Gov. Paul LePage — Photo Robert F. Bukaty, BDN

The governor proposed the bill, L.D. 1806, shortly after publication of a Maine Center for Public Interest Reporting story that revealed that between 2003 and 2010 the state paid almost $235 million to such organizations.

“This legislation will help ensure that the citizens of Maine have a transparent and ethical government and I urge this committee to grant it a unanimous ‘ought to pass,’” said Sen. Nichi Farnham, R-Penobscot, who delivered the public hearing testimony before the Veterans and Legal Affairs Committee on behalf of the bill’s sponsor, Senate President Kevin Raye, R-Washington.

“This legislation,” said Farnham, “attempts to close loopholes in the laws governing financial disclosure by legislators and certain executive employees that quite frankly most of us did not realize were there.”

Current law requires only that legislators or high-level state employees report state purchases of goods or services worth more than $1,000 directly from the individual legislator or family member, not from a corporation or entity for which the legislator or family member works.

The proposed bill requires legislators, executive branch officials and constitutional officers, like the attorney general and secretary of state, to disclose if organizations they or family members were affiliated with – as owners or management-level employees – were paid more than $1,000 annually by the state.

“If you’re the greeter at Walmart and Walmart is doing business with the state you wouldn’t have to disclose that,” said Dan Billings, legal counsel for LePage. “If you’re the manager of Walmart and Walmart is doing business with the state, you’d have to disclose that.”

But that was the one section of the proposed legislation that came under attack during the hearing.

Former House Minority Leader Joe Bruno, a Republican from Raymond and a professional pharmacist, served as a legislator and was CEO and president of Goold Health Systems as well as a board member of the controlling group of Community Pharmacies when each of those businesses got millions of dollars in state contracts. Bruno told lawmakers that the disclosure requirement shouldn’t be restricted to managerial-level employees or owners.

“I’m in favor of this bill,” said Bruno. “But make it equal for everyone. Employees of pharmacies don’t have to disclose, I’m an owner and I have to disclose? Why should any manager be different from any employee who’s doing the same thing? Think about what you’re asking here when you just single out professional, executive managers.”

LePage’s proposed legislation closes another loophole documented in the Center’s story that has allowed departing legislators and officials to ignore the requirement to file financial disclosures each year if the filing deadline falls after they have left office or state employment.

In the past, lawmakers and high-level executive branch employees did not have to file a financial disclosure for their last year (or portion of a year) in state government. Bruno, for example, left office at the end of 2004. But when Ethics commission staffer Cyndi Phillips was asked for a copy of Bruno’s 2004 financial disclosure, she gave this response:

“Unfortunately, we do not have a disclosure form for Senator Bruno for 2004 because he would not have had to report until February 2005, when he no longer was in office.”

The work session on the bill is not yet scheduled.

The Maine Center for Public Interest Reporting is a nonprofit, non-partisan news service based in Hallowell. Web: pinetreewatchdog.org. Email: mainecenter@gmail.com.

Some people call tax breaks for businesses “economic development.”

Others call them “corporate welfare.”

In Maine, one of the names they go by is Pine Tree Development Zones.

The premise of the program is that some businesses won’t create new jobs in Maine unless they get tax breaks.

State house, photo John Christie

The program has cost as much as $46 million in lost taxes since 2003, according to Maine Revenue Service estimates. That’s money other taxpayers had to make up to help the state balance its budget.

Proponents of the program say the cost is worth it because without the tax breaks, the businesses never would have created about 8,000 new jobs.

But a Maine Center for Public Interest Reporting investigation has discovered records that reveal the companies that get the tax breaks have never shown that they need them in order to create the jobs – even though the law says they should.

The fact that businesses are given a “bye” on providing evidence they need the tax breaks means there is no certainty that the multi-million-dollar program can be credited with the new jobs.

Economists and others interviewed by the Center called the statement businesses give to show they need the tax break “a fig leaf,” a “farce” and “fictional.”

The official state economist refused to sign off on a section of Pine Tree Development Zones (PTDZ) applications because businesses weren’t required to prove they needed the tax breaks.

And a committee of Maine economists determined that they could not accurately assess the effectiveness of PTDZ because there was no way to correlate the tax breaks to the new jobs.

The Center’s findings are based on a review of thousands of pages of records, including every application to the program, two state-sponsored studies, the legislative history, and interviews with experts.

ZONES A BALDACCI IDEA

The Pine Tree Development Zones were the brainchild of Gov. John Baldacci, who took over as the state’s chief executive in 2003, at a time when the state was losing manufacturing jobs and faced a billion-dollar-deficit.

One of his solutions – offered in his inaugural speech – was the PTDZ.

“In the coming week,” said the Democratic governor, “I will be putting forth a detailed economic strategy. It will include ‘Pine Tree’ opportunity zones to spur economic growth in areas of Maine that really need it …”

Since then, the program has become a key element in the state’s economic development strategy.

Baldacci was following the lead of what other states were doing to compete with growth in the business-friendly Sunbelt.

Pennsylvania and Michigan, for example, had aggressive business incentive programs. They went by different marketing-savvy names, such as Renaissance Zones, and were known generically as enterprise zones. They were designed to attract private investment to distressed areas within a state or a large city. The idea was to lower a business’s expenses, such as taxes, if they created new jobs.

Under the Baldacci administration, more than 300 businesses have been certified for PTDZ tax breaks since 2003. And although Gov. Paul LePage has said nothing publically about the program, his administration approved 37 businesses for the program since 2011, his first year in office.

Although nearly all of the academic studies of enterprise zones show there is little or no evidence they are effective, they have been popular with governors and legislators.

In 2009, the Federal Reserve Bank of Boston convened a panel of experts to debate enterprise zones.

Peter Enrich, a professor at Northeastern University, concluded that the scholarship on business tax breaks should lead government to “Just say no” to them. Taxpayers, he explained, have to pay for the breaks to businesses while there’s no assurance there is a corresponding benefit.

Another panelist had Maine expertise: state Sen. Richard Woodbury, an independent from Yarmouth and a Harvard–trained economist.

As an economist, he said he questions tax break programs because they mean the tax rate has to be higher for everyone else. But as a politician, he said, “If somebody comes to you with a issue, you want to … deal with it.”

In the end, he said, the “political system may overweight” the arguments from the economists.

In Maine’s case, Democrats and Republicans in the Legislature approved Baldacci’s PTDZ in 2003 and also approved expansions of the program in 2006, 2007 and 2009.

‘FICTIONAL’ LETTERS

The program works this way: Businesses apply to the state Department of Economic and Community Development (DECD) and promise to create new jobs and make capital investments. In return, they get income and sales taxes breaks and lower electric rates for 10 years in most parts of the state.

Most of the breaks kick in after they have added a minimum of five new jobs. The more jobs they add, the larger the tax breaks.

Businesses must pass a key test to get into the program.

The law that created the PTDZ states that a business can qualify for the program only if  “it demonstrates” that without the tax breaks it could not expand or start a news business.

This is known as the “but for” principle.

It means that “but for” the tax break, the business would not add new jobs and make investments in the state.

But never in the eight years of the program has a business been asked for, or even volunteered, any written evidence it needed the tax breaks to start a business or expand, based on the Center’s review of every application in the state’s files.

Instead, the agency that oversees the program, DECD tells the businesses what to say in their application letter in order to meet the “but for” test. DECD directs applicants to copy the following sentence from the sample letter it provides:

“Please be assured that the development project would not occur within the state but for the availability of the Pine Tree Development Zone benefits.”

By including that phrase in their application, the business is seen as meeting the “but for” requirement.

Nearly every letter of the hundreds reviewed by the Center contained that wording, although sometimes the business would fill in its own name.

“The ‘but for’ letter is a fig leaf,” said Charles Colgan, the former state economist, who teaches economic development at the Muskie School of Public Service at the University of Southern Maine.

He was also the chairman of the state’s Consensus Economic Forecasting Commission between 2003 and 2010.

The legislature in 2009 was so concerned about the costs of the PTDZ that it passed a law requiring Colgan’s commission to calculate the tax revenue paid to the state from the new jobs vs. the cost of the tax breaks. The idea was to find out if the program was worth the costs.

The commission — made up of economists and business leaders, all with advanced degrees — wrote on Nov. 1, 2010 to Baldacci and the legislature that they were unable to answer the legislature’s question:

“After considerable deliberations, the (commission) has concluded that we are unable to develop a credible separate forecast” due to the unverifiable assumptions built into the “but for” concept.

They asked that the law that required their analysis of PTDZ be repealed.  To date, it has not.

GOVERNOR VS EXPERTS

The discouraging report from the economics experts – two of the five members appointed by the Baldacci administration – did not deter the governor from claiming the program was working.

Less than two months after getting that letter from Colgan’s commission, Baldacci pronounced the program a success.

In December, 2010, with only weeks left in his last term, Baldacci gave a farewell interview to the Maine Insights newsletter, a pro-Democratic Party publication.

Gov. John Baldacci in front of the Maine Statehouse just before completing his second term — Photo Amber Waterman, Sun Journal

“As of September, 309 companies have located to Maine or expanded their businesses here because of PTZ incentives,” Baldacci said. “But if not for this program they wouldn’t be here.”

Not only did the state panel of economists have doubts that was the case, but so did the Baldacci administration’s official state economist.

Part of the approval process for being certified for PTDZ was an “advisory opinion” from the state economist.

Michael LeVert held that job from 2007 to 2010.

He said he often declined to check the box on the advisory that stated, “To the best of my knowledge, the proposed business activity will not go through without program financing.”

In effect, this was another way of saying “but for.”

LeVert said that after leaving that box unchecked a number of times, he asked DECD to eliminate that question, and they did.

“I didn’t feel comfortable making that assertion from the information I had. I left it blank most of the time,” he said.

LeVert said Catherine Reilly, who preceded him as state economist, also sometimes left the “but for” clause blank, a fact confirmed by the records and Reilly.

THE GOVERNOR’S RESPONSE

Baldacci is currently the director of military health reform in the Department of Defense (DOD) in Washington. Through his former deputy chief of staff, he told the Center the DOD prohibits him from speaking on “potentially political stories.”

Instead, the former aide, David Farmer, responded to the Center’s questions.

“Measuring the effectiveness of economic development programs is difficult, but it’s much easier to see what happens when a state, competing for new jobs, can’t offer an aggressive policy. The jobs go elsewhere,” Farmer wrote in an email response to the Center’s questions.

“Pine Tree Zones have helped to create thousands of good-paying jobs with benefits and led to hundreds of millions of dollars worth of investment in our state. It’s better to invest resources to create good jobs, which Pine Tree Zones require, than it is to spend that money to address the consequences of more people being out of work.”

Baldacci’s confidence in the program is confirmed by some business owners, such as the vice president of Rumery’s Boatyard in Biddeford, a certified PTDZ business. Sean Tarpey told the Portland Press Herald in 2006 that the PTDZ benefits made it easier to “go out on a limb and hire people and pay a good wage and hope the business will expand the way we want.”

One of the jewels in the PTDZ program has been T-Mobile, which announced in 2004 it would open a call center with 700 jobs in Oakland. Baldacci has said the PTDZ program was key to bringing T-Mobile to Oakland. However, at one of the official events surrounding the opening, Maine Public Broadcasting reported that when T-Mobile Vice President John Birrer was asked about the PTDZ benefits, he said, “We would have come here without the incentives.”

One of the few legislators to object to the PTDZ from the beginning was Peter Mills, the Republican from Cornville and currently the executive director of the Maine Turnpike Authority.

Senator Chris Rector, member of the Maine Economic Growth Council, addresses a press conference — Photo Maine.gov

He said that one of the purposes of the “but for” requirement was to “empower the administration to claim that the ensuing jobs were actually created by a tax concession – as if to say that tax law manipulations alone could create such opportunities. That was largely fictional …”

But state Rep. Christopher Rector, R-Thomaston, believes the program has been successful, at least in his district.

“While the benefits can be substantial to the businesses, the benefits in employment in our region here in the midcoast have also been substantial.  Both Boston Financial and Athena Health are examples of the recruitment power of the Pine Tree Zone benefits.  They have said it would not have been the first location choice for their operations were those benefits not in place.”

The signed advisory opinion from the state economist in  Boston Financials’ PTDZ file leaves blank the question of whether the businesses would have been opened without PTDZ tax breaks. The Athena file did not contain an advisory opinion.

Maine & Co. is a non-profit that helps recruit new businesses. Peter DelGreco, the president and CEO, said PTDZ are an essential recruiting tool.

“I know first hand that there are companies that would not be here but for the existence of those programs,” he said, although confidentiality rules prohibited him from naming the companies.

George Gervais has been commissioner of DECD less than a year, but has been in the department since 2008 at lower positions.

Whether the “but for” letters are window-dressing “is a hard question to answer,” he said. When he came into the agency, Gervais said he was trained that a company met the “but for” test if their decision to locate in Maine vs. another state was dependent on the PTDZ tax breaks.

He said he could understand why the ‘but for’ language is viewed with “skepticism.”

“There are companies who are very comfortable saying that, when it may not be true. How do you prove that?”

On the one hand, Gervais said, he recalled businesses that decided not to apply for the PTDZ because they felt “they could move forward without the program.”

Former state Rep. Nancy Smith, D-Monmouth and former co-chair of the legislature’s economic development committee supported PTDZ when she was in the House.  As for the “but for” requirement, she said, “Get rid of it. It’s a farce. It doesn’t pass the straight face test. That’s not to say incentives for businesses don’t have value.”

Why are governments so enamored of tax incentive programs  — Maine has a total of 46 — when there is so much skepticism from economists?

Colgan, the Muskie School economist who has been involved with Maine government for decades, has an explanation:

“Let’s just say that enterprise zones are some people’s ideas of what government ought to do,” he said. “Since it fits those ideas, then they think, it must be a good idea.”

To read  the first part of this series click here.

The Maine Center for Public Interest Reporting is a nonprofit, non-partisan news service based in Hallowell. Web: pinetreewatchdog.org. Email: mainecenter@gmail.com. Staff member Morgan Filbert assisted with the research.

If the Strait is closed, the world could lose as much as one-fifth of its oil supply.

Since the 1970s, the United States has worried about the security of its oil supply and its dependence on the politically volatile Middle East.  Because of the dangers in the Israeli-Arab conflict, the U.S. has tried to reduce dependence on Middle East oil.

Cash Energy makes an oil delivery to Lewiston, Winter 2011. Photo — Jose Leiva, Sun Journal

That concern has filtered down to Maine, the state with the highest percentage of homes heated by oil – 70 percent according to the U.S. Census.  The state has its own Office of Energy Independence and Security, and state law targets a 50 percent reduction by 2050 from oil dependence levels of 2007.

For both America and Maine, complete freedom from dependence on others for energy fuels is impossible.  The United States, with about five percent of the world’s population, consumes about 25 percent of the world’s energy supply.  The country does not have energy resources readily available to meet that level of demand.

Maine’s oil reduction target probably can be achieved. Progress has already been made: In 2009, Maine used 14 percent less oil, mainly for cars and home heating, than it had in 2000, although annual differences in weather conditions may explain a part of that decline.

In turning away from imported oil, it is inevitable that the alternatives will impose higher costs, either financial or environmental or both.  Only increased efficiency – making the same amount of fuel do more – offers any likelihood that such costs may be avoided.

Take domestic oil.  Major American companies want to be allowed to drill for more oil offshore and in Alaska, raising concerns about possible oil spills in the Gulf of Mexico or off Alaska, with the BP disaster and the Exxon Valdez spill still fresh in memory.  And public land now protected from development in Alaska would have to be used.

Canada offers major supplies from its oil sands, but people in the Midwest worry about pipeline ruptures and the potentially damaging effects of the heavy oil.  Environmentalists don’t like tapping the oil sands, though Canada plans to continue developing them with the oil being shipped to China if the U.S. rejects it.

The principal alternatives to oil are coal and natural gas.  “Clean coal” remains an elusive target and drawing new supplies of underground natural gas depends on hydraulic fracturing, called fracking.  Opponents point to the possible pollution of drinking water by the process.  Developers fight environmental safeguards that could reduce profits.

Absent environmental concerns, domestic supplies of coal and natural gas would probably be sufficient to move the country reasonably close to independence.  But ignoring those concerns could pose major threats to public health.

Then, there are renewable resources that can reduce dependence on outside supplies because they never run out.  And we are gradually learning how better to develop some of them.

However, in Maine and elsewhere, hydropower, the renewable resource that offers the greatest potential, is being taken off the table.  Across the country, dams used for electric generation are being dismantled to promote fish passage and recreation.

Wind and solar have limited potential for power production, but they could help.  Yet wind power runs into serious problems when its installations create unwanted noise or destroy scenic vistas.  Both wind and solar won’t realize their potential until better power storage is developed to help smooth out the lack of reliable availability from either.  Because of their locations, these resources are more expensive than might be expected, because they often require costly new transmission lines.

With both the Middle East situation and the presidential campaign heating up, energy issues will be hotly debated in coming months.   To reduce dependence on countries using oil as a political lever against the United States, the choice will involve decisions about fracking, oil sands, off-shore drilling, wind power, pipelines, transmission lines, and even low-wattage light bulbs.

In Maine, the use of natural gas is climbing rapidly, and that could produce economic benefit unless taxpayer subsidies or higher rates drive up the bill.  Much-vaunted wind power arouses sharp debate and imposes high costs for equipment and transmission lines.

Energy issues are among the most important this year, and the arguments will all be about cost – political, financial and environmental.

For historical Maine energy use, see:

http://205.254.135.7/state/seds/seds-states.cfm?q_state_a=ME&q_state=Maine

Gordon L. Weil is a contributing writer at the Maine Center for Public Interest Reporting (pinetreewatchdog.org). He is the former director of the Maine Energy Office and former Public Advocate.  He was chair of the national organization of state energy agencies and an advisor to the U.S. Department of Energy. He is the author of “Blackout: How the Electric Industry Exploits America.” He may be contacted at Weil.Gordon@gmail.com.

Gov. Paul LePage’s proposed budget restores to the state judicial system a position that in the past has helped to improve the hiring and training of state bail commissioners.

According to Leigh Saufley, the chief justice of the Maine Supreme Judicial Court, the governor has agreed to fund a criminal process manager, a position left vacant by the Baldacci administration since January 2010. The budget is subject to the approval of the Legislature.

The salary range is $47,000 to $61,500 and the job requires a law degree.

After the previous criminal process manager left the position, the selection and training of bail commissioners became the responsibility of the deputy chief judge of the district courts, Robert Mullen, who also has bench and administrative duties.

Referring to the governor’s decision as “a piece of good news,” Saufley said filling the position will “improve training and oversight for the bail commissioner system.”

Saufley’s comments came in an interview with the Maine Center for Public Interest Reporting after publication of its series called “Maine’s Bail System: A 19th Century Holdover.”

The series documented long-standing shortcomings in the bail system, from nominal training and oversight of bail commissioners to the inconsistent data they have about defendants to the wide range of bails for similar crimes.

Bail commissioners are appointed, trained and supervised by the state’s judiciary.

“What you’ve heard very consistently — they [bail commissioners] are independent contractors, legislatively created, a small amount of oversight from judicial branch and no resources to do it — that part hasn’t changed,” Saufley said, even after the 2005 state-commissioned study that cited the system’s problems.

The state’s budget problems limit making the needed improvements, Saufley said. “Improvements in a system that has very few resources are always incremental.”

She was also “heartened” to hear that Mark Westrum, the administrator of Two Bridges Jail in Wiscasset, has received a $500,000 grant from the U.S. Department of Justice for a pilot program that could improve the decision-making process when bail is set.

In conjunction with the Muskie School of Public Service and Volunteers of America, Westrum, a former sheriff, will develop a “risk assessment instrument” that would significantly improve the amount and quality of information bail commissioners have when setting bail.

As part of the intake process at the Lincoln-Sagadahoc County jail, Volunteers of America caseworkers will do a thorough interview of the defendant and plug that information into a computer program that calculates the defendant’s flight risk and threat to community safety. The bail commissioner will have access to those calculations when setting bail.

The program is being developed specifically for the Lincoln-Sagadahoc county jail, but Westrum hopes it will eventually be adopted by jails around the state.

Rogue commissioners

The center’s series also prompted fresh critiques of the system from lawyers who work with defendants or victims.

In Maine, bail usually is not set by a judge or court clerk, as it is in most states. Instead, except in major crimes such as murder, Maine relies on bail commissioners, a position created by the Legislature in the late 19th century.

Bail commissioners are not court employees and they are are not required to be certified, pass a test or have any educational credentials except for attending a one-day training session.

Walter McKee, one of the state’s top criminal defense lawyers, has a problem with the state’s archaic bail system that he illustrates with one of his own cases.

“I had a client in Penobscot County, a university student that was charged with sending threatening text messages. No prior record whatsoever, 19 years old, wonderful family,” McKee recalled.

At the time of the arrest, the charge was a misdemeanor, a minor transgression often not punishable by jail time.

Given the defendant’s clean past and the nature of the offense, McKee said he would have expected his client to be released on unsecured bail. That means you are released from custody without paying any cash upfront, but an amount is set that you will have to pay if you fail to show up for your court date.

The call on whether McKee’s client would get to go home or come up with a large cash bail on the spot was in the hands of one the state’s 100-plus bail commissioners.

Anyone setting bail — a judge or a bail commissioner — is required to abide by the U. S. Constitution that says a person charged with the crime is presumed innocent. That means that bail should not be used to try to keep the person incarcerated until their trial unless there is reason to believe the defendant either will flee or is a risk to public safety.

McKee said there was no reason to believe his client would not show up for trial, nor, given he had no record and the level of the alleged crime, was there a risk to public safety.

“If you poll 30 bail commissioners, they’d all say this is an unsecured bail situation every day of the week,” said McKee, who is the former president of the Maine Association of Criminal Defense Lawyers and a former Maine National Guard lawyer, known as a JAG.

Instead, the bail commissioner on call that Saturday night set a $5,000 cash bail, meaning the 19-year-old would have to come up with that much cash or he would spend the weekend in jail with hopes a judge would reduce his bail when court was next in session.

“This bail commissioner, for whatever reason,” McKee said, “decided this was, quote, a serious offense, even though it was only ticketed as a misdemeanor.”

McKee said, “If this person didn’t have some incredible resources or luck of the draw, that the family knew somebody who could cobble together some money, they would have been sitting there in jail at least until Monday or maybe even Tuesday.”

The defendant was eventually convicted, but was not sentenced to any jail time, which McKee said demonstrates a judge — unlike the minimally trained commissioner — recognized his client was not a risk.

“I think what we’ve seen,” McKee said, “is a number of — for lack of a better term — rogue bail commissioners that will set bail at unreasonably high amounts for low-end crimes that wreaks havoc on a defendant.”

McKee, a partner in the Augusta firm Lipman, Katz & McKee, said bail commissioners should be instructed to grant “a significant presumption for anyone who has been arrested on a misdemeanor charge of an unsecured bond.”

In that instance, defendants with minor charges and good records would not be jailed for lack of a cash bail.

Plug a hole

If a defendant or his attorney feels the bail set by a bail commissioner is improper, they can ask a judge to reset the bail. But judges hear bail cases only three days a week in Maine — Mondays, Wednesdays and Fridays.

A person arrested on Friday who could not pay the cash bail, for example, would be in jail until Monday (Tuesday if Monday were a holiday) before a judge could consider their bail.

Robert Ruffner, a former prosecutor who is now a criminal defense lawyer in Portland, said that’s too long to wait for the sole reason that you don’t have the few hundred dollars or more to pay the bail.

Ruffner said it would be better if the courts could handle these cases Monday through Friday. The current system, he said, places too much responsibility on “lay people,” although he said some have years of experience.

“The problem with the use of the bail commissioners is they’re being asked to plug a hole that they were never asked to do” because the courts are not funded well enough to do the job themselves, Ruffner said.

Judge Mullen said the only way to conduct bail hearings every day would be to add judges and courtrooms “or not to do something else that we are doing now.”

Faye Luppi, a former prosecutor and the current coordinator of the Violence Intervention Partnership, which works to prevent domestic violence, confirmed the center’s findings about the lack of information provided to bail commissioners.

She said despite improvements made over the past 10 years, the “biggest problem” is getting bail commissioners all of the relevant history about the defendant so the commissioners can make an informed decision when they decide if a person arrested for domestic violence should be released or a bail set.

“There needs to be clarification whose responsibility it is to run the criminal history. Law enforcement? Dispatch? Jail intake?” she said. “How is the bail commissioner supposed to get the information at two o’clock in the morning when the jail calls him and says they need a bail set?”

She says the solution doesn’t necessarily require more money, but everyone involved in the information sharing needs to get together and “figure out whose responsibility it is to to do each of the steps in the chain of information.”

Luppi will be on a panel at this year’s bail commissioner training in May and intends to bring up that issue at the time.

Ruffner said there likely will not be any major attention to the problems from the Legislature, “Until something so spectacular happens in terms of someone languishing in jail because of some oversight … I don’t think that there’s the will to get the money to do it right, so I don’t think much is going to change.”

In the meantime, the action turns from high-cost primaries to state caucuses, which are a relative bargain.  In February, there will be a few caucuses, which are gatherings of the party faithful to record their presidential preferences.  Maine is a caucus state.  While our local caucuses are spread over a couple of weeks, most will take place on Feb. 11, when the statewide results will be announced.

Only 11 states select a GOP presidential candidate at a caucus. The rest use primary elections.  Maine is unusual in allowing caucuses to take place over an extended period instead of on a single day.

Before 1972, the nominees were usually picked in the legendary “smoke-filled rooms” by a handful of party bosses, whose political machines could turn out the vote for the anointed candidate.  Then, the Democrats began to require a more open process, and the Republicans soon followed suit.

The result of opening the political process is that old-style bosses and their organizations now count for relatively little, and the candidates and their backers try to build their own machines and pay for massive media budgets.

The process of picking a party’s nominee always involves fewer people than will vote for the party’s candidate on Election Day.  That’s especially true for caucuses, where participation falls far below that of primaries.  In this year’s Iowa caucuses, the participants equaled only 18 percent of the number of GOP voters in the last presidential election.  In New Hampshire’s primary, participation was much higher, with primary voters equaling 78 percent of the number of GOP voters in the 2008 election.

In Maine, the Republican caucuses can expect to turn out only a small fraction of GOP voters.   One reason is that there will be relatively few caucus sites compared with the number of municipal voting places.  For example, in huge Aroostook County, bigger than Connecticut and Rhode Island combined, there are only three caucus sites this year.  Of course, weather can also be a factor.

Another reason for a lower turnout is that many general election voters are less committed to the political process or a candidate than are the party activists who participate in Republican affairs on a regular basis.  Going to a caucus takes more time than simply voting, so the less active party voters tend to stay away.

Finally, only party members can participate in caucuses.  Primaries in some states may be more or less “open,” allowing for independents or even members of the opposition party to participate.  In the New Hampshire GOP primary this year, independents could vote.

Political analysts have found that Republican or Democratic caucus participants are likely to represent the more extreme political views among party voters. Republican caucus voters are more conservative and Democratic caucus voters more liberal than the average voter for their parties’ candidates in November. The same is true, though to a lesser extent, for primary voters.   That may explain why moderate voters are often unhappy with the choices they face in the general election.

Candidates often spend a lot of money per vote during the delegate selection process.  Costs are usually higher in primary states where campaigns buy television commercials.  In caucus states, less paid media is used.

This year, Ron Paul, the Texas congressman, has said he is concentrating on the lower-cost caucus states, where political organization matters more than media, and he has stumped in Maine.  He hopes to collect enough support to prevent any other candidate from sewing up the nomination before the Republican National Convention this summer.

Often the early primaries and caucuses determine the nominee.  That explains the rush to schedule the vote early in states like Iowa, with the first caucus, or New Hampshire, with the first primary.  Early losers can find their financial support drying up, and a surprisingly good showing can produce contributions to a long-shot candidate.

When the race seems have been settled early, later primaries and caucuses, some occurring as late as June, don’t really mean much, and participation may be low.  In past years, Maine’s caucuses, even when held in February, have often come too late to matter.  This year, with the race not yet decided, they may help determine the Republican nominee.

What about the Democrats with an incumbent president?  For them, caucuses and primaries help get their candidate more news coverage and build the party organization.  Maine Democrats will caucus in each municipality on Feb. 26.

Gordon L. Weil is a contributing writer at the Maine Center for Public Interest Reporting (pinetreewatchdog.org). He is an author and publisher and served as a Maine state agency head. Weil was also a correspondent for the Washington Post and a columnist for the Financial Times. He is a former Harpswell selectman. He may be contacted at Weil.Gordon@gmail.com

Current law only requires that legislators or high-level state employees report
state purchases of goods or services worth more than $1,000 directly from the
individual legislator or family member, not from a corporation or entity for which
the legislator or family member works.

LePage said in a press release Thursday that he was prompted to introduce the
legislation by a Maine Center for Public Interest Reporting story that revealed that
between 2003 and 2010 the state paid almost $235 million to such organizations.

The proposed legislation also requires an executive-level state employee whose
employment has ended to file financial disclosures within 45 days of leaving
that state position. Currently, if that employee left their job before the disclosure
deadline, then they wouldn’t have to file a financial disclosure at all.

The lead sponsors for LePage’s bill are Senate President Kevin Raye, R-Perry, and
House Speaker John Nutting, R-Oakland. The bill will be considered by the Joint
Standing Committee on Veterans’ and Legal Affairs.

A proposal for a joint venture that would undertake major construction of wind towers across the state and region has encountered more regulatory complications, a week after reports were published that state officials recommended the proposal be turned down.

The state’s Public Utilities Commission (PUC) was set to decide on Jan. 31 whether the proposal by First Wind, Emera Inc. (the Nova Scotia-based parent company of Bangor Hydro and Maine Public Service) and Ontario-based Algonquin Power and Utilities Corp. could move ahead. But that meeting has been indefinitely postponed while attorneys for the deal’s proponents and opponents wrestle over actions taken by First Wind and Bangor Hydro over the last week.

A confidential and contentious meeting between PUC staff and lawyers for the parties in the case was held on January 25. A transcript of that meeting was released by the PUC on Monday, January 30. The Maine Center for Public Interest Reporting is linking to the transcript as a public service for those who are interested in this issue. To read the document, click here. To see the order issued by PUC staff in response to requests made at the confidential meeting, click here.

The sales tax is one of the touchiest political issues.  Unlike the income or property tax, just about everybody pays it: rich and poor, resident and visitor — even the teenager who eats at McDonald’s.

Almost every time a change to it is proposed, it sets off controversy.

Recently, Gov. Paul LePage vetoed a bill to exempt  non-profit performing arts organizations from paying a sales tax on goods and services, similar to the exemption for some other non-profit groups.  LePage said: “Exemptions from the sales tax should be saved for the necessities of life – food, shelter, medicine….”

He also would exempt the sale of items that promote economic growth and increase tax revenues.

Maine is a national leader in exempting goods and services from its sales tax.  In a 2008 survey, the Federation of Tax Administrators identified 168 items that are subject to the sales tax.  Maine taxed only 25 of them.  In sharp contrast, Connecticut taxed 79, and Hawaii taxed 160.  Even New Hampshire, which is thought to have no sales tax, actually taxed 11 items.

And Maine’s five percent sales tax rate is one of the lowest in the country, placing the state in 43^rd place, according to a study by the Tax Foundation.  Maine bans local sales taxes, but many other states don’t, a factor that pushes up the average rate in those states.  For example, to New York’s state rate of four percent was added an even greater amount in local sales taxes, making that state rank eighth in the country.

Adding together the relatively few items taxed and the relatively low tax rate makes Maine’s sales tax one of the lightest in the United States.  Tacking on more exemptions, such as the one LePage vetoed, would reduce it even further.

Sometimes people mistakenly believe that the vendor responsible for collecting the sales tax actually pays it.  The customer pays the tax, which the vendor tacks onto the price, then collects the tax and passes the funds on to the state.

Rich people pay more sales tax than poor people, simply because they buy more.  To ease the burden on lower income people, essentials like food are often exempted.

One of the major arguments against the sales tax is that it raises the price of whatever is being sold.  The vendor usually claims that when the price goes up, he or she sells less, thus harming the business and reducing the profits on which taxes are paid.  This claim is widely accepted, often without any study of the effect of a price increase from the amount of the sales tax.

The effect of price increases on sales is what economists call “the price elasticity of demand,” and it can be studied to see the effects of changes in price on demand for an item.  Such studies have been done for products and services ranging from eggs to air fares.  For different products, the results vary.  Adding a cent to a 20 cent item can have a different effect from adding $5 to a $100 item, though the rate increase is the same.   When the price of gasoline went from, say, $2 a gallon to $2.40, there was little sign that drivers used less.  When it hit $4, consumption declined.

Most important is whether the customer can choose a cheaper alternative.

Let’s take the hotel room tax.  In Maine, the rate is seven percent, while in neighboring New Hampshire, it is nine percent.  In Florida, the rate can be as high as 11 percent.  The traveler’s alternative is to visit another state or not go at all.  But few people seem to be deterred from visiting the Sunshine State simply because they might have to pay a high lodging tax. They seem to pay little or no attention to the tax rate when deciding to travel or choosing among hotels.  In short, the room tax probably does not lead people to consider alternatives.

Seen in the light of the effect of the tax on customers and state revenues, Gov. LePage’s veto may be considered good economic sense, especially in the absence of any study on how many more theater tickets would have been sold if there were no sales tax.

This issue is more than a question of whether a given service or product should be taxed or exempt.  It’s a question of total government revenues that pay for services that people need or want.  If one source of state revenue, such as the income tax, goes down, then increasing the sales tax, either by raising the rate or having fewer exemptions will likely be on the table.

Correction: This story has been revised on Jan. 25, 2012 to reflect the correct nature of the sales tax exemptions proposed for non-profit performing arts organizations.

Gordon L. Weil is a contributing writer at the Maine Center for Public Interest Reporting (pinetreewatchdog.org). He is an author and publisher and served as a Maine state agency head. Weil was also a correspondent for the Washington Post and a columnist for the Financial Times. He is a former Harpswell selectman. He may be contacted at Weil.Gordon@gmail.com

But in just the last week,  the Maine Public Utilities Commission (PUC) dealt a potentially fatal blow to the deal.

Faced with what opponents have called the first serious challenge to the state’s landmark electricity deregulation

Paul Gaynor, CEO of First Wind, signs one of the windmill blades at the Stetson II wind project expansion in Township 8 Range 4 near Danforth. Photo: Gabor Degre, BDN

law, which went into effect in 2000, PUC staff on Jan. 13 recommended that the agency give the thumbs down to the deal.

“We deny approval of the ‘proposed Transactions’ as we find that the risk of harm to ratepayers exceeds the benefits,” the draft decision reads, “even if conditions intended to mitigate the risk of harm to ratepayers were imposed.”

The recommendation, which will be considered and voted on by the three agency commissioners Jan. 31, caps a nine-month struggle over a deal that’s described in legal filings as being worth, “at the high end,” $880 million. The capital infusion to First Wind alone would amount to $333 million.

First Wind, Emera Inc. (the Nova Scotia-based parent company of Bangor Hydro and Maine Public Service) and Ontario-based Algonquin Power and Utilities Corp. propose to jointly build and operate wind energy projects in the Maine and elsewhere in the Northeast. After a failed bid to go public in 2010, which left First Wind cash-hungry, the deal is a way for the Boston-based company to continue building wind towers across Maine and the region, as well as a way for Emera and Algonquin to reach new energy consumers in the U.S.

At last count, there were 312 legal filings in the case, a brigade of lawyers from the Maine’s top law firms and state agencies, briefs, motions and documents that referenced Hemingway, Shakespeare and Lady Gaga and a subpoena served on an Emera official by a retired Canadian Mountie.

The case centered on two legal issues: Was the proposal in the interest of ratepayers. And would the deal violate the state’s “Electric Restructuring Act.” That act, which took effect on March 1, 2000, prohibits utilities from owning both transmission and generation, which forced the state’s utilities to sell off their dams and power plants. After what came to be called “restructuring,” utilities were responsible only for delivering power, while other companies produced it – all in the hopes that would lead to more competition and lower electricity rates.

Parties to the deal asserted in filings that it would benefit ratepayers by providing “a substantial benefit in achieving the State’s aggressive wind energy targets,” lowering the price of electricity in the regional market and strengthening the finances of both Bangor Hydro and Maine Public Service. And they said that the Restructuring Act would not be violated because Bangor Hydro and Maine Public Utility, the two regulated Maine utilities in the deal, would not actually “own” or “have any measure of control” over generation assets or hold a “financial interest” in them.

But Eric Bryant, an attorney for the Maine Public Advocate’s office, which represents the interest of utility customers, said last week that his office opposed the deal because it could result in “higher utility prices,” thus violating the law that required a deal to do no harm to the interests of ratepayers.

Bryant said the plan would violate the Restructuring Act, too. Its complex corporate structure, he said, would amount to just what the law forbids — a utility controlling a power generator.

“It’s a virtual vertical utility,” said Bryant. “If we’re going to actually honor the Restructuring Act, you can’t allow this restructuring to happen.”

Anthony Buxton, the lead attorney for industrial energy users such as Verso, Huhtamaki and Madison Paper, who are opposed to the deal, said, “Maine is being asked to change its energy policy, dramatically. The interpretation of this part of the statute is incredibly important in keeping a competitive market for electricity prices in Maine.

“The question is whether the Restructuring Act will be kept whole,” he said, “or whether someone will drive a big hole in it.”

The PUC staff draft decision rejected the opponents’ arguments that the Restructuring Act would be violated, because it would be a utility affiliate that owned generation, not the utility itself.

The staff concluded, “The utilities will not have any equity interest or voting securities that will allow them to exercise any direct or indirect management control over the development or operation of generation assets within the meaning of the statute.”

Nevertheless, staff wrote that the proposed affiliation of Bangor Hydro and Maine Public Service with companies that will “develop, own and operate generation assets” raises “substantial concerns regarding the possible exercise of preferential treatment by a utility to its competitive affiliates.” That, in turn, could produce higher transmission rates and higher electricity prices.

First Wind spokesman John Lamontagne said Thursday that, “We firmly believe that the joint venture with Northeast Wind will bring significant benefits to Maine ratepayers and will lead to as much as $3 billion in investment in the Maine economy and its communities.  That will create hundreds of related jobs and generate more competitively priced clean, renewable energy for Maine homes and businesses.”

Emera spokeswoman Sasha Irving declined to comment.

The Maine Center for Public Interest Reporting is a non-profit, nonpartisan news service based in Hallowell. Email: mainecenter@gmail.com. Web: pinetreewatchdog.org.