The Quoddy Tides

2007 March 9

Perry financial agreement with Quoddy Bay outlined, debated

by Eileen Curry

Deal or no deal, that's a question that Perry voters will be asked to answer in a referendum on Monday, March 26. Town counsel Erik Stumpfel presented an overview for a little over an hour on March 7 to a group of about 50 people on a proposed Financial Framework Agreement between the Town of Perry and Quoddy Bay LNG. He reviewed legal issues, financial projections and other host community agreements for LNG projects. Stumpfel went over Federal Energy Regulatory Commission (FERC) procedures, the taxable status of a pipeline, Pine Tree Zone eligibility for the project, impact fee ordinances and the results if the town decided in favor of the financial package. Projections and several mill rate impact scenarios were given, with and without entering into a final package with Quoddy Bay LNG.

Stumpfel called the agreement "a term sheet for a final document," which would be asking Perry voters to "approve the basic terms" of the agreement. Final documents would include a tax increment financing (TIF) district approval and a TIF credit enhancement agreement. If TIF is not approved, Stumpfel explained, Quoddy Bay LNG would not be obligated to make the guaranteed payments provided in the Financial Framework Agreement.

Resident Gary Guisinger asked Stumpfel, "Why don't you do the TIF first?" Stumpfel said that the final agreements and the TIF approvals "would not constitute local permit approvals," and it wasn't necessary "to supply the TIF before the project was built."

The Financial Framework Agreement states that Quoddy Bay LNG would make minimum annual payments to the Town of Perry (taxes included) of $3.6 million per year for 25 years, adjusted annually for inflation. The payments are expected to start in FY 2008, according to the document, at least two years before the majority of the new value from the project would otherwise be taxable by the town. Quoddy Bay would develop an Emergency Response Plan (ERP) and Facility Security Plan as part of the FERC license application process, to cover the costs of additional fire protection and public safety services from the town; a total of $300,000 per year of these costs are included in the annual payment. Quoddy Bay LNG would also pay the full cost of any new facilities, fire trucks, police protection or other equipment required; make a one-time donation of $600,000 to the town to pay for school renovations and expansion and $400,000 for educational equipment; create a college scholarship fund for students from Perry, and contribute $100,000 per year to the fund for 25 years; pay to upgrade the Old Eastport Road and Cannon Hill Road and repair them as necessary upon completion of construction of the LNG project; reimburse the Town of Perry's legal and professional costs associated with the project; cooperate to make either compressed natural gas available for local consumption; give hiring preference to residents of Perry, Eastport and members of the Passamaquoddy Tribe, to the extent of the law, for services and jobs in connection with the project; and negotiate with local fishing organizations regarding impact on commercial fishermen.

Stumpfel was asked by a member of the audience, "What if Quoddy Bay (LNG) doesn't pay?" Another question was: "You're predicting a $250 million project, what if the project is $400 million, then what?" Stumpfel said, "The town and Quoddy Bay can set some sort of assurances. We haven't had that part of the agreement discussed, but the town could place a tax lien, or engage in the guidelines of any non-payment matter to resolve the issue." Quoddy Bay LNG Project Manager Brian Smith said, "To take out any uncertainty on this issue, it doesn't matter if we build one or three tanks, we will still pay the annual amount to the town."

Perry resident John Cook presented a PowerPoint presentation in opposition to the financial agreement between the LNG developer and the town. Cook said, "Our conclusion is that this is generally a bad deal for Perry." Cook said that the agreement "only talks about revenue, doesn't consider costs, staffing needs, operating costs and it is far too premature to present it to the town. Perry voters are not in control here, the project is open-ended and basically a blank check." Cook outlined a "dismal outlook" for Perry's fire and safety issues and that "Quoddy Bay will only provide for Perry and not the surrounding areas." He commented, "The school part of it is a charade, there are no administrative features, and Quoddy Bay will be in control of everything."

Gary Guisinger, a resident in opposition to the package, read a statement, saying, "Since projects of this magnitude of an LNG facility can impact a community with almost unimaginable changes, it is prudent that all the facets of the proposals be scrutinized so as to assure the process is fair and transparent. It is with these goals in mind that the Perry Citizens for Responsible Growth, in cooperation with Save Passamaquoddy Bay, commissioned with the Yellow Wood Associates to analyze the Financial Framework Agreement put forth to the town of Perry from Quoddy Bay. Their study, and subsequent report, brings up numerous questions that the voters of Perry should have answers to before committing their town to this agreement."

The Yellow Wood Analysis summary that was prepared by Shanna Ratner was distributed during the hearing. It states, "The Financial Framework Agreement is, essentially, an agreement to agree. It does not take effect until a comprehensive agreement is negotiated and signed, and then only if a tax increment financing district (TIF) for the facility is also established by the Town of Perry. Neither the comprehensive agreement nor the TIF agreements are available for review. Quoddy Bay is not obligated to any of the terms in the financial agreement unless and until a comprehensive agreement is negotiated and signed and a TIF is established. However, since the financial agreement states that the comprehensive agreement 'shall include the following terms and no others,' the town will not have the opportunity to reconsider if it decides the benefits are less than anticipated and/or inadequate to meet town needs. Neither will the town have the ability to terminate the financial agreement once it is approved by voters on or before April 1, 2007, although Quoddy Bay will have the right to terminate it."

During the hearing a concern was raised regarding Stumpfel's role as counsel for the Town of Perry. "Have you been working in the town's best interest?" and "With all due respect, how can you represent the town properly while you are being paid by Quoddy Bay?" Stumpfel, who was seated when the question was asked, stood up and briskly walked to the podium and stated, "My obligation professionally is to the Town of Perry. This question has been asked before and is personally distressing. I am not being paid by Quoddy Bay LNG, I am being paid by the Town of Perry. This question has troubled me greatly. There is no secret conspiracy here. I have only recently met Brian Smith of Quoddy Bay LNG, and this question is basically saying that I am violating the Maine Bar rules. I am not, thank you."

The town has scheduled further discussion about the Financial Framework Agreement between Quoddy Bay LNG and the town for Wednesday, March 14, at 7 p.m. at the Perry Elementary School.