BIW gets a $45 million tax break. It should expect scrutiny.
Bath Iron Works is one of the most important companies in Maine, but that doesn’t grant it immunity from basic oversight of tax programs designed for its sole benefit.
The company employees more than 6,000 people, most of them unionized. It’s a defense contractor, building destroyers for the United States Navy.
It’s also more than that.
Like lobstering and logging, shipbuilding is part of the Maine mythology. And when it comes to building ships, I dare say few in the state can’t repeat the slogan, “Bath built is best built.”
Taken together, it also means the shipyard, which is owned by giant aerospace and defense company General Dynamics, is untouchable politically.
Two years ago, the Maine Legislature and governor signed off a $45 million tax cut for BIW. The tax cut was meant to help the company be more competitive with its larger competitor, Mississippi’s Huntington Ingalls Shipyard.
This fall, the largest union at BIW reached out separately to state Senate President Troy Jackson and Speaker of the House Sara Gideon. Local S6 told the lawmakers that the company was not living up to the terms of the tax cut.
Questions were raised about starting salaries for new workers, overtime rules and the use of out-of-state subcontractors.
I spoke with Jackson on Monday. He told me that after speaking with the union, he also met with representatives of BIW. And that while they described the reasons differently, the conversation was consistent with what Local S6 had said.
A lot of new employees were starting at $15.97 an hour, there was limited or no opportunity for overtime and BIW was hiring subcontractors to do the work that could have gone to full-time employees from Maine, he said.
After the meeting, Jackson and Gideon sent a letter to BIW on Dec. 20 expressing their disappointment and suggesting that they might reconsider the tax break if the company couldn’t provide evidence that it had met the terms of the deal.
Needless to say, the letter and BIW’s response have created a political firestorm.
The company’s response was terse and the original letter has been described as a threat in media coverage.
Republicans piled on, saying that BIW shouldn’t be forced to respond to these types of allegations.
When a company receives $45 million of taxpayer money, it has an obligation to answer questions about whether or not its is living up to the bargain.
“I supported this tax cut, even though a lot of people were concerned,” Jackson told me. “I worked to get my colleagues to support it. … This is making sure that this company is accountable and doing what they said they would do.”
The Maine Center for Economic Policy is a left-leaning think tank with an expertise on tax policy.
“There’s little to no evidence that corporate tax credits, such as the $45 million received by BIW, actually spur job creation or investment,” Mario Moretto, MECEP’s communications director, told me. “But as long as those credits are on the books, we should expect our elected officials to ensure that profitable corporations are upholding their end of the bargain. … This kind of accountability shouldn’t be controversial. It is the due diligence deserved by the Mainers who foot the bill for corporate tax cuts.”
I don’t know if BIW has lived up to the terms of its deal, but asking the company to document what it is and isn’t doing should be part of the bargain.
Jackson, for his part, says he’s used to being in hot water, whether it’s coming from large landowners, big companies or political opponents.
“When I support these kinds of bills, it’s because I believe the companies are going to do the right thing,” Jackson said. “Millions of dollars of tax breaks for a big company that’s paying $15.97 an hour isn’t right. When I see something that’s not right and not fair, I’m going to speak up about it.”
David Farmer is a public affairs, political and media consultant in Portland, where he lives with his wife and two children. He was senior adviser to Democrat Mike Michaud’s 2014 campaign for governor.