MADISON — Town officials have consulted attorneys on how to react to opposition about their proposal to build a natural gas pipeline, received letters of interest from energy companies and shared among themselves state and national news pertaining to natural gas.

They have worked closely with the town’s lawyer, an engineering firm and a banker in developing their proposal to build a $72 million pipeline through 12 central Maine municipalities.

They have gauged the willingness of major industrial customers along the proposed route, examined relevant statutes within Maine law and researched ways to estimate operating expenses.

These are some of the many things in hundreds of documents released Monday morning, the day before today’s election when Madison voters will decide whether to approve the $72 million bond request to finance the pipeline. A private company, Portland-based Kennebec Valley Gas Co., is also proposing to build a pipeline.

Town officials collected the more than 700 pages of emails, letters, meeting minutes, news articles, financial projections and engineering analyses after Madison resident Doug Denico requested Oct. 24 that they be made public under the federal Freedom of Information Act.

Denico is a member of the group Madison Taxpayers Against Bad Debt, which opposes the proposed town-owned pipeline and has received funding from Kennebec Valley Gas.

“The information is on the public computer for anyone who wants to come view it,” Town Manager Dana Berry said, referring to a computer at the town office. “We’ve been as open as we can be. We don’t have anything to hide.”

The documents reveal relatively little new information. But the collection of all available public data shows that natural gas research has been ongoing for two years.

In one of the hundreds of emails, Madison’s Economic Development Director Joy Hikel wrote to William Van Tuinen, assistant to Madison assessors, on Oct. 3: “We have been working on how to bring natural gas to Madison for two years and were quite surprised to hear Kennebec Valley Gas Company paralleled our plan. We also made an overture to KVGC to meet with us about us bonding for the pipeline project but they did not contact us.”

Taxable or not taxable?

No Madison residents viewed the documents on Monday, but an attorney with the Preti, Flaherty law firm did. Janet Mills, a former Maine attorney general, was at the Town Office on behalf of Kennebec Valley Gas and said the most surprising aspect of the documents was what she didn’t find: an analysis of whether the bonds would be tax-exempt.

“The lack of analysis about that very fundamental issue — that’s very bothersome,” she said.

She was talking about whether Madison has the ability to lock in at a lower interest rate on the bonds than a private company. Because it is a nonprofit entity, the town says the investors who buy Madison’s bonds do not have to pay income taxes on the interest that they earn — making them tax-exempt bonds. That is why the town has projected it can do the project about $40 million cheaper than Kennebec Valley Gas over 20 years.

But Mills questioned whether Madison could issue tax-exempt bonds on a pipeline that extends into other municipalities. If the pipeline is taxable property, she said, are the bonds still tax exempt? If they’re not tax-exempt, Madison’s project would be more expensive.

Berry replied that the town has looked into the matter, and “the decision of whether it’s property taxable is still in limbo.”

If the pipeline is determined to be taxable, the town will pay property taxes to the pipeline communities in the form that best fits their needs, whether through direct tax revenue or a tax-increment financing (TIF) district, Berry said. The TIF would act as a tax shelter for those towns and would not require a percentage to be returned to Madison.

If it’s determined that the pipeline is not taxable, Berry said, Madison would make equivalent payments to the pipeline communities anyway, in what’s referred to as payment in lieu of taxes.

In an email in the collection, Berry wrote on Sept. 22 to Lee Bragg, the town’s attorney, “I think we would want to discuss with each town (sic) some may prefer tax revenue and some may prefer a possible TIF, we would have the flexibility to discuss with each Town individually.”

Bragg wrote on the same day: “Typically, facilities owned by the Town are not subject to property tax assessment. Further investigation is warranted with respect to confirming the future tax status of the pipeline, should it be owned by the town.”

Town was prepared

The collected documents also indicate the town prepared for a request for documents under the freedom of information law.

“I suggest marking sensitive documents ‘Confidential — Prepared for executive session discussion.’ There is a pretty good chance that we will receive a FOIA request for all of the preparatory material,” Bragg wrote in an email Oct. 21.

According to the compiled documents, officials have also been discussing the necessity of large industrial customers.

“Key anchors that would need to commit offtake agreements in order for the project to proceed are likely to include: Huhtamaki, SAPPI and Madison Paper Industries (MPI). Based on preliminary discussions with representations of backyard (sic) Farms, there may also be some interest in connection,” Jon Edgerton, with Wright-Pierce engineering, wrote in an email on Oct. 23.

The town has also discussed how to combat opposition mailings and advertisements paid for in part by Kennebec Valley Gas.

“Yesterday I suggested a postcard, (sic) I’m not comfortable with that recommendation as I’ve thought about it. It may appear too slick, and too campaign-like. I think the Town should position itself to take the high road and respond by posting a letter on the town’s website addressed to citizens from the Board of Selectmen,” wrote Kay Rand, an attorney with Bernstein Shur law firm.

The town also received correspondence from a couple of energy companies, including Northeast Energy Solutions.

“We have given your proposed project extensive thought and believe there is more value to the project than you may be aware. Also, we believe that Madison itself owning the project (instead of Kennebec Valley Gas Company) has both economic and strategic value to the Town and Madison Electric Works,” Calvin Bell, with the company, wrote in an email to the town on Sept. 29.

Over the weekend, Madison Taxpayers Against Bad Debt sent a mailing to Madison voters stating that if the town defaults, the bank will sell residents’ homes, cars and trucks to pay off the bonds.

Bragg responded by saying, “It is not accurate to say that the town would be mortgaging the property of all Madison residents as collateral for the bonds. The pipeline itself would provide collateral, as would the irrevocable gas purchase contracts. This is the same collateral that the private developers plan to use for their financing.”

Erin Rhoda — 612-2368

[email protected]


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