears strategically irrational. If, when feeling threatened by a research journalist, one deals with the perceived threat by derogating the research and devaluing the output, one should not be surprised when the researcher responds like a researcher and investigates. The information is on line. How can his friend lose his job because I read it and ask him if he is one and the same? Perhaps he should not be publishing secret information online.
I scanned my memory for all my past interactions with OPEGA, once perceived to be sharing a common interest but after receiving no response to correspondences or inquiries on numerous occasions, I came to understand OPEGA as embedded into the system that I protest, if only because of the psychological cultural gestalt the system creates with everybody worrying about their spot on the totem pole. Seagulls don’t do that, so why should I?
History Keeps on Repeating Itself
The precursor to OPEGA is the Beldon Hull Daniels firm, an actor in the story I reported in I am a Baby Boomer, and this is the story of how my generation let the great wealth divide happen. The Daniels firm was hired by the Maine Legislature to evaluate the consistency between the practicing policies of the Maine Capital Corporation and its enabling statute, only to have their work ignored by the Maine Legislature, which was just preforming the actions mandated by their apparent job, while in the real world, serving the interests of the stockholders of MCC.
The Maine Legislature created OPEGA and funds OPEGA. I have used OPEGA reports in my own arguments and concur with their perspective on the Pine Tree Zone, but there is still the fact that OPEGA works from within the system and I from outside of it and the the State is a hand that feeds OPEGA.
Public Comments on OPEGA and the Pine Tree Zone
In2017 the Pine Tree Zone was scheduled to sunset. The 2017 Public Comments for congressional testimony concerning the Pine Tree Zone Tax Incentives begins with the testimony of five businesses who are beneficiaries of the Pine Tree Zone Tax Incentives. Unsurprisingly they all testify in favor of the Pine Tree Zone. That is followed by testimony from George Gervais, Commissioner of the Department of Economic and Community Development.
The DECD testimony references a report done by Investment Consulting Associates titled Comprehensive Evaluation of Maine’s Research & Development and Economic Development and Incentive Programs
The report begins with describing a review of previous reports:
Findings from Previous Studies The team reviewed previous reports and documents prepared for the State to understand incentive and investment history in the State of Maine. One concern echoed by multiple entities is that this series of evaluation reports should be performed differently and to suggest new strategies for enhancing economic development within the State of Maine. While the present report does suggest new action items, many of these items were also presented in earlier reports but have not been enacted. Many are still relevant, and the team has included additional specific implementable action items to address these ongoing concerns as well emphasis mine)
In May of 2015 there was a legislative bill in the works. It would set up an evaluation schedule, so we were told. George Gervais, Commissioner of the Department of Economic and Community Development, a partner and fiscal agent of the FAME corporation, testified before the Government Oversight Committee.
At one point OPEGA Director, Ashcroft asked Gervais whether it was the Legislature’s responsibility to implement the recommendations from the 2006 OPEGA report in order to improve DECD’s programs.
“I think that’s part of what’s gone wrong here,” she said. “There hasn’t been a follow-through on what needs to be done and an opportunity to get the report questions answered.”
Gervais didn’t directly answer the question.
It’s a good observation,” he replied.
….“The 2006 report hasn’t been our focus. It has not been, to use the term, our playbook,” replied Gervais, adding that his department has met most of the recommendations “within resources.” He (Mr. Gervais) said that forcing businesses to cooperate with audits should fall to Maine Revenue Services.
“Any action should be done by Maine Revenue Services because it conflicts with our role,” he said. “Our role is to help businesses. We can’t be pounding them over the head on other issues at the same time. But I agree that we need the data.” Portland Press Herald, Maine’s economic development chief says agency lacks staff to oversee tax incentive programs, by Steve Mistler Aug 20, 2015
The testimony from Government Oversight Committee of the Maine Revenue Service says about OPEGA’s request for information that it is too burdensome and too expensive for the Department of Maine Revenue to provide, giving substance to OPEGA’s position that it does not have the data to answer the following questions as stated in the 2017 OPEGA report on the Pine Tree Zone:
The OPEGA report lists these questions as unanswerable due to lack of data
To what extent are those actually benefiting from the tax expenditures the intended beneficiaries?
To what extent is the tax expenditure achieving its purposes, intent or goals, taking into consideration the economic context, market conditions and indirect benefits?
To what extent is it likely that the desired behavior might have occurred without the tax expenditure, taking into consideration similar tax expenditures offered by other states?
To what extent is the tax expenditure a cost-effective use of resources compared to other options for using the same resources or addressing the same purposes, intent or goals?
The 2017 DECD testimony promotes the great success of the Pine Tree Zone tax incentives, portraying itself as willing to work with an communicate with other agencies.
This report touched on the issue of better communication between state agencies to administer various aspects of PTDZ more efficiently. DECD appreciates that feedback and steps to improve communication and administration between various agencies is taking place. DECD congressional testimony pursuant to the Pine Tree Zone.
Testimony by the DECD is followed by more testimony by businesses addressing and contesting the OPEGA report and a testimony from Representative Ryan Fecteau supporting OPEGA’s claim that it was not supplied with adequate data to produce a viable report. There are different views on whether OPEGA was given adequate data.
The following is an example of why the method used for measuring data can affect the perception of success or failure:
Evaluation of Public Benefit Missing in Action
A 2014 Portland Press Herald article by Jessica Hall describes a report done Investment Consulting Associates, the same consulting firm that produced the 2017 report.
(The investigation) found that the Pine Tree Development Zone program’s costs exceed its benefits. Specifically, it said the PTDZ delivered total direct benefits to the state of $358 million in 2012, in terms of people employed and salaries and total sales in the state. The program, however, had $457 million in total direct costs related to lost taxes, administrative costs, overhead and other expenses.
…. According to the ICA report, the total value of corporate incentives was divided by the total number of newly created jobs, which provides a “rate per created job” or information on what governments “paid” for one new job.
Maine awarded total incentives worth $159,000 per created job for the period from 2010 through 2013, the report found. Portland Press Herald. Pine Tree Zones tax breaks costing state more than they deliver by Jessica Hall April 14 2014
A different system used in 2017 produced dramatically different results:
The IRR of the PTDZ CBA equals 297.2%, which results in a return of $3.972 on each dollar invested in the PTDZ program by the State of Maine, implying $2.972 of additional tax revenue generated by the PTDZ program for the State of Maine. As mentioned, this is the case in the scenario where all PTDZ recipients would not have realized their investment or expansion in the absence of the PTDZ program and, as such, is the most favorable scenario. 2017 Report
Its like comparing apples to oranges. I can’t wrap my head around how to effectively compare these two measures. I searched “cost per job” in the 2017 report but it produced nothing, but in comparing the methods used to to obtain information, the method used in the 2017 report is stated as being the same used in the 2014 report except for the Pine Tree Zone which used a method based on an assumption correlating to one of the questions that Opega proposed to answer; “To what extent is it likely that the desired behavior might have occurred without the tax expenditure, taking into consideration similar tax expenditures offered by other states?”,
The report produced by ICA stated that there was a special model used to collect data for the Pine Tree Zone which began with assuming that companies would not locate in Maine but for the Pine Tree Zone Tax exemptions, This explains the dramatic difference in results between the 2014 and 2017 reports, both produced by ICA, except that the description below makes it sound as if the IRR model just adds another level to the Costs Benefits Model. From what I have been able to discover, the IRR model replaced the Costs Benefits model.
The Economic Development Survey developed for the 2014 and 2016 reviews was used again during this evaluation to obtain information from participating companies on doing business in the State of Maine as well as to collect input values for the Cost Benefit Models (CBM). With Investment Consulting Associates (ICA) Comprehensive Evaluation of State Investment in Economic Development 4 Prepared for Maine DECD much hard work from both DECD and MTI staff, a completion rate of over 90% was obtained for those that replied to the survey request.
…… The IRR model for PTDZ was similar but included a sensitivity factor keyed to the assumption that companies made their decision to locate in Maine based on the “but for” clause in the PTDZ legal agreement. In other words, that if not for the incentive, the project may not have proceeded in Maine.
The DECD testimony is followed by a testimony from Investment Consulting Associates. The testimony states:
“Our survey of companies receiving PTDZ benefits yielded a response of 72% and evaluation of survey results enabled us to evaluate the real results of the program in terms of hiring and financial benefits”
In other words the data provided by the third party independent report referenced by the DECD is derived solely from those who receive the tax incentives.
In my study of the entire corporate welfare benefits system, it is consistently found that companies are commonly funded at least 50% by the taxpayers of Maine, all things considered. It is so common that the 50% subsidy comes across as the presumed natural right of private corporations in the public-private State.Tax incentives are key in transforming refundable tax credits into subsidies.
It is a common practice to place the refundable tax credits in one act and the tax incentives in another act as if separate and unrelated. However, a tax exemption can transform Maine’s Seed Capital Tax Credit into a subsidy worth 50% of its capitalization costs. Since a refundable tax credit is one in which if no taxes are owed, the holder is due a cash payment from the taxpayers, without the tax exemptions, a refundable tax credit may not be transformed into a subsidy.
What company benefiting from this generosity wouldn’t testify favorably for the continuation of this program? It is from this category of beneficiaries that the data in the Comprehensive Evaluation of Maine’s Research & Development and Economic Development and Incentive Programs, is drawn. The testimony of Investment Consulting Associates claims to have worked with the Maine Legislature and drawn from a much more inclusive body of stakeholders than the OPEGA report, and yet makes no mention of stakeholders outside of the government and the private beneficiaries of the Pine Tree Zone tax incentives, such as the taxpayers who fund the benefits without receiving them. Some would argue that the rest of the populous receives general welfare benefits but general welfare benefits do not equate with funding economic opportunities and in fact are designed to suppress economic growth, especially of an entrepreneurial nature, in the below the medium income sector.
The ICA testimony continues on to say “ The program has helped to bring businesses to Maine, resulting in a net improvement to the economic conditions of the State.“ That is one way of putting it, if one believes that a continually increasing wealth divide is what Maine needs. The Pine Tree Zone is used to create corporate welfare cities where in the tax-payer subsidized income of PTZ employees far exceeds that of the free enterprise economy of surrounding areas, driving up housing costs, which in turns drives existing populations out. The latter is based my own observation, not on a study of the effect of the Pine Tree Zone on the whole economy as opposed to its effects only on those who receive its benefits.
On March 19 2013, Douglas Ray, Development Program Manager for the Department of Economic and Community Development testified before The Joint Standing Committee on Labor, Commerce, Research, and Economic Development, saying this:
Of the 390 or so businesses participating in the Pine Tree Development Zone Program a vast majority, more than 300 are manufacturers, that’s roughly 80%. These businesses have pledged almost a billion dollars in investment and anticipated payroll of nearly $850 million and 74 hundred jobs.
Taking the figure of $159000 as the costs of incentives per job, as reported in A 2014 Portland Press Herald article by Jessica Hall, and 74 hundred jobs with a payroll of nearly 850 million pertaining to Pine Tree Zone Tax Incentive employees costs the state more than a billion dollars, $1,176,600,000.00 to be exact.Mr. Ray tells that the companies have pledged to invest almost a billion dollars. The average wage calculated on Mr. Ray’s figures is $114,864 annually, more than three times the median income in Maine in 2013.
Following the testimony from Investment Consulting Associates is a testimony from Maine AFL-CIO. This is a testimony in support of the OPEGA Report. The AFL-CIO testimony makes the point that businesses are required to hire at least one employee within two years of certification to receive a full package of corporate welfare benefits including discounted utility rates, reimbursements for purchases,sales tax exemptions and income tax credits. If the business fails to hire one employee, it’s certification is revoked but it does not have to repay any of the benefits it collected.
The same section has information on how businesses that are in the program that fail to create at least one job and are not a part of the employee tax increment financing (ETIF) expansion can receive assistance that is not proportionate to the number of jobs created. This creates a scenario where Maine is at risk of spending money in the form of forgone tax revenue through sales tax exemption and reimbursement benefits that is not fully offset by positive economic impacts resulting from new jobs. AFL-CIO Testimony
In the light of the above testimony, it raises the question, Are any of the reimbursed purchases used for investments in automation, considering that automation is the direction that “advanced technology” is headed? This would increase the bottom line for a business by reducing the need for expensive human labor. The money saved by the application of corporate welfare benefits could go toward capitalizing automation and when the corporate welfare benefits end, the company will not need to hire as many employees due to its advanced automation technology,
or else – automation will create new jobs, and learning new skills and updating technology will be a continuous process through out life, requiring continual capital reinvestments in both technology and skills as the older technology and skills become obsolete. That sounds like problem for quantum computing to solve, but our question is should the general taxpayer be financing the ownership class in this brave new world, using economic development ideas from the twentieth century?
Also there is the consideration that for the two years that the company is permitted to be provisionally certified for PTZ tax exemptions, it can apply the exemptions to the Seed Capital Tax Credit, worth 50% of their capital investment.
Title 10: COMMERCE AND TRADE
Part 2: BUILDING AND DEVELOPMENT
Chapter 110: FINANCE AUTHORITY OF MAINE
B. As used in this subsection, unless the context otherwise indicates, an “eligible business” means a business located in the State that:
(1) Is a manufacturer;
(2) Is engaged in the development or application of advanced technologies;
(3) Provides a service that is sold or rendered, or is projected to be sold or rendered, predominantly outside of the State;
(4) Brings capital into the State, as determined by the authority; or
(5) Is certified as a visual media production company under Title 5, section 13090-L. [PL 2009, c. 470, §3 (AMD).] (emphasis mine)
6. Reports. Any business eligible to have investors receive a tax credit under this section must report to the authority, in a manner to be determined by the authority, the following information regarding its activities in the State over the calendar year in which the investment occurred and for such additional years as may be required by the authority:
A. The total amount of private investment received; [PL 2001, c. 642, §10 (NEW); PL 2001, c. 642, §12 (AFF).]
B. The total number of persons employed as of December 31st; [PL 2001, c. 642, §10 (NEW); PL 2001, c. 642, §12 (AFF).]
C. The total numbers of jobs created and retained; [PL 2001, c. 642, §10 (NEW); PL 2001, c. 642, §12 (AFF).]
D. Total annual payroll; and [PL 2001, c. 642, §10 (NEW); PL 2001, c. 642, §12 (AFF).]
The section on jobs requires a report,only.
In 1976, the first enactment under the newly centralized Maine economy was the charter of the Maine Capital Corporation. A review of the MCC’s consistency with its enabling legislation was required in 1984. All agreed that it did not meet the standards of its enabling legislation, but allowed it to continue. The Beldon Hull Daniels report strongly urged that the MCC be made accountable to the State with respect to minimum standards and goals being included in the law, such as the number of new jobs to be created, for investors to qualify for the tax credit, but the Daniels recommendations were ignored.
Like the MCC, the Maine Seed Capital Tax Credit is refundable. It is required that jobs data be reported but there is no required minimum to meet.
So here we have a conspiracy theory!
In this conspiracy theory, a company can use the PTZ tax exemptions and the Seed Capital Tax Credit to capitalize advanced technology which will automate production reducing the need to hire expensive human labor, all within the law, as was the Cate Street Scandal, that costs Mainers 16 million dollars. It wasn’t a theoretical 16 million.
Following the testimony of the AFL -CIO is a testimony from Maine & Co protesting OPEGA”s claim that it did not have access to adequate data. Maine & Co asserts that OPEGA had adequate data, by which it means all the data pertaining to companies that directly benefit for the Pine Tree Zone tax exemptions. What else do we need to know?
OPEGA is very clear that they are not evaluating the performance of the program. Here is a list of items in the report that OPEGA reminds the reader that they did not do:
• They did not collect data.
• They did not speak to most of the stakeholders marketing the program.
• They did not speak to businesses that have used the program.
• They did not speak to people that have benefited from being hired by companies that use the program.
Even though OPEGA clearly and explicitly acknowledges these limitations in their analysis, it has not stopped people outside of the economic development community from inferring inaccurate conclusions.
By “economic development community”, Maine and Company appears to mean those who benefit from the tax exemptions, exclusively, failing to acknowledge that there is a much larger economic development community inclusive of those who pay taxes that are used for corporate welfare programs without themselves benefitting from those programs. Maine and Company then asserts that it knows for a fact that the data is there because it worked with ICA and sat on the legislative steering committee, but the testimony from ICA states that it got its data solely from the insiders club of the public-private state- sending its survey only to those who received the benefits and so it is no surprise that the majority of testimonies in the congressional report are from the same demographic from which ICA derived its conclusions.
Rep Ryan Fecteau, the Maine AFL-CIO, and the Maine Center for Economic Policy all supported OPEGA’s conclusions but Maine’s Pine Tree Zone tax exemptions were extended three more years.
Governor LePage did not sign the Pine Tree Zone Extension Act because LePage wanted the tax exemptions to be extended for five years. The three year extension places the end for new applications at December 31, 2021, during Governor Mill’s term, Five years would have put it in the next Governor’s term. LePage has been advertising his intention to run as Maine’s first third term Governor since he left office.
In the next year we should be seeing a new debate over a new extension of the Pine Tree Zones. There will probably be a new report. The new report should include both the Cost Benefits Model and the IRR model to better reflect the entire economic picture. The IRR model assumes that businesses would not locate in Maine without the Pine Tree Zone but we live in a new world today defined by corona virus.
To date Maine is one of the few states where the corona virus effect is low, let us hope it stays that way. Perhaps the new world of remote working will need to be incorporated into a new model which does not begin with the assumption that companies will not move to Maine, or anywhere else, if they are not highly subsidized by the taxpayers. It’s time for a new dawn. The time to start’s Maine’s Pine Tree Zone debate is now. While obtaining more information is desirable, there are difficult obstacles to overcome but ICA has already done one report with the Cost Benefit Data and another using the IRR model. There is no an obstacle, other than political will, to producing a single report that incorporates both models.