EAST MILLINOCKET — A town leader expressed hope Friday that the auction at Great Northern Paper Co. LLC will pay the company’s tax debt to Millinocket and would help restart GNP’s local paper mill.

“I think it will tie up some of the loose ends in Millinocket. I am hoping that it gets our mill going sooner or later,” Selectman Mark Marston said Friday.

He expressed concern that 212 of 256 workers laid off from GNP on Feb. 6 will soon run out of unemployment benefits.

“A lot of their workers are in their 50s and 60s,” Marston added. “[The auction] is a step forward, and I think if it didn’t work out and they didn’t make any money, I would be worried about our situation here.”

Koster Industries of New York auctioned what Millinocket town manager Peggy Daigle estimated to be about $3.58 million in papermaking equipment at the GNP industrial park in Millinocket on Thursday.

Alexandra Ritchie, a spokeswoman for GNP manager Cate Street Capital LLC, declined to confirm the amount raised but said it would cover the company’s $2.24 million property tax debt to the town.

“Once funds are received from purchasers, the Town of Millinocket will receive payment for GNP’s outstanding property taxes directly from the auctioneer,” Ritchie said in a statement released late Friday afternoon.

The equipment auctioned included the No. 11 paper machine, which auction attendee and Millinocket Town Councilor John Raymond said sold for $2.5 million. Koster Industries and Ritchie declined to comment whether the machine was sold.

According to the agreement among GNP, the town and Koster Industries, the Internal Revenue Service would receive 15 percent of all sales and Koster would receive 10 percent.

That should leave about $2.68 million, enough to end GNP’s $2.24 million property tax dispute with Millinocket, Daigle said Thursday.

GNP owes East Millinocket $657,900 in property taxes for the 2013-14 fiscal year, which ends June 30, plus interest and expenses. Unlike Millinocket, which filed a tax lien on GNP on May 21, East Millinocket’s Board of Selectmen voted 5-0 on June 12 to issue a vote of confidence in GNP.

Marston doesn’t regret the vote, he said, but some positive development with the mill or East Millinocket’s tax bill needs to happen.

“We need the news,” Marston said. “We need good news for the people who are thinking about applying for jobs, and for the town. Some of the [laid off] people don’t have a lot in savings.”

Marston and East Millinocket Treasurer Beverly MacLeod said East Millinocket officials haven’t heard from or been paid taxes by GNP since the sale.

Daigle was off from work Friday. She, Raymond and Millinocket Town Council Chairman Richard Angotti did not return messages. Millinocket officials said they hoped to be paid at the close of the auction at the earliest.

Cate Street is the New Hampshire-based investment firm that purchased the East Millinocket and Millinocket paper mills for $1 in 2011 and formed Great Northern to run them. Cate Street also manages Thermogen Industries, which plans to build a high-tech, $140 million wood pellet mill at the former Katahdin Avenue mill site in Millinocket.

Proceeds left after the Koster, IRS and Millinocket payments “will be utilized to further Great Northern Paper’s restart effort, inclusive of addressing some additional outstanding vendor payments,” Ritchie said in a statement Thursday.

“The team at Great Northern Paper has remained steadfast in their efforts to secure all components required to facilitate a restart and remain optimistic that they will be successful in doing so,” she added.

Thermogen has an environmental permit pending with the Maine Department of Environmental Protection. If all goes well, the permit could be approved and construction could begin as early as September, DEP officials have said. The pellet plant’s start date is late 2015, according to the permit application.

Unlike Millinocket, which Daigle said has cash reserve enough to last until mid-July, East Millinocket can last a while without emptying its undesignated balance, Marston and MacLeod said.

East Millinocket has a $2.2 million undesignated fund balance, MacLeod said. With GNP’s property-tax tab unpaid, town government’s expenditures and revenues have averaged $743,000 and $698,000 per month this year, respectively, she said.

With GNP’s tax payment, the average monthly revenues would be $753,000, exceeding the monthly average expenditure by about $10,000, MacLeod said.

“I would say that we are holding our own,” MacLeod said.

At their regular meeting Monday, selectmen will discuss making more cuts to the $6.8 million town and school budget voters approved on June 3, said Marston, who doesn’t see much possibility for easy cuts.

As part of the budget, town officials will transfer $700,000 from the reserve account to cover Great Northern Paper’s tax debt, which would lower the undesignated balance to about $1.5 million. The town’s auditor warned against using the balance that way, saying it could threaten the town’s credit rating.

Under the new budget, the town mill rate would increase from $21.93 per $1,000 of property valuation to $27. That means that owners of $50,000 properties who pay $1,096 annually would face a tax increase of about $253.50 effective July 1 — a difficult increase, officials have said, in an area with an increasingly large population of fixed-income residents.

Selectmen have said they fear needing to set a $37 mill rate if Great Northern Paper remains delinquent on its taxes.

“A $37 mill rate is unrealistic. No business will want to relocate here,” Marston said. “Who is going to want to buy a house in a town with a $37 mill rate?”

“I am very anxious that something starts to happen soon,” he added.

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