Financial Framework Agreement between
the Town of Perry and Quoddy Bay LNG
Is this really the best deal available for the Town of Perry?
Let’s look at the other side of the story!
The Framework Agreement:
- Would eliminate the town’s right to negotiate for more favorable terms.
- Would give Quoddy Bay the community endorsement it needs for its FERC application. With that endorsement, Quoddy Bay will have no further incentive to negotiate with the town.
- Gives Quoddy Bay investors assurance that they will never have to pay the town more than $3.6 million per year—no matter what the impacts on the town might be. The $3.6 million isn’t a minimum payment; rather it is a MAXIMUM payment.
- Specifies no particular value to any part of the facility. It does not even limit the scope of construction. It lists an LNG regasification and storage facility, plus pipelines, temporary housing, and OTHER FACILITIES. This could be $250 million or it could be $500 million.
- Gives Quoddy Bay (but not the Town) the right to terminate the Agreement.
Guaranteed Annual Payment to the town of Perry:
- Freezes the total amount that Quoddy Bay or its investors will ever be required to pay the Town of Perry, regardless of the fiscal impacts on the community.
- Protects Quoddy Bay and its investors from future impact fee ordinances that might be assessed to other business in town.
- There is nothing in the Agreement that specifies the annual payment will be made every year for 25 years. Rather states that the framework agreement itself “shall terminate immediately on the occurrence of one of the following events…March 26, 2027,” barely twenty years out, not 25.
Comprehensive Spending Plan
The Financial Agreement focuses exclusively on revenues. Fiscal health is a function of the relationship of costs to revenues.
Perry needs a comprehensive spending plan before approving any financial agreement. A spending plan should address all additional costs the Town will incur as a result of the development, as well as infrastructure and services that will affect future budgets
The Town of Perry will require 24/7 365 days a year professional staffing of emergency personnel and equipment. Additional police and firefighters may be required during construction.
The Town should consider an emergency operations center that would direct and control response functions and stock emergency kits. An effective communication infrastructure would be needed to connect all responders.
This development would necessitate full time staffing of town government to handle the details, plus the infrastructure to house them.
It has been stated that since Perry is expected to house only a portion of the project, it would bear less of an impact. Any community which bears the responsibility for any part of this development bears the full array of impacts. It is unfortunate for Quoddy Bay that they are placing the facility in two or, perhaps, three communities. All of these communities will share similar impacts.
TIF District Approval
Requires that the town create a TIF district which requires a great deal of planning and oversight.
The purpose of a TIF is to encourage economic development in a municipality. It is not intended to be a device which allows a municipality to forego paying its share of county taxes and sheltering state subsidies.
Municipal TIF monies are covered by specific rules and regulations. A municipality cannot use the funds any way it wants.
A TIF plan requires State approval and is subject to close supervision by the State. Annual reports are required. And if the expenditures do not meet the requirements, the tax deferral and revenue sharing features of the TIF will be nullified.
ERP Impact Fee Payment:
This Impact Fee is expressly limited to those items required under the Energy Policy Act of 2005”.
The Town is responsible for the first $3000,000 of these fees and that comes out of the $3.6 million.
Any additional reimbursements for impacts are also “expressly limited to those items required under the Energy Policy Act of 2005”.
The detail in the Agreement (new fire and emergency services, etc.) is not in the Energy Policy Act, and is, therefore, misleading
The Energy Policy Act of 2005 simply states in Sec 3A ©(1): “In any order authorizing an LNG terminal the Commission shall require the LNG operator to develop an Emergency Response Plan. The Emergency Response plan shall be prepared in consultation with the U.S. Coast Guard and State and local agencies and be approved by the Commission prior to any final approval to begin construction. The plan shall include a cost sharing plan.”
The Energy Policy Act of 2005 continues in Paragraph 2: “A cost sharing plan developed under paragraph (1) shall include a description of any direct cost reimbursements that the applicant agrees to provide to any State and local agencies with responsibility for security and safety----“ (A) At the LNG terminal; and (B) in proximity to vessels that serve the facility.”
By signing this agreement, the Town is limiting Quoddy Bay’s cost sharing responsibilities to town-related costs and making the Town responsible for any contributions to any larger regional effort. An accident can occur anywhere along the LNG tanker route, as well as at the tank farm and pipeline, and coordination will be required beyond Town boundaries.
Donation for School Renovations and Updating:
This is a one-time feel-good provision that does not take into consideration any future impacts of the LNG facility on the school.
Perry voters recently turned down an expansion of the school at a cost of $400,000. In less than a year, that cost has escalated to $600,000. This $1 million does not get adjusted for inflation. It does not get paid for an indeterminate time, during which time both our needs and inflation will increase the costs.
Any future transfer of applicable licenses or the facilities to another owner does not require this payment to be honored
Quoddy Bay Scholarship Fund.
All scholarship recipients must be confirmed by Quoddy Bay.
Timing of Payments and Contributions:
Quoddy Bay makes none of these payments to the town of Perry until or unless they receive full permitting and secures both a supply and investors.
Improvements to Old Eastport Road and Cannon Hill Road
Who will determine if the roads are adequately improved or if they are brought back to their “existing condition”?
How will “existing condition” be documented and at whose expense?
Cost and Fee Reimbursement Payments
Limits legal and professional expenses to those pre-approved by Quoddy Bay. What if the Town wants a second or third opinion and Quoddy Bay does not approve? What if the town needs legal representation for an action against Quoddy Bay?
Residential Property Buy-Out Program
Has no arbitration provision
Limits the buy-out to specific properties and does not take into account any additional properties that may be affected
Sellers must agree to buy-out offer by 12/31/07. This means that ownership of their own property will be tied up for one to two years or more without even knowing that Quoddy Bay can secure permits or financing.
Local Access to Natural Gas
So weak and vague as to be entirely unenforceable and essentially meaningless.
What does it mean that “Quoddy Bay will cooperate with the Town and other local communities for local supply?”
Local Hiring Preference
So weak and vague as to be entirely unenforceable and essentially meaningless.
The clause “To the extent feasible and consistent with applicable law” relieves Quoddy Bay of any measurable obligations.
Stumphel has repeatedly advised the selectmen that this is not enforceable.
Impacts to Local Fishing Industry
Under this provision, Quoddy Bay has no obligation to financially compensate fishermen for losses.
What is the “local fishing industry”? Does this include only licensed Perry fishermen? What is “potential negative impact” and who decides whether it is caused by Quoddy Bay? Who are the negotiating representatives? What if, after negotiations, negative impacts persist?.
Transfer of Licenses or Facility and Enforcement
There are no provisions for enforcement of the Financial Framework Agreement in the Agreement itself.
Any agreement is only as good as its enforcement.
Is the Town prepared to put funds aside to enforce the Agreement through arbitration or the courts if necessary?
Is it actually legally feasible to enforce the agreement if and when Quoddy Bay is sold to someone else? If not, it will be null and void as soon as such sale occurs.
The Agreement could state that Quoddy Bay will remain liable for the payments even in the event of such a transfer. It does not.
Other Impacts
The Agreement does not take into account the reduction in real estate values that will partially offset the added value of the Quoddy Bay LNG facility. The Whole Bay Study estimates that 113 impacted properties lie in Perry.
There is no mention of another class of businesspeople likely to suffer losses, such as businesses that depend wholly or in part on the tourist trade.
The idea of zero property taxes for Perry taxpayers creates an inequitable situation. One property owner might pay $200 in taxes. Another might pay $5,000 in taxes. Those who need the most will benefit the least.
Does not specify who will ensure the safe and lawful handling of solid waste and sewage for the labor camp.
If Perry voters reject the Framework Agreement:
Quoddy Bay still needs community endorsement for their filing process with FERC and the State of Maine. They will still have an incentive to negotiate further with the Town of Perry.
If Perry voters approve the negotiating committee in the referendum vote of March 27th , a broad representation of community members will negotiate on behalf of the whole town. (Such a committee was approved at a town meeting of 2/1/07 by a 2–1 vote and subsequently blatantly ignored by two members of the board of selectmen. Let’s do it again.)
It needs to be pointed out that as “just another taxpayer,” Quoddy Bay could be taxed on the value of the business profit, reportedly as much as $3 million per day at optimal operating conditions. Erik Stumphel, of Eaton Peabody, pointed out, at the information meeting of February 6, 2007, that should the facility cease to operate and be unable to keep up their tax payments, it is possible that the assessors could be directed to assess the value of the property on the defunct business revenues. The reverse is also true.
It is also true that if voters reject this agreement, Quoddy Bay can be assessed any and all impacts that affect the town.
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