February 24, 2011

Hartland among LePage's list of default risks

By Scott Monroe smonroe@mainetoday.com
Staff Writer

HARTLAND — Was the town government in this small Somerset County community on the brink of bankruptcy just weeks ago?

Paul LePage
click image to enlarge

Maine Gov. Paul LePage

Associated Press file

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Gov. LePage's spokesman, Dan Demeritt, said the sale of Hartland's Prime Tannery, pictured here, to Tasman Industries helped the town face "huge financial challenges."

Staff photo by David Leaming

That question has been raised with the disclosure Wednesday that the town of Hartland was among the unnamed communities that Gov. Paul LePage said were "ready to default" in a budget address he delivered Feb. 10 to the Legislature.

Local officials on Wednesday suggested that the town's financial outlook wasn't quite that bad, though it had been in recent years.

Selectmen publicly announced in spring 2009 that they had considered having the town file for bankruptcy protection if it was unable to restructure its mounting debt and pay its bills. The town was later able to strike a $1.4 million deal with the Maine Municipal Bond Bank to refinance its debt and acquire another loan.

"We're in a slow recovery and we're treading water, basically, but we're not in default," Town Manager Susan Frost said Wednesday. "We're on the right track now."

LePage, Maine's new Republican governor, painted a dire financial outlook for the state in his budget address.

"Because whether or not the state defaults, we have a couple of communities that are ready to default," LePage said. "So folks, it's a lot more serious than anyone is willing to give it credit."

After delivering his speech, LePage declined to name the communities he was referring to, drawing criticism from Democrats.

But LePage spokesman Dan Demeritt confirmed Wednesday that Hartland was one of the communities in question. In support of the "default" description, Demeritt cited the recent sale of the town's landmark tannery — which has 170 employees and is the town's largest employer — and the uncertainty of whether the sale would close.

Prime Tanning, which had filed for Chapter 11 bankruptcy protection four months ago, might have shuttered the tannery's doors if the court-approved sale had failed. Kentucky-based Tasman Industries completed its $6.5 million purchase of the leather-producing operations just two days after LePage's remarks.

"The tannery sale was a huge issue for the town," Demeritt said. "Certainly, they were facing a huge financial challenge."

On Feb. 12, voters at a special town meeting approved a deal with Tasman Industries that establishes a new cost-sharing arrangement for the wastewater-treatment and pollution-control facility, of which the tannery is the biggest contributor. The facility also serves area residents.

The new arrangement will cost the town slightly more than previously, increasing town taxes by $24 per $50,000 of property value. But without the tannery contributing to the facility's expenses, town officials estimated that taxpayers would pick up an additional $450,000 expense to run the facility, increasing taxes by $155 per $50,000 of property value.

The vote to approve the deal, which was the last remaining hurdle to the Tasman sale, was 196-15.

Attending the Hartland meeting was Philip Congdon, commissioner of the state Department of Economic and Community Development, which worked with the Department of Environmental Protection to assist in the tannery sale.

Congdon said Wednesday that he had brought the situation in Hartland to LePage's attention.

"It would have been a problem had we not been able to close this deal," Congdon said. "They have a large wastewater treatment facility, it costs money to operate and the lion's share is paid by Tasman. Without that income, where would they find the funds to keep that system running? The financial burden of taking that on would have come close to overwhelming."

In a statement after the sale, Congdon and other state officials said the economic department helped broker the cost-sharing arrangement between the town and Tasman, while the DEP agreed to temporarily withhold enforcement action against the tannery's new owners, who have pledged to upgrade facility equipment in order to comply with state regulations on the discharge of chromium.

(Continued on page 2)

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