By Carol Coultas,Business Writer

LEWISTON – Four years ago, Wal-Mart made a promise to bring jobs and taxes to the city if taxpayers were willing to help foot the bill.

They were. In a packed hearing room just after New Year’s 2002, city councilors unanimously approved a deal that would trade $17 million in tax breaks for a $45 million distribution center, hundreds of jobs and future tax revenues.

Since then, the agreement has been tweaked, deadlines extended and numbers changed, but today the original promise takes a giant step forward with the official opening of Phase 1 of the distribution center. Phase 2 will nearly double the size of the original project, bringing its total cost to $60 million. When finished, the center will be roughly the size of three Auburn Malls.

Wednesday also sets the clock ticking on the agreement between the city and Wal-Mart. Within three years of opening, the distribution center must show a $45 million investment and provide 350 full-time jobs with an average wage of $12 per hour, or lose its tax breaks.

That should be easy – Wal-Mart is already past the midway point.

More than 200 people with starting wages of $13 per hour have been hired. The company has completed work on the first phase of the distribution center and is rapidly closing in on the second phase. More than $30 million has been put in the ground to date.

When the second phase is done – expected in the summer of 2006 – another 200 to 250 people will be hired.

“Wal-Mart is meeting or exceeding the terms of the original agreement,” said Lincoln Jeffers, deputy director of economic development for the city. “It is really a win-win situation.”

The center is also making an impact on the tax base. Last year, Wal-Mart paid its first property taxes on the then-undeveloped parcel near Alfred Plourde Parkway – $40,000. Now the dry-goods warehouse is up and running and construction of the refrigeration warehouse is under way. Last week, the company got its 2005 tax bill: $503,384.

That’s money the city keeps. Because the project was delayed 16 months, Wal-Mart can’t take advantage of the 50 percent property tax break it negotiated with the city back in 2001. The tax break was based on the site’s having a $20.5 million assessed valuation; this April it missed the mark by about $2 million.

The delay also prompted a $525,000 penalty this year to cover debt service payments against city loans. That clause was negotiated into the agreement to protect the city when it appeared the project would be delayed.

“Every time they asked for an extension, we tied them tighter,” said Greg Mitchell, assistant city administrator and architect of the deal that landed Wal-Mart.

The delays were worth it, though. The Lewiston facility is the most automated of Wal-Mart’s 34 grocery distribution centers, using new technology to replace manual labor. The technology is proprietary, and that’s part of the reason the company isn’t inviting the public to its grand opening Wednesday.

“We’re getting a better center,” said Jeffers. “Wal-Mart kept improving the technology and they built a state-of-the-art, model distribution center.”

What Wal-Mart gets

Most of the $17 million in incentives Wal-Mart expects haven’t even kicked in yet. The state offered $10 million in tax breaks, primarily through two economic development programs: one that reimburses a company for the taxes it pays on business equipment, and the other that refunds 50 percent of state income taxes paid on new hires. The income tax program works out to a minimum savings of about $600 per employee per year. The business equipment tax is estimated at $684,000 per year.

Wal-Mart hasn’t applied for refunds from either program as yet. It must apply in December for income-tax reimbursements for new hires in 2005. And companies generally apply for the business equipment break at the end of the year as well.

The state did pay for the $1 million in traffic work that was needed to get the project off the ground. The scale of the project required moving a portion of Alfred Plourde Parkway and upgrading Goddard Road, as well as access to the Maine Turnpike, to allow for the 12 trucks per hour, 24/7, expected once the project is complete. The second phase of the traffic improvement – another $1 million or so – should be finished within a couple of months, said Mitchell. That will improve the ramp access to the turnpike and direct Wal-Mart truck traffic directly onto Goddard Road.

Lewiston’s share

The city has sunk nearly $5 million in the project through various infrastructure costs. It moved its municipal public works operation to another location, and it extended water and sewer lines to the area. It also picked up $1 million of the $3.2 million cost for Central Maine Power Co. to build a substation there.

Jeffers said the infrastructure improvements were necessary to develop the broader area around Exit 80 anyway.

“We needed to do this to let the Exit 80 sector grow,” he said, pointing to the new Gendron Business Park as a case in point. In June, Max Finkelstein tire distributors announced plans to build a $5.2 million distribution plant in the city’s newest industrial park. Two other tenants are expected by year’s end.

The city’s biggest incentive to Wal-Mart, though, is a 50 percent refund of the property taxes the distribution center will pay over the next 20 years. Those payments, based on today’s tax rate, are $960,000 per year, half of which will be returned to Wal-Mart.

All together, the city will net about $883,000 a year in taxes from the distribution center, once building, land and equipment taxes are all tallied and debt service is subtracted. That’s a pretty decent boost to the city’s coffers, said Mitchell.

On the hot seat during much of the early negotiations, Mitchell said he never saw a downside to the proposal. Since the agreement required Wal-Mart to repay all of the city and state investments if it decided to abandon the project, there was little danger of the taxpayer being taken to the cleaners, he said.

“This community will be benefiting for years to come,” said Mitchell. “Almost overnight, we have one of the largest local employers, one of the largest taxpayers and a solid corporation of worldwide stature that’s about as recession-proof as you can get.

“You have a situation where $4 or $5 million in local investment is leveraging $60 million in private investment,” he said. “That ratio doesn’t get any better than that.”

What: Official opening of the Wal-Mart distribution center in Lewiston. Ceremony closed to the general public.

So far: Phase 1 complete. Unofficially opened in late June. Two hundred people have been hired. Project valued today at $30 million.

Still to go: Phase 2 to be completed by next year. An additional 200 to 250 hires anticipated. Total value estimated at $60 million.

Payback: The city has invested approximately $5 million in infrastructure improvements. Offsetting that, the city stands to gain $883,000 a year in tax revenue from the project.