A bill to modify state valuations for Skowhegan, Madison and two other towns to reflect the loss of local paper mills’ value has cleared hurdles in the Maine House of Representatives and Senate, but has a long road ahead before final passage.

Hanging in the balance are millions of dollars in local property taxes and potentially higher tax rates, as the struggling paper industry also faces the prospect of layoffs because of a challenging market environment.

The bill’s primary sponsor, Rep. Jeff McCabe, D-Skowhegan, and co-sponsor Sen. Rod Whittemore, R-Skowhegan, both said Wednesday they are trying to ensure passage of the measure, which would refresh the state’s valuation of the four towns immediately and allow adjustments to state revenue sharing and general purpose aid for schools. McCabe amended the bill, which originally included only Skowhegan and Madison, to also include the towns of Jay and East Millinocket.

Following passage late Tuesday, L.D. 281 headed to the special appropriations table for ratification and delivery to the governor’s desk for signature, but Gov. Paul LePage is expected to veto it.

Meanwhile, the S.D. Warren Co., the legal owner of the Skowhegan mill property, has filed an appeal of the Skowhegan Board of Assessor’s denial in April of the company’s request for a tax abatement. If that appeal is successful, it would lower the value of the mill further.

Whittemore said in a news release Tuesday that “the decline in Maine’s paper industry has hit our region hard.”

“I’m pleased that my colleagues in the Senate have joined me in supporting this measure to ensure residents of Madison and Skowhegan will not face more challenges as a result of the loss in valuation of Madison Paper and S.D. Warren,” he said.

The House and the Senate voted to move the bill to the Appropriations Committee table because of a “fiscal note” that has to be satisfied to deal with the revenue shortfall because of the devaluation of the four towns — Madison, Skowhegan, Jay and East Millinocket.

McCabe said Wednesday that legislators “have some ideas” to help find money for the towns, since the lower valuation will affect the state budget.

“They’re looking at sources of money right now,” McCabe said. “There may even be some surplus in education funding, and there might be some into-the-year savings in other areas. They’re trying to find a source of funding that is not earmarked for anything else.”

Concern about the mill valuations comes as the paper industry struggles with costs and layoffs. Verso Paper Corp. closed its Bucksport mill at the end of last year, idling more than 500 workers.

Last year, Sappi Fine Paper North America announced it would trim 5 percent of its workforce nationwide, including an undisclosed number of positions at the paper mill in Skowhegan. Earlier this year, Madison Paper furloughed 110 of its workers for about two weeks as a cost-saving measure.

AN EMERGENCY?

The bill originally called the mills’ loss of value and its effect on the towns “an emergency” and that the legislation is “immediately necessary.” The towns’ valuation, which affects state revenue sharing, wouldn’t be changed for state purposes, including revenue sharing, for another two years, though the mills’ revaluation affects the town now.

It wouldn’t affect the towns’ general purpose aid for schools for three years.

The emergency enactor, or preamble, to the bill was dropped Tuesday night in the House, but the Appropriations Committee could restore it later, McCabe said.

With the emergency designation, the measure would become law 10 days after a veto override vote, if there is one. If it is not an emergency, it would become law 90 days after the Legislature adjourns, McCabe said.

Because state tax valuations trail local valuations by two years, Madison and Skowhegan would continue to lose money they could be receiving from the state. Education subsidies are based on the average state valuation over a three-year period, so the effect would be longer for the school districts.

L.D. 281 asks the state to make exceptions to that rule for the communities, which face large reductions in municipal valuations.

The bill points out that from 2013 to 2014, the value of the Madison Paper Co. was reduced by $149,700,000, representing 65 percent of its taxable value. The value of the S.D. Warren Company, which is Sappi Fine Paper’s parent company, has been reduced by $100,000,000, representing 18 percent of its taxable value.

Before its value was reassessed, Madison Paper Co. represented about 40 percent of the tax base of the town, and the S.D. Warren Co. represented about 53 percent of the tax base of Skowhegan, the bill notes.

The bill would modify the 2015 state valuation of Madison Paper Co. at $80,000,000 and value the property of the S.D. Warren Co. at $463,630,900.

The measure also would affect School Administrative District 59, which includes Madison, and School Administrative District 54, which includes Skowhegan, Canaan, Cornville, Mercer, Smithfield and Norridgewock.

SAPPI APPEAL

Complicating matters, Sappi has filed an appeal of the town’s denial of a requested tax abatement, and if the appeal is successful, it could lower the value of the mill further.

The appeal was filed June 17 with the town’s Board of Assessment Review.

S.D. Warren filed a formal property tax abatement application in March, asking that Skowhegan cut the property tax value of the Sappi mill on U.S. Route 201 by more than $137 million, which would have resulted in the loss of $2.3 million in revenue for the town. The board of assessors denied the request in April.

The town has assessed the paper mill for taxation at $463,630,900. The company says the property should be taxed based on a value of $326,343,426.

The difference — the amount by which the company says the valuation should be cut — is $137,287,474.

The April vote to deny the tax abatement was 3-0 and came after a recommendation by Skowhegan’s assessor’s agent, Bill Van Tuinen, to deny it.

Van Tuinen told the board that several components of the company’s abatement request made him “substantially less than convinced” that Sappi’s appraised value was the correct value.

The company disagrees, saying through their attorneys at Verrill Dana, of Portland, that the property is “significantly over assessed.” The company points to an appraisal of the real estate and personal property at the mill by Duff & Phelps, a New York firm that specializes in commercial property valuation.

The abatement request followed months of negotiations between the town and the mill that last September that resulted in a $100 million cut in the mill’s tax valuation. Last year, Sappi paid $9.3 million in property taxes.

The previous reduction in the mill’s value, from $567 million to $463 million, approved by assessors last year, cut its tax bill to $7.94 million.

POSSIBLE VETO

McCabe said LePage has opposed the bill since the beginning. He said that by adding Jay and East Millinocket, which also have lost valuation because of paper mills that were a large part of the towns’ economy, the benefit of passage of L.D. 281 will be greater throughout the state.

“I hope the governor stands up for rural Maine and signs this bill into law,” McCabe said Wednesday. “In the meantime, the entire Somerset County delegation will be working hard to build support for this common-sense measure. It’s about basic fairness. Our communities should not lose out on state funds for our towns and schools just because the state is using outdated figures in its calculations.”

An email sent to the governor’s office seeking comment was not answered Wednesday.

Whittemore said on Wednesday the bill passed in the Maine House of Representatives around midnight Tuesday in a roll-call vote and “went under the hammer” in the Senate, meaning it was passed with no debate.

The bill then returned to the House, where the emergency preamble was stripped from the bill because there weren’t enough votes to support it, which could pose a problem later if the governor vetoes the bill, which Whittemore expects to happen. A two-thirds majority vote is needed to override a veto.

“In the House, I was told late last night that we have lost a few Republican House members that voted for the bill,” he said Wednesday. “The fact that we didn’t have a two-thirds vote in the House, I suspect there currently is not a majority in the House to override the governor’s veto, so that’s a problem.”

Bill co-sponsor Rep. Brad Farrin, R-Norridgewock, said Wednesday that passage of the bill is an essential measure to keep taxes from sharply increasing in the coming year with the changes to the school funding formula. He said he and other members of the Republican caucus are working hard to whip up enough votes to override the governor’s veto, if there is one.

Farrin, a first-term legislator, said he and others will work hard for passage and that the bill’s ultimate fate will be decided sometime between next week and mid-July, when the Legislature is expected to return for a special “veto day.”

Whittemore, in Tuesday’s news release, said, “We must ensure that our schools and municipalities receive an appropriate amount of funding to continue serving our citizens, and avoid a spike in property taxes for local families. From students to seniors, this legislation is necessary for the well-being of the families of Madison and Skowhegan.”

Doug Harlow — 612-2367

[email protected]

Twitter: @Doug_Harlow


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