The LePage administration is hoping to continue a business incentive program that was designed to spur job creation in the state’s most economically depressed areas. But the Legislature’s watchdog agency says the Pine Tree Development Zone program, scheduled to expire at the end of next year, is poorly designed and doesn’t work very well.
The Pine Tree Zone program offers businesses an array of tax benefits, including income tax credits and sales tax exemptions for the purchase of business equipment, at cost of roughly $13 million a year. In exchange, the businesses agree to create jobs.
But according to the Office of Program Evaluation and Government Accountability, or OPEGA, the program may pay out more in benefits than the state receives in new jobs.
Jennifer Henderson, an OPEGA analyst, summed up her agency’s report during a presentation to the Taxation Committee on Monday.
“The current program design does not adequately support achievement of any of the program’s desired outcomes and also does not ensure that benefits flow only to businesses that add qualifying jobs,” she said.
Henderson said some companies could receive benefits for up to two years and never create a single new job. And the program was originally created to benefit economically depressed areas, but was expanded to include almost the entire state.
Those and other concerns from OPEGA have prompted some lawmakers to call for Pine Tree to end when new applications are halted at the end of next year. But the report has encountered pushback from the LePage administration and members of the business community.
A spokesman for the Department of Economic and Community Development declined to comment on the specifics of its proposal to extend the program, but he did say that the administration believes Pine Tree makes Maine competitive with states that have lower tax structures.
Republican state Sen. Andre Cushing of Newport said the 13-year-old incentive program should be evaluated based on a variety of factors, not just job creation.
“I think we’ve got to reflect on what this means holistically to the state’s economy and our future before we start cutting the baby up,” he said.
Other lawmakers suggested changing the purpose of the program from job creation to keeping businesses from leaving Maine. But such a pivot in purpose is likely to set up an intense debate next year over how the state can, or should, evaluate taxpayer-subsidized economic development programs.
This story was originally published Nov. 27, 2017 at 4:14 p.m. ET.
