The Quoddy Tides

Eastport, Maine

2007 March 23

Perry ponders yea or nay:
Proposed financial package examined

by Marie Jones Holmes

Perry voters will go to the polls on Monday, March 26, to vote on several items including a proposed Financial Framework Agreement between the Town of Perry and Oklahoma-based Quoddy Bay LNG. The document is an agreement to negotiate a comprehensive financial agreement in good faith. Quoddy Bay LNG hopes to construct a two-billion cubic feet per day liquefied natural gas (LNG) facility at Pleasant Point's Split Rock site and a tank storage site in Perry.

Under the agreement, Quoddy Bay would guarantee an annual amount to the town of $3,631,210 to be used for any municipal purposes. If the value of the construction at the Perry site is valued at more than $3.6 million, the town would not get any additional compensation. The proposed agreement states, "In exchange for the ongoing financial commitment by Quoddy Bay and to provide financial predictability for future investors in the project, Quoddy Bay's annual payment is dependent upon the town of Perry establishing Tax Increment Financing (TIF). Quoddy Bay shall not be entitled to an tax reimbursement under a TIF unless the town's mill rate in any given year is high enough to cause Quoddy Bay's assessment to be higher than the annual payment amount, in which case Quoddy Bay shall be entitled to a tax reimbursement under the TIF that would allow Quoddy Bay's tax payment for that year to remain at the agreed annual payment amount. Through the financial agreement, the TIF is being used to set a cap on the amount of taxes Quoddy Bay will owe the town of Perry on an annual basis."

The TIF program is administered by the Department of Economic Community Development (DECD), and once a request is filed it is given close scrutiny. If the TIF is not properly structured to meet the goals for which the TIF is intended, the State of Maine may disallow it, thus making the financial agreement null and void. Within 30 working days the DECD will respond to the request. A TIF establishes a geographic district within which any value added to the tax base by development is set aside from the overall property value assessment, which allows the town of Perry to keep the added value of the LNG development off the state assessed value list for the town. This allows the town to continue to receive general revenue sharing funds and education revenue sharing funds from the state that would not be received if the value of the development were not protected by a TIF. The designation of a TIF district requires a local public hearing, the majority vote of the municipal legislative body and state approval.

Items 9, 10, 11 and 12 in the Financial Framework Agreement are subject to question on several points. Item 9 deals with a residential property buy-out program. Quoddy Bay would agree to purchase, at the election of the landowner, certain residential properties for a purchase price that is equal to 150% of the current appraised value. The seller would have to notify Quoddy Bay in writing on or before December 31, 2007, of the desire to sell the residential property. Shanna Ratner of Yellow Wood Associates, in reviewing the agreement, points out there is no guarantee that Quoddy Bay will have unappealable permits by that date. "Therefore, property owners are being told they must agree to sell to Quoddy Bay before they know for sure whether or not the development is going to happen," Ratner points out.

Item 10, local access to natural gas, states Quoddy Bay will cooperate with the town and other local communities in negotiations for local supply of compressed natural gas delivered through a local pipeline distribution system. Quoddy Bay has stated it will not be involved in the sale of gas to the communities. Distribution systems are dependent on sufficient population areas to make them financially feasible. For example natural gas flows through the pipeline from Baileyville to Veazie before any community has access to it. A lack of population centers along the pipeline route makes it a poor investment.

Item 11, concerning local preference, states, "To the extent feasible and allowed by law, Quoddy Bay will give a local hiring preference to residents of Perry, Eastport and members of the Passamaquoddy Tribe for services and jobs in connection with the project." Eaton Peabody attorney Erik Stumpfel at the March 14 Perry public hearing noted that this could be subject to interpretation. Federal and state laws deal with discrimination in hiring, and "local preference" could be challenged. Stumpfel, in a December 4, 2006, memo to the Town of Perry Board of Selectmen, recommended, "While Maine law does not expressly prohibit the town from negotiating local preference provisions in its agreements with Quoddy Bay LLC, such provisions may be subject to challenge under federal law. Accordingly, we recommend that the town not attempt to include a local preference requirement in its agreements with Quoddy Bay."

Under Item 12, concerning commercial fishing impacts, Quoddy Bay only agrees to negotiate with fishermen.

The final agreements and TIF approvals would not constitute local permit approvals. Final permit approvals may impose additional obligations and financial requirements on Quoddy Bay, as approval conditions.

At the March 14 public hearing, Stumpfel presented a review of the agreement and may have summed it up best when he said, "Even if it [Quoddy Bay] obtains all permit approvals, Quoddy Bay must finalize its financing and supply agreements before the project is built."


© 2007 The Quoddy Tides
Eastport, Maine
Article republished on Save Passamaquoddy Bay website with permission.