LIMESTONE, Maine — The Loring Development Authority met on April 9 for their monthly board of trustees meeting. Board members, media and representatives the offices of state and local politicians all gathered in the LDA board room for the last time prior to the board’s annual meeting in May.
At first glance, the agenda for Wednesday’s meeting, with less than 10 articles on the docket, appeared thinner than that of a typical meeting. However, by the meeting’s adjournment it was clear that the lack of a lengthy agenda did not diminish the importance of the articles themselves.
A brief update made by LDA President and CEO Carl Flora, on the Norinco Motors railcar manufacturing project made it known that the Chinese manufacturer remains adamantly interested in establishing a potential partnership with LDA, that would ultimately place Maine Military Authority as Norinco’s production contractor in the company’s railcar manufacturing endeavor.
At the previous meeting on March 12, Flora mentioned that Norinco still needs to investigate and select an appropriate market niche for long-term production that will serve customers in both the U.S. and Canada. This will enable both sides to move ahead with the project and take advantage of the immediate opportunity in the railcar manufacturing business. Flora explained there is a demand for modern railcars that will meet new safety standards. He used the example of the rail company BNSF who demonstrated that need when recently deciding to solicit a bid for the immediate manufacture of 5,000 new railcars, even before new safety standards have been established by the Federal Railroad Administration, a part of the U.S. Department of Transportation that is currently working to improve railroad safety standards.
A memorandum of understanding (MOU) between Norinco and MMA has been circulated between the two parties, outlining the preliminary understanding of the business relationship, project conditions, needs, fees and compensation being considered for LDA. Project revenues were discussed and it’s been decided that at a minimum, LDA would receive an impact fee to compensate for municipal services and infrastructure use. Additionally, LDA officials claim they would prefer that any success-based compensation be based on gross revenue or another objective, measurable standard rather than equity.
As of April 1st, the MOU between LDA and JAC Group and China North Industries Corporation (Norinco) has been fully executed by all parties. According to Flora, discussions are continuing with MMA which has the potential to supply labor and production oversight of this operation.
“Norinco wants to meet with the Association of American Railroads (AAR) which is the standards setting organization for North America’s railroad. Charting a pathway forward with AAR to obtain overview and certification of the Norinco railcar designs is an important step if Norinco is to manufacture and sell its railcars in the United States,” Flora said.
Flora also explained in his President’s Report that Norinco has not yet engaged a railroad industry expert with expertise in the certification and review process used by AAR, but they have been in contact with a consulting firm who does possess this expertise.
The LDA board also readdressed LD 1835, an act to improve Maine’s ability to attract major private investments. The proposal seeks to permit Maine to compete for “transformational business expansion projects.” These potentially very large-scale projects would take place in a military redevelopment zone, and according to a March 24 testimony Flora made to the Committee on Labor, Commerce, Research and Economic Development, the act would require a projected investment of $50 million or more, and would result in at least 1,500 new jobs.
“The incentives that are at the center of the proposal are bold enough to attract the interest of the few businesses each year that open a major new facility somewhere in the United States,” said Flora. “Right now, I do not believe that Maine is a serious contender for such large-scale developments as would qualify as ‘transformational.’ This is the case in spite of the fact that Maine has two major former military installations each of which have the size and physical infrastructure needed to host a transformational project.”
Flora added that Loring Commerce Center and Brunswick Landing are both huge facilities with incredible assests that now exist for the benefit of Maine’s citizens. However, the potential of these properties to be fully redeveloped to support jobs and economic activity is not being fully realized, in part because other states are experiencing more success in their efforts to attract new large-scale projects because of meaningful business incentives.
“A transformational project at Loring with 1,500 new jobs, would be a game-changer in Aroostook County. Such a project could easily create $50 million of new payroll, supporting the formation of new households and helping to reverse the troubling out-migration trends we’ve seen over the past several decades,” said Flora. “The $50 million of payroll will create new demands for goods and services in the region, everything from cars and restaurants to groceries, recreation and public services like teaching. Add to that the consumption of goods and services by the new project itself, initially in the construction phase and then on an on going basis.”
Flora proclaimed in his testimony that increased demand for raw products and support services will touch off a round of growth in small and medium businesses.
“I’m not an economist and won’t pretend to estimate the magnitude of the indirect and induced impacts of a transformational project, but the multiplier effect is a well known phenomenon that has its most pronounced impact with growth in the manufacturing sector. There is perhaps a good chance that a transformational project will be a manufacturer,” said Flora. “A transformational project at Loring could restore Aroostook County to the level of economic vitality that was enjoyed while Loring Air Force Base was open.”
He explained that each of the incentives in the bill is a tool for economic development specifically targeted at very large enterprises.
“Having these tools to use does not guarantee that a transformational project will be secured. And, having these tools would not prompt the Loring Development Authority to shift its focus entirely to prospective large-scale projects,” said Flora. “These base closures we’ve experienced in Maine demonstrate the danger of having too much of a region’s economy dependent on a single employer.”
Flora claims the LDA sees value in a diversified and resilient economic base to replace the one-time military employer Maine lost nearly 25 years ago.
“On the other hand, the incentives identified in LD 1835 do open the door to the possibility that the state could attract a very large-scale enterprise. Assuming we are satisfied that a particular large scale project will have all the transformative qualities the bill suggests, the state should equip itself to do all that it can to respond to that opportunity.”
LD 1835 could potentially bring some much needed revenue to the state, where the few large-scale businesses and manufacturers that still do exist are having a difficult time keeping parts of Maine, especially northern Maine, attractive for things like tourism and commerce. Flora and the LDA consider this a pivotal moment for Maine’s economic future and the bill an important step in a positive direction.
“I am sensitive that some aspects of the LD may be modified. However, the value of the bill, in whatever form it takes, is that Maine can be part of the dialogue for the next major investment that some prospective new employer is
considering.”
