John Loyd's Letter to the Times-Record

 

To the Editor:

I have become increasingly concerned about the amount and character of misinformation, misconceptions and myths that are informing the discussion about ConocoPhillips/Transcanada’s so-called Fairwinds proposal for Harpswell. These are misconceptions and myths regarding the Fairwinds project, Harpswell’s present and future financial situation and Harpswell’s former fuel depot site. Increasingly, this misinformation has been printed in ConocoPhillips’ advertisements and reports, it is appearing in the press and letters to the editor and it is recited as fact at public meetings. This misinformation is not supported by the facts yet it is having an unfortunate persuasive effect on many Harpswell voters. My goal is to identify and correct these misconceptions.

Misconception #1. Harpswell is over taxed. This is simply not so. No tax is easy to pay, especially a property tax. Harpswell’s tax rate – its mill rate – is among the lowest in coastal Maine. In fact, statistics compiled by the Maine Revenue Service show that Harpswell has far and away the lowest tax rate of all towns in Cumberland, Sagadahoc and York Counties. Harpswell’s mill rate is lower than all but four towns in Lincoln County and lower than all but one town in Knox County. Even if you believe that Harpswell may be bearing a disproportionate share of S.A.D. 75’s annual budget we are not over taxed. If Harpswell’s share of the S.A.D budget is of concern to the voters, we should deal with that issue directly rather than allow that it to muddy the discussion about Fairwinds.

The Selectmen have postulated that the Harpswell tax rate is about to grow out of control yet not once have any of them provided the voters of Harpswell with an analysis of why they believe that to be so. How can we be expected to embrace a heavy industrial project of this magnitude on unsupported claims that our taxes are about to grow out of control.

Misconception #2. Reduced property taxes will make Harpswell a more affordable place in which to live. Most of us in Harpswell are understandably concerned about the rapidly escalating cost of real estate in Harpswell and the fact that it is making it difficult and often impossible for Harpswell’s younger generations to stay in Harpswell or to return to Harpswell. This is an unfortunate truth that applies to my family just as it applies to others. Real estate prices are changing the Town as the population becomes increasingly older and includes a larger portion who are “from away.” Many arguments have been made that the revenue stream from the ConocoPhillips project will somehow allow us to reverse this trend or at least slow it down. However, an economic analysis of this argument revels that this simply won’t happen! In fact, any tax relief from the Fairwinds project is likely to increase real estate prices.

The proponents of the ConocoPhillips project argue that if there is tax relief as a result of the ConocoPhillips project, Harpswell real estate well become more affordable or that prices will stabilize. That simply is not so, because, while the property tax mill rate is partially driven by the value of real property the reverse is not true. The value of Harpswell real estate is driven by market forces – not the tax rate. The only reduction in the market value of Harpswell real estate that is likely to occur if the ConocoPhillips project is approved will affect property on Harpswell Neck alone, due to the unfortunate and undesirable proximity of the property to the LNG site.

Elsewhere in Harpswell (which is most of the Town, geographically) the market value of real estate will continue to rise or fall as a function of market demand for real estate. To the extent that the ConocoPhillips project revenue does provide property tax relief it will probably have the perverse result of driving up the price of Harpswell real estate. This acceleration in the rate of increase in market value will come from the fact that Harpswell will be perceived to have a more favorable real estate tax climate compared to other coastal towns. This factor will likely make Harpswell real estate more attractive by comparison and will drive up real estate prices all the more.

As we all know, there is a finite amount of coastal real estate and an increasing number of buyers in search of coastal real estate. This creates the classic set up for the operation of the economic law of “supply and demand.” Regardless of the Fairwinds project and any tax relief that the Fairwinds lease might generate, Harpswell real estate pricing will remain a function of the supply and demand for coastal property and, as the inventory of available coastal real estate diminishes or remains constant against a growing number of buyers, we can expect the price of Harpswell land to increase accordingly. There is absolutely nothing we can do about this. A vote for Fairwinds to obtain tax relief is a vote to increase the market value of real estate in Harpswell and to make the affordability problem worse than it is now.

Misconception #3. The lease’s revenue stream will be used for tax relief. As I write this and before the first nickel is paid to the Town, the call has been sounded by Harpswell citizens for an incredible wish list; a senior center, a youth center, bike paths, a swimming pool, health center, library, withdrawal from the S.A.D. while assuming our share of the S.A.D. bonded debt, our own schools, a college scholarship fund for all Harpswell students,…and the list grows by the week. ConocoPhillips uses the ever expanding wish list to demonstrate to the Town that, with the revenue from the lease “the sky is the limit” – we can do and afford whatever we want – a seductive siren call for sure.

In the first full year of the lease, after construction and the project is operational, the lease payment will bring in nearly $9 million. Nine million dollars is a lot of money by any measure, but as much money as it is, it is barely enough to do all that is needed now, let alone to begin to satisfy even the smallest portion of the Town’s wish list. When one begins to tally the costs to the Town that it must and should assume if it enters into the Fairwinds’ lease there is little left over for tax relief. For example: The Town has to start off by establishing a $4 million reserve for the fishermen’s mitigation fund – that is the upper limit of the Town’s responsibility under the lease. Whatever is not spent in any year on mitigation can be carried forward but – to the extent that the mitigation reserve is used – the funds will have to be replaced. So, if most of the mitigation fund is spent in any lease year the Town will have to set aside $4 million for the next year, then the next, and so on, for the term of the lease. Add to that the “set aside” investment fund that, in the exercise of prudence, the Town must create and maintain to guard against the precipitous loss of revenue to the Town on the day, 30 or 50 years from now, when ConocoPhillips decommissions the facility. Most money managers would recommend that upwards of one half of the revenue stream be used to fund the Town investment fund in order to avoid leaving a fiscal time bomb for our children. In the first year of the lease, assuming a flat municipal budget and before we have our own schools or build the swimming pool, we might have a net contribution to the Town budget of $1 million. If the Town does what it must to be fiscally prudent and the Town budget grows at a rate that is just a smidgen greater than the rate of inflation, the net contribution to the Town budget likely will be only $300,000 - $500,000 in the fist year. Thereafter, in later years, the net contribution to the Town budget may appear to increase but, because of inflation and the tendency for government to grow, in real terms, the net contribution to the Town will not increase appreciably if at all. Personally, I do not believe that contributions to the Town budget of any amount justify the irreparable harm that the Fairwinds project will do to Harpswell, but net contributions to the Town budget of $300,000 - $500,000 are not worth even a moment’s consideration.

In addition, it would behoove all of us to look at the negative experience of towns like Wiscasset, East Millinocket, Millinocket and Lincoln to see the consequences of total reliance on a single industrial facility.

Misconception #4. The former fuel depot site is so contaminated that it cannot be used for any purpose other than the ConocoPhillips project. I serve on the fuel depot committee and, as a member of that committee, I am aware of the environmental conditions of the former fuel depot site. Based on the information available to the committee and from the Maine Department of Environmental Protection it is clear that the environmental condition of the site and level of contamination of the site is being intentionally distorted and misreported. The site has been “remediated” – cleaned up – and is approved for all uses other than residential housing – period. What little contamination remains is located deep in the soil and is rapidly being consumed and cleaned up by naturally occurring bacteria. Let me say this another way – the former fuel depot site is safe for all uses except residential housing and it has tremendous potential for many uses, commercial, recreational and otherwise.

Misconception #5. Harpswell is under the gun for the cost of removal of buildings and the pier if the Town does not approve the ConocoPhillips project. The projected cost of removal of these structures is estimated to be between $1 million and $2 million. The Town appears to be in a headlong rush to remove these structures before we know whether any potential commercial or light industrial tenant of the former fuel depot can use these structures or would be willing to remove all or some of them as part of its lease obligation to the Town. There is no need to rush to remove these structures. The Town should continue its search for one or more suitable tenants for the former fuel depot site and negotiate the use or removal of the structures with these tenants.

Misconception #6. The ConocoPhillips project is Harpswell’s last chance to develop the former fuel depot site – if we don’t approve Fairwinds the Town will have missed the opportunity to develop the site. The fuel depot committee has investigated, in a non-strategic and somewhat relaxed manner, a handful of possible light industrial or commercial uses and tenants for the site. But the fact is that the Town and the Committee have not taken a serious, systematic strategic approach to the economic development of the site. If the Town approached the economic development of the former fuel depot site in a direct and sophisticated manner, say, in the way that Topsham and Brunswick have for their available sites, I have no doubt that a huge number of potential tenants for the site would be identified and that leases would ensue – if that is what the town’s voters wish. More to the point, if the Town had put a fraction of the time and energy into finding a suitable tenant for the former fuel depot site as it has in dealing with ConocoPhillips, there is no doubt that we would have had one or more appropriate tenants some time ago. Let’s simply resolve to approach the development of the former fuel depot site using appropriate and professional economic development techniques and in time Harpswell will have what it wants and needs – one or more tenants that are appropriate to the site, that may well cover all or some of the cost of removing the structures on the site and that will provide revenue and increase the Town’s tax base.

Misconception #7. ConocoPhillips will save Harpswell. Harpswell does not need to be saved, it is a wonderful place in which to live, raise a family and work – now. The only thing that Harpswell needs to be saved from are those who are willing to sacrifice the character, culture, environment, health and safety of the Town and Middle Bay for a seductive and illusory income stream.

Economic issues are only a few of the important issues that Harpswell voters should consider in connection with the ConocoPhillips proposal. I hope my focus on important basic economic issues, such as taxes, property values, and the former fuel depot site will help Harpswell voters consider the real facts and economic considerations and not have their opinions biased by the large amount of misinformation on these issues.

 

John F. Loyd, Jr.

Harpswell Resident

 

 

This letters was published originally in the Times-Record, on the letters page. Mr. Loyd's letter was published on 2/13/04.  It was  also available on the Times-Record website at The Times Record Home,    Mr. Loyd's 'myths, misinformation, misconceptions' refuted