By Kathryn Skelton,Staff Writer
To protect Maine’s water resources, a referendum could chase out a state icon.

The label boasts: “Natural spring water from Maine since 1845.”

But the company says it can take its label – and business – elsewhere if Maine adopts a first-ever tax on bottled water.

Poland Spring says it doesn’t need Maine to keep its best-selling brand alive.

The state insists the company isn’t bluffing.

Officials are worried that a proposed 3-cent state tax on every 20 ounces of water bottled here will drive the company out of Maine and worsen an already-weary business climate.

At the end of the month, it’ll be clear whether enough signatures have been gathered to force a vote on the tax, estimated to cost Poland Spring and five other bottlers more than $100 million a year if approved.

Just the idea of it is bad enough, says development Commissioner Jack Cashman.

Six months ago, with water tax petitions still circulating, he sat down with a man from an out-of-state firm contemplating a major investment in Bangor.

The representative half-joked “‘When are you people going to tax air?’ These types of things give us a reputation beyond our borders,” Cashman said. “It sends a message to the rest of the world, ‘We don’t want business in this state.'”

The referendum’s chief supporter, former state legislator James Wilfong, says it’s time everyone in Maine profits from the spring water that so many people – homeowners, paper companies, municipalities – have had a hand in getting, and keeping, clean.

“Fortune Magazine said that water is the oil of the 21st century. This resource is more important than oil,” said Wilfong, who lives in Stowe.

But even with $624 million in sales last year, Poland Spring insists it couldn’t absorb the proposed tax and, in a price-sensitive market, couldn’t pass it on.

In a state where snowmaking uses more water than water bottling, the company says it shouldn’t have to.

“There are good regulations already in place. We are protecting natural resources,” said Nestlé Waters North America spokeswoman Jane Lazgin. Nestlé is Poland Spring’s parent company.

The rest of the nearly $10 billion industry is watching to see what Maine will do, worried a tax that takes hold here could be embraced elsewhere.

It’s a valid concern: Wilfong says he’s already been contacted by other states’ legislators privately considering the same tax, or a broader one, inspired by Maine.

Right now, no state taxes water for bottling.

“If I understand it correctly, it’s ludicrous. Twenty cents a gallon? I don’t see how anybody could work under that,” said Robert Feeney, president of the Northeast Bottled Water Association.

A new tax and sharing the money

Poland Spring became a Nestlé brand in 1980. It’s one of seven spring waters sold by the company in the U.S. under different names, and third in the water wars behind Aquafina and Dasani – both purified tap water.

In Maine, Poland Spring employs 550 people at bottling operations in Poland and Hollis. The company says it won’t make any decision on a new plant in Kingfield – another 250 jobs – until the tax question is settled.

If the existing jobs disappeared, the Department of Labor estimates another 1,888 jobs at other companies supported by Poland Spring would go, too.

University of Southern Maine economics professor Charles Colgan says Androscoggin and York counties would be hardest hit.

The water tax proposed by Wilfong and the group H2O for ME would apply to companies that extract more than 500,000 gallons a year for sale. Twenty-four companies are licensed to bottle water in Maine; this year, only six are expected to go above that number.

Poland Spring, the biggest, is permitted to withdraw 500 million gallons but takes less.

As written, the new tax money would be funneled into a Maine Water Dividend Trust, where investment earnings would be split among taxpayers.

“It would make it tempting if we ever collected a dime from it. (But) if Poland Springs packs up and leaves, there’s nothing to collect,” Colgan said.

The trust would be similar to a fund in Alaska through which residents split a tax on oil, but the comparison between water and oil doesn’t work, Colgan said. Oil is being depleted and demand is inelastic – it hits $3 a gallon, and people still buy it.

Bottled water is more discretionary – easier to skip if it gets too pricey – and Maine’s groundwater isn’t being depleted, according to State Geologist Robert Marvinney.

An average 42 inches of precipitation each year continually recharges it, he said.

It’s “an attempt to redistribute the wealth,” said Town Manager Richard Chick in Poland, where Poland Spring makes up more than one-quarter of the tax base. “I really don’t find the argument (to tax water) compelling.”

Wilfong doesn’t want to estimate how much money there would be to split, saying he doesn’t want to over-promise.

He also takes issue with the argument that water is an unending resource.

“Water is finite, what we’ve got is what we’ve got. We don’t have any more or less,” Wilfong said. “We’re not at any risk if you look at (it on) a statewide basis today. It’s pretty poor public policy to only look at the things of today.”

His group turned in more than 50,000 petition signatures back in September after a year of collecting.

If enough are verified by the secretary of state, “Do you want the state to tax companies that extract, bottle and sell Maine water, create a fund for business loans and conservation projects, and to regulate the amount of water removed?” would appear on the ballot in November 2006.

‘We love doing business here,’ but …

Commissioner Cashman said it’s a “very real possibility” that Poland Spring would leave if voters approved that question.

“We’re not the only place in the world with water, you know,” he said. Nearly $250 million in holdings here won’t stop the company from moving. He pointed to six paper mills, each a major investment, that closed in whole or in part during the past five years.

“Millions of dollars don’t tie anyone here anymore. Those days are over,” Cashman said.

In the United States, Nestlé gets its spring water primarily from six states: Maine, Michigan, Pennsylvania, California, Texas and Florida.

“There is (nothing) that would cause us to leave the state of Maine other than economic hardship. We love doing business there,” Lazgin said. However: “The Poland Spring brand could survive even if that water came from outside of the state of Maine.”

Coke and Pepsi do bottling in Queens, N.Y., she added. “We do ours hours away and absorb that cost.” It’d be cheaper to bottle closer to the market.

John Wood, who chairs the Board of Selectmen in Hollis, says he believes the company might scale back and switch products if faced with an extraction tax. By changing products, to carbonated or flavored water, for instance, and switching sources, from spring water to surface water out of a lake, Poland Spring would avoid a tax. The proposal only taxes bottled spring water.

“They’re something nice for us. To me, giving up Poland Spring would be like saying we’re not selling lobster anymore,” Wood said. “Quite frankly, I seriously doubt the Legislature would leave this alone. Poland Spring is too big to do something this dumb.”

Spokesman Stephen Kay at the International Bottled Water Association said it objects to the tax because it focuses on one industry user.

In Maine, municipalities used 34 billion gallons of water last year, 8 billion from wells and springs, according to a state report. Snowmaking accounted for 560 million gallons, about 200 million of which were groundwater.

Bottled water operations used 450 million gallons, all groundwater.

“The aquifer doesn’t know who that pipe belongs to,” Kay said. “There’s a lot of emotion in this,” he added, noting that it’s easy to rally around the idea of one man taking on a giant corporation.

Richard Bornstein would be affected by the tax, and he isn’t a giant corporation. He owns Crystal Springs in Auburn, a water bottling company his grandfather bought from Edward Little almost 100 years ago.

The state estimates his company will bottle 1.6 million gallons this year.

“I’m a Maine company selling Maine water to Maine people. He’s trying to put me out of business,” Bornstein said.

If the referendum passed, he would be tempted to sell his company.

The state would lose in the end, he’s convinced, by missing out on jobs and sales tax.

“Whatever Poland Springs is – and believe me, they’re a competitor of mine, I don’t like them – but they’re better for Maine in the long run,” Bornstein said. “If they can’t compete with the rest of the world using Maine water, they’re going to go to New Hampshire.”

And maybe they will, Wilfong said.

“They just threaten to take their jobs and go home. That’s their decision to make. My point will be, the water is here. It’s close to a huge market. If Nestlé isn’t here, somebody will be. We just want them to play by our rules.”

He’s got no issue with irrigation and snowmaking, Wilfong said, because they soak back into the ground, rather than being “lugged out of the area.”

There’s also a difference with companies such as Pepsi-Cola, which bottles using water from Lake Auburn, or Shipyard Brewing , which bottles using water from Sebago Lake, he said. Yes, they’re “lugging out” water, but they’re adding value first.

That’s why he didn’t include that use under the proposed tax.

Wilfong, who served as an aide in the Clinton administration, has attracted press this week from Time magazine to the Christian Science Monitor. It’s an idea that’s got people taking notice nationwide.

“If there’s not enough signatures, I will do the campaign over again,” he said. “I do not want this to die.”