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Thursday, October 6, 2022

Global Statistics

All countries
548,935,393
Confirmed
Updated on June 26, 2022 8:18 pm
All countries
520,730,887
Recovered
Updated on June 26, 2022 8:18 pm
All countries
6,350,765
Deaths
Updated on June 26, 2022 8:18 pm
Molderizer and Safe Shield

Did it work? The elusive impact of a $45 million state grant to grow jobs

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In 2017, Maine voters approved borrowing $45 million to pay for private sector development, encouraged by the promise of new jobs and economic growth the investment was expected to generate.

Money from the program, known as the Maine Technology Asset Fund, was awarded to nearly 30 private companies in grants ranging from less than $100,000 for software improvements to a Brunswick call center to more than $12 million for a mouse breeding facility in Ellsworth.

Five years later, nearly all the money has been spent. But determining its impact on the state’s economy is complicated by secrecy built into the law that created the Maine Technology Institute, the quasi-state nonprofit that administers the grant program.

In some cases, major public investment helped install new equipment, build offices and state-of-the-art factories, and add hundreds of jobs.

But other cases are less clear-cut. A high-rise headquarters in Portland funded with a $9 million grant remains unfinished. A project awarded $3 million never materialized. An industrial disaster at a paper mill wiped out millions in public investment.

Based solely on direct job creation, one of the few pieces of information made public about the program, the investments’ success has been modest. To date, fewer than 1,000 new positions have been created at 27 companies.

THAT’S CONFIDENTIAL

The program’s wider benefits are harder to discern because nearly everything about grant-funded private projects is considered confidential under state law.

Companies granted awards are required to file regular reports with the Maine Technology Institute and are only reimbursed for costs after meeting certain benchmarks, according to the institute. But what those benchmarks are, how they are determined and the precise nature of the projects paid for with taxpayer money is not made public. Even the details of an initial economic impact report that estimated that this sizable state investment would result in more than 5,000 direct jobs and over $1 billion in economic benefit to the state over three years are secret.

Brian Whitney, president of the Maine Technology Institute, said such confidentiality is necessary to shield company finances, trade secrets, business plans and other privileged information.

“As a public instrumentality, we have to provide confidence to investors and Maine companies that their intellectual property is going to be protected,” he said.

Basic information about which companies have received  grants and loans, whether the money they received has been spent and how many jobs have been created are explicitly public under the law, but little else.

To evaluate the program, the Maine Technology Institute says it collects ample information, including how much the companies it funds spend on Maine products and vendors as well as their wages and benefits, job numbers, corporate taxes paid, research and development projects, and additional investments they make or receive as a result of public financing.

But those figures for the recipients of the $45 million aren’t publicly available, or at least not yet.

“We are indeed due for a more thorough progress review at this point,” Whitney said.

THE INSTITUTE’S ACCOUNTING

Public investment spurred matching private investment worth more than $200 million, according to Whitney. Companies that receive grants have to match the money with funding from other sources. It helped companies large and small install new equipment, build new offices and factories, improve technology and add jobs.

It also encouraged research and development, an area in which Maine lags behind the nation, said Heather Johnson, the state’s Economic and Community Development Commissioner.

“State investments in innovation not only help create jobs, but it can help to attract private investment, support the creation of higher wage employment opportunities and contribute to the overall diversification of our economy,” Johnson said in a statement.

A forthcoming evaluation of the state’s economic development investments – the first in four years – will examine the technology asset fund, “striving to ensure that all investments are properly utilizing taxpayer dollars to help drive growth in sectors key to our state’s economic future,” Johnson added.

The $45 million approved by voters was intended to help companies in seven specific sectors invest in new buildings, infrastructure, machinery, equipment and technology upgrades. Voters were told in the ballot question that with taxpayer-funded investment matched by private financing, companies that got funding from the state could gain and keep market share, increase revenue and expand and maintain employment.

In 2019, the Maine Technology Institute awarded the money to 18 companies across the state. An impact report from that year – one of the program’s only public documents – stated the investment was expected to directly result in 5,350 jobs and $1.4 billion in economic impact within three years.

The reality is far different from those projections, which were generated in a confidential economic impact analysis.

According to an analysis of job figures obtained by the Portland Press Herald/Maine Sunday Telegram, just 979 direct jobs had been created through the funding as of this year, a cost of nearly $46,000 per job. Only one third of the 18 companies awarded grants in 2019 met three-year employment expectations. Five companies have fewer employees now than they did when they received the state money.

Whitney said the real problem was not that far fewer jobs than expected had been created. It was that the initial statement about how many jobs would be created through the funding was not worded accurately.

The document should have clarified, he said, that the total number of jobs expected to result from the program would be a combination of direct hires by the funded companies, “indirect” jobs at their suppliers and subcontractors, and “induced” jobs from the economic activity generated by the investment.

“We could have been clearer,” Whitney said in an email. “I would characterize it as an editorial oversight on my part.”

While the number of direct jobs may seem small, the funding could have created a rough estimate of as many as 3,500 indirect and induced jobs, Whitney said. The three-year period of job creation referenced in the report, he noted, doesn’t end until 2023.

At the peak of their hiring, before the pandemic, the companies that received money created more than 1,700 direct jobs, well ahead of projections. That works out to about $25,000 per job, a reasonable return on investment for an economic development program, Whitney said.

But a lot of those job gains eroded in the disruption from pandemic and an ultra-competitive job market later, he said. At least two companies that received money now have double-digit job openings, Whitney said.

“Job creation and retention is a bellwether” for the public and policy makers, Whitney added. “I still think the job numbers tell a good story, but it is not as good as we would like.”

CHECKING UP

In fact, even though job creation numbers are among the only information that the program makes publicly available, they are not central to how the funded companies report progress and get evaluated.

State bonds like the $45 million borrowed for the program can only be spent on hard assets – infrastructure, equipment and technology upgrades – and companies get paid portions of the money they’ve been awarded as they reach milestones in the projects they said they would undertake. According to the program rules, they have to make regular reports to the institute and have five years to invest the money.

For example, a Portland-based veterinary technology company, Covetrus, which at the time it was awarded funding was Vets First Choice, got $9 million – the program’s second-biggest grant – to help finance a $20 million headquarters in the city’s India Street neighborhood. In 2018, the company claimed the headquarters would hold 1,500 employees across a four-story office complex.

Four years later, the office building still has not been finished. Since its award was approved, Vets First Choice merged with a veterinary products company, became a controversial publicly traded firm called Covetrus and is now being taken private by its equity capital financiers. To date, Covetrus has been paid $4.6 million of its award.

A Covetrus spokesperson did not respond to multiple interview requests regarding its state award and the plans for its headquarters.

Whitney said he recently toured the nearly completed building and is expecting to receive a reimbursement request from Covetrus for its remaining award.

Verso Corp. received $4 million through the program for a $17 million project to restart a shuttered pulp line and convert a paper machine to make packaging at its paper mill in Jay. About 120 workers were hired as a result. In 2019, Verso Corp. sold the mill to Pixelle Specialty Solutions, which in turn was recently acquired by H.I.G. Capital, an alternative investment firm.

In April 2020, a pulp digester at the mill exploded, taking most of the new investments  offline. The mill now employs 323 people, about 70 fewer than it did when it was awarded funds.

The paper machine funded by the grant is now idle, “but we are continuing to investigate other potential products that the machine could produce,” Pixelle spokesperson Alan Ulman said.

SUCCESS REPORTED

The Jackson Laboratory, the Bar Harbor-based genetic research nonprofit, was granted $12.5 million, the program’s largest award, to expand a new vivarium – or structure in which to breed its mice – in Ellsworth.

State support from the Maine Technology Asset Fund helped add 262 jobs at Jackson Laboratory, including 150 in Ellsworth, the company said – nearly 100 more jobs than had been projected.

“MTAF funding not only accelerated the overall project, it also provided proof of principle that a modern vivarium could be built at a much larger scale using advanced automation systems,” said Katy Longley, Jackson Laboratory’s chief operating officer, in a statement.

But measuring the local impact of the state’s investment is complicated.

More Jackson Laboratory workers have moved to Ellsworth, bought property and stimulated the city’s economy, said Ellsworth’s Economic Development Director Janna Richards. The area around the laboratory, which had multiple vacant parcels, has filled up and drawn interest for additional commercial and housing developments.

“It’s hard not to think the reason why those are being proposed here has a relationship to Jackson Laboratory,” Richards said.

But many people moved to the Ellsworth area in the wake of coronavirus, unconnected to the laboratory. A hot housing market and demand for new construction exists even without its presence. So sifting out what benefits investments in Jackson Laboratory brought is tricky.

“We know that it is a significant contribution to the city of Ellsworth and our economy. You can’t deny it. It is just a matter of how to quantify that – it is kind of difficult,” Richards said.

In Kittery, Good-to-Go used a $150,000 grant from the state fund to help upgrade packaging equipment for its dried to-go camping and backpacking meals.

Co-founder Jen Scism said the funding allowed her tiny company to overcome a production bottleneck, serve customers faster and expand.

“It was a huge help for us, not only for the automation and efficiencies – it continued with a growth trajectory for the company” Scism said. The staff has expanded from 13 to 24 employees and is growing into a new food mixing space and office space.

Funding also appeared to spur major growth for other companies, though they were not available to discuss if the connection between the funding and the growth was direct.

Ready Seafood, which did not respond to multiple requests to discuss the funding, was given $2.25 million for a new state-of-the-art processing factory in Saco. The company has grown from 72 to over 400 employees, triple its job projections.

Pleasant River Lumber, which also did not respond to a request to discuss its grant, got $4.2 million to upgrade a Dover-Foxcroft sawmill in order to process small logs and balsam fir that lacked markets in Maine. Since its award, Pleasant River has hired more than 50 people, above its projected job creation.

In one case, the institute awarded funds to a project that never materialized.

Smartlam, a Montana-based specialist in cross-laminated timber, was approved for a $3 million grant to build a $22.5 million manufacturing facility in Maine. The company was unable to execute its plans, no contract was executed and no money flowed, Whitney said.

The funding Smartlam would have received was redirected to 10 companies in 2020. Those include American Unagi, which is raising eels for the U.S. sushi market in Waterboro; Springworks Farm, which grows aquaponic lettuce in Lisbon; and Acadian Composites, a Nobleboro company developing building materials from recycled plastic.

Many of the publicly funded projects, Whitney said, are developing innovative products and attracting more private financing. But he acknowledged the lack of public information and awareness of their achievements is a drawback.

“We haven’t gotten the word out as well as we should have,” he said. “People see these things and they don’t realize the state has played a role in helping grow these companies.”


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