Two projects show big risks in public deals

It seemed like the bird of fortune had landed in Midcoast Maine two years ago.

The Kestral Aircraft Co. announced it would build a new type of aircraft at the decommissioned Brunswick Naval Air Station.

But last January that deal collapsed with the company claiming Maine had reneged on millions of dollars in public financing. CEO Alan Klapmeier had hoped to receive $39 million in tax credits, but said he received only a fifth of that.

State development officials said Kestral never provided "updated and thorough financial information," according to a press release from Gov. Paul LePage.

Then we learned another reason for the switch: the conservative governor of Wisconsin, Scott Walker, had stepped in with an even more liberal bundle of incentives. 

Only time will tell whether that investment will pay off for the badger state, nicknamed for that short-legged member of the skunk family.

But in states desperate for jobs, it is tempting to use the public treasury to get a potential employer up and running.

As the rapidly deteriorating fate of former Red Sox star Curt Schilling's company shows, those bets can quickly go awry.

At about the same time Maine was being romanced by Kestral, Schilling and his company, 38 Studios, was working out a similar deal with Rhode Island.

Schilling, a pitcher who spent a lot of time playing video games while on the road during his career, was trying to raise money and obtain tax breaks so his company could build a new fantasy game.

Schilling and outgoing Gov. Donald Carcieri reached agreement on $75 million in public funding two weeks before the Republican left office.

But investing in the gaming industry is risky, experts say. It is extremely competitive and timing is critical.

Meanwhile, the money spent generally results in no hard assets — land, buildings or manufacturing equipment — that can be used to help secure a loan.

Even worse, a new software venture can run out of money before the project has been completed, which seems to be what has happened to Schilling's company.

"To be successful in the space requires superb timing, superb management, superb talent and a good dose of luck," one industry expert told the Boston Globe.

Schilling's company has burned through $50 million and is seeking to delay a $1.1 million payment to the state. Friday, 38 Studios applied for a $14 million film tax credit and last week its workers went unpaid, according to the Providence Journal.

Republican Gov. Lincoln Chafee, who opposed the Schilling deal as a candidate, said the company should now seek private funding.

"Taxpayers have had a very generous deal for 38 Studios," he told the Huffington Post. "We're in deep."

Which is a place no state, particularly a small, struggling state like Rhode Island, wants to be.

There's no way of knowing yet whether the Kestral Aircraft bet will pay off for Wisconsin or if Schilling's company will survive.

But both companies demonstrate that luring speculative start-ups can be risky and costly for taxpayers.

rrhoades@sunjournal.com

The opinions expressed in this column reflect the views of the ownership and the editorial board.

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Comments

FRANK EARLEY's picture

How much noise can a windmill make?

All I've heard in the past year or so is the complaints of too much noise from windmill's. I'm sorry, but you haven't lived with noise, unless you grew up in a house with a six lane highway in your back yard.
I'm not sure exactly when the "Southeast Expressway" was opened in Massachusetts, But it was just about the time I was born. I grew up with a highway three hundred feet from my house. It was so loud that no one noticed. People would come over, and the first words out of their mouth were, how can you live with this noise? I never really noticed it because I pretty much grew up with it. The only time I noticed was when the steady smooth sounds of traffic was interrupted with the screeching skids and metal crunching. There's nothing quite like it at two in the morning. So you'll have to excuse me, I doubt a windmill could compare to that. And by the way, everyone fought like hell to keep that project from happening too.

Re: Pro-wind comments

When we hear Angus King talk about more birds being killed by flying into pictures or brought home by the family cat, we know these are arrogant lies aimed at the simple-minded.We have overwhelming proven that the only renewable resource for wind electricity id the constant flow on subsidy dollars and that industrial turbines have no potential usefulness in producing electricity no matter the confusing and "Official sounding" lies.
Wind Industry Sponsored Online Blogging Alive, Well and Against the Law?

https://skydrive.live.com/?cid=b6147304a619be64#cid=B6147304A619BE64&id=B6147304A619BE64!225

Posted by Whetstone_Willy on May 20, 2012 at 10:00am
Send Message View Blog

The next time you read some bald faced pro-wind lies in an online post, consider that the blogger may be employed by an organization that has made this commenting part of his or her job. The employer could be a wind company but also a wind industry law firm, engineering firm, a paid off so called environmental group, an ornithologist who rigs bird studies, etc.

It is now established fact that many of the pro-wind comments we see in online reader comments are the result of paid bloggers or bloggers otherwise employed by the wind industry or their mercenaries in the paid off environmental organizations.

The following directives are taken from the Board of Directors of the American Wind Energy Association 11/2/11 meeting materials.

"Respond quickly to unfavorable articles by posting comments online, using the AWEA blog and twitter, and putting out press releases".

" • Work with Grassroots team to recruit and activate a “Wind Army,” identifying state, member and third-party surrogates to spread AWEA messages. Results: • Quadrupled size of online community from February to October, building online advocacy list from 25,000 to 113,000; plus LinkedIn at 8,000, Twitter at 12,500, Facebook at 37,000, for a total online community of more than 172,000 and still rapidly growing".

Zack Lenhert's picture

"The next time you read some

"The next time you read some bald faced pro-wind lies in an online post, consider that the blogger may be employed by an organization that has made this commenting part of his or her job.'

Its called marketing, and I suspect that you may be guilty of the same thing you accuse others of.

Please enlighten us all with which type of power generation YOU would like to see developed in the state. Is there a type of power generation that has ZERO ill effect to the surrounding environment?

Just sounds like NIMBY arguments to me.

Roger Moulton's picture

natural gas

Natural gas is a great source of power that I would like to see us take more advantage of. I wouldn't say there are zero ill affects on the environment but it is more efficient, less noisy (more actual noise at the source but it's contained to a small area usually away from residences. And I do work for a natural gas company but I am not paid to write this, probably would take some heat if they knew I did. lol

Roger Moulton's picture

cleaner than others

oh and it is also cleaner and better for the environment and other fossil fuels. And I know some of you are afraid of natural gas but I've had the opportunity to learn to fight natural gas fires and propane fires. I have to tell you I would feel much better about having a giant tanker full of natural gas in my yard than that small propane tank we all have on our porches/decks/patios. You can outrun a natural gas fire, propane you can not. Natural gas is lighter than air so goes of into the atmosphere if there is a spill, propane settles to the ground and spreads out. If Natural Gas is something that frightens you I say do some research and definitely run outside and bring your propane tanks somewhere to properly dispose of them because they are far more dangerous than natural gas could ever be. If anyone is interested I have some video of both that I can show you and explain better some of the differences.

Jason Theriault's picture

Nope

I have no dog in this fight other than I hate to see opportunities missed.

So Show me some peer reviewed studies, and we can talk. I have said this in alot of the debates on wind power, and all I have ever seen is links to groups who are against wind power quoting self commissioned studies.

So I guess either I :

Am simple minded.
Have been bought by the Industrial Wind complex
Am an internet troll.

 's picture

there is only one troll, and

there is only one troll, and you are not he

i've haven't seen much either besides complaints about noise and unprettifing the environment for the tourists. i have read about some interference with migratory bats out west, but the companies put some kind of beacon on the turbines that redirects them.

Roger Moulton's picture

efficiency

Efficiency is the biggest problem with wind turbines. They don't create very much power for the amount of money they cost and the space they take up. So you and I the tax payer are paying big bucks to help these wind companies with the intent of saving money on electricity but you will never see a decrease in the cost of electricity due to wind turbines unless you own a large one yourself and only energize your house. If we want these windmills only to save the environment I would tell the bird lovers and noise haters to be quiet but if you want to look at environment and cost windmills don't hold a candle.

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