Despite secrecy, technology grant program protects taxpayer funds, experts say
The public benefit of a state-funded $45 million business development program may be obscured by secrecy, but it helps protect taxpayer investment from exploitation by private beneficiaries, according to state and national analysts.
The Maine Technology Asset Fund, a grant program paid for with a state bond, has paid out tens of millions of dollars to almost 30 Maine companies since 2019. However, confidentiality built into the program administrator, the quasi-government nonprofit Maine Technology Institute, leaves scant public information about the program’s outcome.
Fewer than 1,000 direct jobs have been created so far from the investment, far less than the 5,340 jobs projected from a confidential economic impact analysis in 2018 that also predicted the program would stimulate $1.4 billion in economic growth within three years.
The Technology Institute and state authorities say the program is due for an evaluation, but that it has also resulted in hundreds of millions of dollars of high-tech investment, innovation and hundreds of jobs.
Responding to reporting about the technology asset fund by the Maine Sunday Telegram, political leaders said the program should be evaluated. But there have been no calls to ease the blanket confidentiality enshrined in the 1999 law that created the institute and shields details of its grant and loan programs from the public.
Gov. Janet Mills “takes seriously the state’s obligation to be good stewards of taxpayer money, using it prudently and in a way that maximizes its intended purpose,” said spokeswoman Lindsay Crete.
The governor looks forward to a review of the Maine Technology Institute and will work with the institute and Legislature “to ensure the program is utilizing taxpayer money as efficiently and responsibly as possible,” Crete said.
Co-chairs of the Legislature’s Innovation, Development, Economic Advancement and Business Committee said the institute enjoys broad bipartisan support and is connected to a number of success stories over the years.
The lawmakers welcome a discussion about whether the institute’s unique reporting requirements should be strengthened or altered, Sen. Chip Curry, D-Belfast, and Rep. Tiffany Roberts, D-South Berwick, said in a statement.
“While we want to ensure the rules are stringent enough to prevent fraud we also don’t want to make the reporting so strict and cumbersome it renders the program inaccessible or stifles innovation,” the lawmakers said.
Opinion varies among national economic development experts about how effective cash and other government incentives are for local and state economies.
Alison Wakefield, a business incentive specialist with the Pew Institute, said the technology asset fund structure has built-in protections against waste and abuse, especially compared to tax breaks in Maine and other states.
Under program rules, companies actually have to make investments – such as a new office building, factory or technology upgrades – on set milestones before receiving money from the technology institute.
That means the program is capped at a certain amount – unlike a continuing tax benefit – and pays out based on performance, making it easier to evaluate.
“The fact this was a performance-based project where companies had to meet milestones and collect reimbursement is a protection,” Wakefield said.
Confidentiality and limits to data collection beset incentive programs across the country, Wakefield said. State governments in recent years have demanded stricter requirements from private companies to improve public outcomes, she added. In Maine, the state’s Office of Program Evaluation and Government Accountability has conducted numerous, high-quality reviews of the state’s incentive programs, Wakefield said.
The hardest question to answer about the efficacy of tax breaks and grant programs is what Wakefield calls the “but for” question: Was public money needed or would a private company have made the investment without it?
“If you are rewarding companies for what they would have done anyway, if the incentive didn’t really influence business decisions,” then it may not have been worth it, Wakefield said.
Tim Bartik, senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Michigan, said public disclosure is necessary, especially in competitive cash award programs such as the technology asset fund.
Without information about what public money was spent on, evaluating the impact of the program is difficult, Bartik said. The Maine Technology Institute says it collects broad data on companies awarded grants, including jobs created, taxes paid and employee benefits, but that information is not yet publicly available.
Cash payouts are less helpful than other public investments, such as job training, infrastructure and development site preparation that can support long lasting local economic benefits, Bartik said.
“In general, cash incentives tend to be overused, expensive and not as helpful as people think because companies would have made the investment anyway,” he said.
Sen. Nate Libby, D-Lewiston, co-chair of the Legislature’s government oversight committee, pointed to the New Markets Capital Investment Program – a notorious Maine tax incentive that resulted in a $16 million payout to private financial companies without promised investment in an East Millinocket paper mill – as an example of a program gone bad.
Compared to that “fiasco,” the technology asset fund has more guarantees public money will be spent appropriately, Libby said. “The investment fund is structured the way economic development funds should be structured,” he said.
Still, there are questions to be raised about the level of secrecy imbedded into Maine Technology Institute, Libby added. Confidentiality is needed to protect companies’ trade secrets, finances, business plans and other privileged information, he said.
But there is no reason other disclosures shouldn’t be made, such as the precise nature of the investments and documents proving they occurred, Libby added.
Institute President Brian Whitney, in an email responding to the Maine Sunday Telegram reporting, said it was fair to question a lack of currently available information about the grant program.
The technology asset fund will be included in a broad evaluation of the state’s incentive programs and Whitney has said it is due for its own detailed accounting.
But he said the reporting “did not seem to fully balance the success of the program with the critiques presented,” and that he’s witnessed tangible benefits to Maine’s economy.
Pleasant River Lumber, which was paid $4.2 million through the asset fund, built what is going to be the state’s biggest saw mill and has partnered with a company to produce biomass fuel from lumber waste, Whitney said. Ready Seafood, awarded $2.25 million, built a processing plant in Saco that now employs more than 400 people and partners with lobster scientists in a research lab.
Whitney also highlighted the Jackson Laboratory mouse breeding facility in Ellsworth. It received a $12.5 million grant and offered specimens nationwide during the search for drugs and vaccines against COVID-19.
The unfinished headquarters of Covetrus, a Portland-based veterinary products firm awarded $9 million, includes a specialty pharmacy, technology center and collaborates with the University of New England. A 27,000-square-foot building in Waldoboro, funded with a $175,000 grant, will be the first U.S. eel aquaculture company.
And despite an industrial disaster in 2020 that wiped out $4 million awarded to refurbish a paper machine at the Androscoggin Mill in Jay, the investment was worth it, Whitney said.
“While the explosion in 2020 was devastating, it did not end up shuttering the plant and MTI’s award helped play a meaningful role in its survival,” he said.
Many of the companies Whitney mentioned did not respond to earlier interview requests.