A state legislator and beneficiaries of loan programs aimed at small businesses are expressing surprise and disappointment over Gov. Paul LePage’s veto Tuesday of a bill that would have authorized the state to issue $12 million in bonds earmarked for small-business financing.
The bill, scheduled for a veto override vote in the Legislature on Thursday, received strong bipartisan approval but could fail to garner enough Republican votes now that LePage has acted to prevent its passage, state officials said.
The bill would provide an additional $4 million to insure portions of bank loans made to small businesses under the state’s Commercial Loan Insurance Program, and put $8 million more into a revolving loan fund, both programs administered by the Finance Authority of Maine, a state financing agency.
LePage said in his veto letter that he supports the loan guarantee part of the bill, but not the infusion of new money into the revolving loan fund.
“I believe that borrowing money on the backs of taxpayers is not the right way to go,” LePage’s letter says. “Furthermore, the mechanism by which the $8 million portion of this bill is disbursed to the small businesses does not yield the highest return on Maine taxpayers’ investment.”
Including interest, the cost to repay the bonds would be roughly $15 million, according to a legislative analysis.
But for several Maine business owners, FAME’s loan guarantee program and its Regional Economic Development Revolving Loan Program have been crucial.
Mark McAuliffe, managing principal of the Portland-based pharmacy Apothecary By Design, said his business used the Commercial Loan Insurance Program, along with other state and local incentives, to open its two locations.
The company has gone from 12 to 60 employees since it opened in 2008, McAuliffe said.
“We would not have been able to open the business without that loan guarantee,” which covered 90 percent of a business loan issued by Bangor Savings Bank, he said.
A number of business owners and executives testified in favor of the bond measure at a March 27 hearing before the Committee on Appropriations and Financial Affairs.
The bill’s original language would have authorized the state to issue $73 million in bonds to fund seven business-development programs and organizations. It later was whittled down to $12 million.
Tony Rinaldi, co-owner of The Forks-based outdoor adventure provider Three Rivers, attributed the company’s steady growth in large part to the FAME loan programs.
“They have been instrumental in providing us with the ability to start and grow our businesses, and still do today with insurance on two major mortgages,” Rinaldi said. “We have been able to provide for 16 year-round employees and 125 seasonal employees totaling over $525,000 in payroll and over $65,000 in sales tax in recent years.”
David Weatherbie, chief financial officer of Seafax Inc., a Portland-based financial data provider for the seafood industry, said in his testimony that the company has grown to 85 employees since it was founded in 1985, thanks in part to FAME’s revolving loan program.
After Seafax received a revolving loan in 2001, it was purchased by new ownership, which saved the company from likely liquidation, Weatherbie said.
“That purchase enabled us to keep 55 jobs in Maine, and it also provided us with a platform for growth,” he said. “Our revenue has tripled since we got the initial funding, which has been paid off in full.”
Sen. Linda Valentino, a Democrat from Saco and Senate chair of the Joint Select Committee on Maine’s Workforce and Economic Future, said in a written statement that the measure would have a direct impact on economic growth.
“The governor doesn’t have to take our word for it, he could’ve listened to the dozens of bankers, business owners and economic experts who showed up to tell us the importance of this jobs bond,” Valentino said.
Carla Dickstein, senior vice president at Coastal Enterprises Inc., said she was surprised that LePage vetoed the bill, given his stated support for Maine’s microbusinesses, many of which have participated in the two loan programs. CEI, a nonprofit community development corporation based in Wiscasset, has contributed $5.2 million to businesses through the revolving loan program.
“It provides very flexible capital for small-business lending that helps loans happen,” Dickstein said. The governor also vetoed a second bill that would have made changes to the revolving loan program, including broadening the eligibility of businesses, increasing the cap on the maximum loan amount and adding downtown revitalization and economic sustainability as purposes of the program.
The revolving loan program reduces the risk to private lenders by covering a portion of the loan. It can only be used when the lender otherwise would not be willing to issue a loan based on the perceived risk of default. In a revolving loan program, funds paid back from previous loans are used to issue new loans.
Since it was created by the Legislature in 1993, FAME has disbursed $16.2 million, which has seeded 772 revolving loans to Maine businesses, said FAME Government Affairs and Communications Manager William Norbert.
The state’s $16.2 million allocation has leveraged nearly $259 million in additional private and public financing, an overall ratio of 16 to 1, Norbert said.
The revolving loan program has helped to create and retain a total of about 10,500 jobs, he said.
Demand for the program has increased and most of the allocated funds are tied up in loans, leaving little money left to subsidize new loans, Dickstein said. The additional $8 million would allow the program to increase its loan capacity and continue without interruption, she said.
“There hasn’t been an addition for a while,” Dickstein said.
The bill was passed by a vote of 29-3 in the Senate, and by 123-23 in the House. If the veto override is successful, the measure would go before voters on the November ballot.
J. Craig Anderson can be contacted at 791-6390 or at: