MADISON — Town officials said at a public hearing on Thursday night that a town-owned natural gas pipeline would earn enough revenue after about five years to offset most municipal taxes.

Preliminary projections show the town would have a yearly return of about $3.2 million after the approximately 80-mile pipeline has operated for five years. That amount is about enough to fund the town’s current operating budget of $3.23 million.

Though officials said Madison residents may no longer have to pay taxes to the town, it would not eliminate their contributions toward county and school budgets. Also, the Maine Public Utilities Commission has final say on natural gas rates, and the projected return on investment depends on a growing demand.

It also depends on whether Madison voters approve a $72 million bond request at the polls Tuesday, Nov. 8. The bond would finance the project, which is also being pursued by a private company, Portland-based Kennebec Valley Gas Co.

“Gas pipelines appear to make considerable income. We want that income to come back and offset local taxes,” Town Manager Dana Berry said. “This is for the greater good of central Maine.”

The pipeline would run from Richmond to Madison, feeding industrial, commercial and residential users along the way, Berry told a crowd of about 85 people Thursday night at Madison Area Junior High School. Natural gas is projected to be about one-third of the cost of oil this winter, according to the U.S. Energy Information Administration.

Before the meeting, resident Paul Fortin questioned whether the town could use pipeline profit to offset the municipal budget. Though private companies are able to use their profit as they wish, nonprofits, including towns, follow different rules, he said.

In an interview, Maine Public Utilities Commission Chairman Thomas Welch said he couldn’t say either way whether Madison would be allowed to subsidize its town operations with pipeline revenue. That’s because it depends on what structure Madison ultimately presents to the commission.

In an interview, Maine Public Utilities Commission Chairman Thomas Welch said he couldn’t say either way whether Madison would be allowed to subsidize its town operations with pipeline revenue. That’s because it depends on what structure Madison ultimately presents to the commission.

“I don’t want to say based on what I know at this point that the answer is absolutely yes or absolutely no,” Welch said, adding, “I don’t doubt that we’ll have to resolve it.”

Madision Economic Development Director Joy Hikel said it will be possible to revert pipeline revenue to the town. “This is an innovative project. The PUC doesn’t have a precedent,” she said. “The preliminary investigations look fine. This is a viable project, and probably the competition would agree with us,” she said.

Resident Peter Sirois said he supports the Madison-owned pipeline.

“I see them as a group of opportunists who just see a really fast way to make a lot of money,” he said about Kennebec Valley Gas.

Some residents may have questioned executive sessions selectmen have held over the last few months, Sirois said, but they are allowed to negotiate certain issues in private.

In comparison, he said, “Private entities do not have to divulge anything at any time to anybody.”

Resident Doug Denico said he doubts the projected savings. “That factual statement you’ve got up there is not right,” he said. “I’d like to see a letter from the PUC saying that is something viable.”

Denico said the town should be talking about the risk to taxpayers. “As I understand it, municipal bonds are cheap because of why? It’s because of what they’re really backed by and that’s people like me, because you can always go to those people and get redress if someone defaults,” he said.

“People like myself are being taken advantage of here,” he said.

Resident Al French responded, “If it’s not going to work for us, it’s not going to work for the other guys either.”

Resident Jeff Paine said he’s pleased that the town won’t pursue the project unless it’s feasible to do so. “You can’t ask for much more than that, in my opinion,” he said.

The town gave Tony Buxton, a principal of Kennebec Valley Gas, permission to speak at the public hearing.

“What we want you to realize is, you don’t have to build a pipeline to get gas,” Buxton said. “We’ll bring gas to Madison.” Buxton also told the crowd that it’s risky to bond for $72 million.

“What we ask you to think about is whether you need to do that … or whether you think the private sector ought to do this,” he said.

Berry said the return on investment the first several years the pipeline operates will be about $1.2 million. The projections are based on the town borrowing $72 million at a 4 percent interest rate over 20 years.

He said a private company would likely receive an 8 percent interest rate and projected the town can do the project $41 million cheaper than Kennebec Valley Gas over 20 years.

A more expensive project would translate into a higher cost of natural gas for consumers, Berry said. Also, a privately owned project would not provide tax relief to Madison citizens. He added that revenues from the pipeline would also be used to build lines able to feed residential areas.

A group called Madison Taxpayers Against Bad Debt handed out fliers Thursday night stating that taxpayers’ homes would be at risk if the town defaults on the loan. Hikel responded that the private company’s project would be more expensive and therefore it would be more likely to default than the town. The town can borrow money cheaper and doesn’t have stockholders expecting a high, quick rate of return, she said.

“We will have less of a debt obligation per year than they would,” she said.

Berry said even if residents approve the bond, the town won’t do the project if it turns out it won’t save residents money.

“The board of selectmen would not issue bonds unless they feel they are assured there is sufficient revenue to guarantee the debt,” he said.

In addition to Berry and Hikel, residents listened to a presentation by Richard Ranaghan, senior vice president of public finance at Gorham Savings Bank, who confirmed that commercial interest rates for large development projects would be two to three times more expensive than those offered to a municipality.

The town is also exempt from paying sales tax, Ranaghan said, making it cheaper for Madison to buy materials and supplies.

Calvin Ames, superintendent of Madison Electric Works, said the pipeline would allow the electric utility to build a plant to generate its own electricity.


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