AUGUSTA — Sen. Eric Brakey, R-Auburn, stood alone Thursday against a bill that could set up a new fund with the Finance Authority of Maine to make large loans to businesses hoping to bring good-paying jobs to the state.
The bill, LD 1480, sponsored by Sen. Stan Gerzofsky, D-Brunswick, creates the Maine Capital Investment Program within FAME to provide loans or bond funding to eligible business development projects that have:
• Projected costs of at least $50 million; or
• Are projected to result in the creation or retention of at least 250 full-time jobs.
But Brakey, in an attempt to derail the bill on the Senate floor Thursday, said the measure would open the door to taxpayers funding large loans that may or may not be paid back.
The Senate voted 33-1 to enact the bill and send it to Republican Gov. Paul LePage for his consideration.
Brakey said he wanted to amend the bill to strike language that would allow a future Legislature to contribute to the fund, even though the current measure doesn’t call for any state money. It creates an avenue for private companies, large trust funds and private endowments to pay into the fund that would then be administered by FAME.
“If it were a profitable situation, private lenders would already be willing to make those loans,” Brakey said. “All I wanted to do was change the statute to clarify the intent. And if the Legislature wanted to come in, in the future, and put taxpayer money at stake — then they would then also have to go back in and change the statute.”
Brakey said he doesn’t have an issue with most of the bill’s provisions, especially those that depend only on private funds to fuel the loan or bond program.
He said his concern is that the bill sets up the potential for a giant “corporate welfare” program that would be on the backs of Maine taxpayers.
“When we are talking about government making loans of other people’s money to other organizations, it’s a really poor set-up for accountability,” Brakey said. “We have private lending organizations and those organizations work because they have real stakes; they have real risk assessment, because if they make poor choices, they go out of business.”
But Gerzofsky said the bill is a “game changer” as the state has plenty of programs that help small businesses with capital needs but doesn’t have any way to help a large company that might need a little financial help or an incentive that matches those available in other states that could be competing for the same development.
He said Brakey’s assertion that private lenders would finance developments if they were profitable may or may not be the case, and that many financial institutions in Maine simply don’t have the revenue on hand to make those giant loans.
“Our state does a fantastic job helping small and medium-size businesses,” Gerzofsky said. “With passage of this bill, we’ll improve our ability to attract large companies that create hundreds, not dozens, of good-paying jobs. With our traditional large employers, the paper mills, having much-publicized trouble, this is just the shot in the arm our economy needs.”
Gerzofsky said the bill, which could help at least two large business developments in the works in the Brunswick area, would also help Lewiston-Auburn and other nearby towns that have the workforce those companies would need.
According to Gerzofsky, the bill is modeled on successful programs in other states, which have provided seed capital for business creation and expansion.
He said that as it is currently written, the bill obligates no taxpayer dollars to the fund. Rather, the Maine Capital Fund would operate as a type of mutual fund for business investments and will be capitalized by pension funds, institutional endowments, insurance companies and other types of investment instruments.
“In the past few weeks, large businesses have announced the creation of 700 jobs in Brunswick alone,” Gerzofsky said. “Those jobs will affect not just our city, but an entire region — from Lewiston-Auburn all the way down to Portland and beyond. When this bill becomes law, we can expect a lot more announcements like that.”
The bill next goes to LePage, who has 10 days to sign it into law, veto it or allow it to become law without his signature.