Super Parks: New regionalism in economic development?

(from Maine Townsman, June 1998)
by Jo Josephson, Staff Writer

Carve out a $1 million grant for economic development from the state's $16 million Community Development Block Grant program. Require that it be spent on developing Maine's first high-tech super park. Require that two or more towns apply for the grant. Then dangle it before the small cities and towns of the state and see what they come up with by August 1998.

That's what Steve Levesque, Director of the Maine Department of Economic and Community Development's Office of Business Development, has done, in an attempt to put Maine at a competitive advantage nationally for the next generation of business parks: the so-called high-tech parks that house such emerging industries as software developers, biotechnology, telecommunications intensive businesses, marine sciences, insurance and financial services and precision manufacturing.

It's an approach that Levesque sees as the only way Maine can come up with the millions of dollars needed to develop such a park. No one town could or would take the risk and come up with the money needed for the infrastructure; but many could and should is Levesque's mantra these days.

National competition aside, Levesque also sees his challenge grant addressing a number of Maine's public policy issues, like the disparity of income in the "Two Maines" and the economic sprawl that is occurring throughout the state as towns attempt to broaden their tax base. According to Levesque, not only would a high-tech super park become a major employment center for a region, bringing business and employment to the economically depressed rural areas in the state, it would also focus development in areas where it should be and would keep it out of areas where it shouldn't be; i.e., tiny towns could preserve their character while still reaping the benefits of economic development - jobs and tax revenues.

This article not only looks at the concept that Levesque is proposing, it also looks at some of the responses his proposal has generated around the state, including the efforts of one region in the state as it gears up to apply for the grant.

THE BASIC CONCEPT & NUMBERS

Elsewhere in the country, high-tech parks are dubbed "smart parks" and "technology parks". Levesque calls his a "super park" to distinguish it from the small industrial parks that have grown up in cities and towns around the state, many of which he sees as being undercapitalized and therefore lacking the amenities required by the high-tech firms that are looking to expand into such parks.

As Levesque sees it, the infrastructure of his proposed super park will be costly, with its large size, advanced telecommunications infrastructure, advanced electric distribution facilities, architecturally controlled structures and buildings, and community water and sewer. He calculates such a park will cost between $6 million and $7 million to develop. And that's where the so-called "multiple jurisdictions" or multi-community collaboration he is calling for comes into play.

Levesque realizes that no one entity would be able or willing to undertake the risk of such a enterprise but that if the risk and the cost were spread out over many "jurisdictions", such a project would be possible, he says.

To those who are apprehensive about the numbers, Levesque has developed a concept paper that includes a couple of scenarios or case studies to indicate the kinds of investments and returns that communities can expect if they take the plunge and decide to collaborate in such an enterprise. Each of his scenarios is built upon certain basic assumptions:

•The park will be 300 acres in size (most parks in Maine are 50 to 100 acres).

•The build out will "max out" at 2.5 million square feet ( the Maine Mall in South Portland is only 1 million square feet); it will take 17 years to "max out" at 150,000 square feet a year.

•All participating communities will have an equal share in costs and revenues.

•The property will be valued at $75 a square foot and the mill rate will stay a constant at $25 per $1,000 of valuation.

•The debt service on $3 million will be 15 years at 7 percent.

Given the above, Levesque calculates that if 12 communities collaborate, each will be required to make an initial investment of $250,000. They will take a loss the first year, but in the second year, they should each receive $20,500 in profit; and after 16 years, they should each realize a doubling of their initial investment. If only three communities collaborate, each will be required to make an initial investment of $1 million; in the second year they should each realize $82,000 in profit, and after 16 years, they should each realize a doubling of their profit.

As Levesque sees it, by doing away with local competition, Maine could become competitive on a national level. And, while Levesque's concept sounds pretty straight forward, it is in fact a revolutionary one in a state where competition for an expanded tax base is the name of the game. Just look at all those TIFs!

SOME SEASONED ADVICE

To those familiar with Levesque's background, his concept of a multi-jurisdictionally supported super park is not surprising. Before coming to work at the DECD, Levesque worked for Lewiston, a city known to collaborate with its neighbor Auburn on an unusually high (at last count it was 24) number of projects. Most notable is Lewiston-Auburn Airpark that was created in 1979 on land located in Auburn, but owned by the two cities, after they jointly purchased it from the U.S. Government in the 1940's.

To understand what it takes to make a multijurisdictional project work, the TOWNSMAN turned to Lucien Gosselin, who was the city manager in Lewiston during the Airpark's creation and who now serves as the director of the Lewiston-Auburn Growth Council.

To begin with, Gosselin says that collaborating towns and cities should be "comprehensive in their memorandum of understanding." They should be clear on the physical boundaries of the project. They should be clear on what taxes are being shared. They should think hard about what would make for an equitable cost-revenue sharing formula. And they should give real thought to structure. That said, he then offers some specific advice.

On the issue of physical boundaries, Gosselin notes that one should take into account the so-called concept of "sphere of influence", realizing that infrastructure developed for a multijurisdictional park could positively impact undeveloped properties adjacent to the park. As such, in addition to its 30 percent share of the revenue as the host city, Auburn also receives a 17 percent share from the park's so-called sphere of influence, bringing its share of revenues from the Airpark to 83 percent.

On the issue of shared taxes, Gosselin notes that tax sharing isn't just about property taxes. What about so-called "rolling stock". When United Parcel Service moved from Lewiston to the air park, Auburn agreed to split the excise tax with Lewiston 50-50.

On the issue of equitable sharing, Gosselin says what is equitable for one city or town may not be for another. He notes that Lewiston (pop. 37,373) is almost twice the size of Auburn (pop. 23,652). "If we had based the formula on population size," says Gosselin, "Auburn would have gotten short-changed." As Gosselin sees it, basing formulas on population and valuation will always give the advantage to the larger communities.

"Equity is a relative issue," says Gosselin, adding that "if everybody puts the same amount in, it will ensure that they will get the same amount out." As he sees it, this approach (equal sharing) will create a stronger bond between the communities than can one with artificial barometers.

On the issue of authority, Gosselin says, given the fact that most of the agreements between Lewiston and Auburn require council oversight, his preference is to create a free-standing authority. He notes that much energy has been required over the years in dealing with just two municipalities; think of the amount of energy that would be required with three, with four…..? For Gosselin, the bottom line is to keep it simple.

SOME GENERAL THOUGHTS

The Lewiston-Auburn experience aside, the TOWNSMAN also turned to the following planning and government administrators for their thoughts on the proposed super park as a tool for regional economic development.

Planner Gore Flynn, who was the director of development for the City of Lewiston in the 1970's when the Lewiston-Auburn Airpark was created says competition between towns is counterproductive when it comes to economic development.

He says he is surprised that the Lewiston-Auburn model has not been replicated elsewhere.

Flynn says while regionalism is difficult to promote because of conflicting alliances and community egos, he thinks it has a better chance - is easier to promote - when you have a common identity. It might work in the Katahdin region (Millinocket, East Millinocket, Medway) as the area is economically isolated from the rest of the state, says Flynn.

He says that it would not work in the Portland area where people can stand alone. He also says the Lewiston-Auburn Airpark was possible because there was a "compelling reason": Auburn had the better access to transportation; it also had more available land.

Lucien Gosselin says while he is aware that the super park proposal is an attempt to overcome economic disparity in the state, his "knee-jerk" response is that it would create unfair competition for the larger urban communities in the state who are excluded from applying for the grant money under the Small Cities Community Development Block Grant. (Of the $17 million in CDBG money available in 1998, the regional super park program will account for $1million). Gosselin says the proposal could run counter to certain public policy issues, like re-establishing the integrity of the urban centers and containing sprawl and the ripple effect of a 200-acre park.

David Holt, who is the manager of Norway (pop. 4,675), which is one of eight members of the Oxford Hills Growth Council, says his region may apply for a super park grant down the road. At the moment, however, he and others are not convinced that the region could afford the size park advocated by DECD. "We would be challenged in this region to raise the dollars and to provide the workers for the size park the state is advocating," says Holt, adding that he is concerned that only those who are in areas where all the development is already occurring can come up with the amount of local dollars being sought.

But that doesn't mean the towns in his region don't see value in the concept of a high-tech park for the region. "We have a tremendous out migration in our region; we need to provide good paying jobs that will keep our youth here," says Holt, adding that "the truest form of economic development is the one that keeps people in the area.." As such, Holt reports that at least three towns - Norway, Paris and Otisfield - have agreed to share in the cost of a feasibility study for a high-tech park.

Holt says those supporting the project look at it in terms of jobs rather than revenues. "It is going to be a lot of years before this will pay for itself; we are not talking about taxing oceans of machinery, says Holt. If the feasibility study being conducted by the Growth Council says it is a "go", Holt says it is conceivable the group would apply for a CDBG in a future funding cycle but that another source of seed money for a smaller park might be the Economic Development Administration.

Peggy Daigle, the administrative assistant of East Millinocket, reports that 10 years ago, in an attempt to expand and diversify the region's tax base, Great Northern Paper Company donated acreage in East Millinocket for a regional high-tech industrial park.

The Katahdin Region Development Corporation, which is made up of the East Millinocket, Millinocket and Medway, applied for and obtained a $1.1 million grant to develop the park's infrastructure, while a subcommittee of KRDC developed a tax base sharing proposal for the three towns. However, the proposal was only approved by the two larger towns. Daigle is not sure why it was rejected and speculates it may have had something to do with the contentious mood at the town meeting at which it was voted down.

Daigle confesses she is not sure why the collaborative approach being marketed by DECD hasn't caught on in the region but she says that currently a more traditional approach to regional economic development is getting underway as the three-member-town KRDC embarks on a hardwood forest products marketing campaign, mailing out promotional material on behalf of its three towns to 1,500 secondary wood processors in the Northeastern states. She says whether a plant locates in her town or next door makes no difference, the resulting jobs are the important thing.

Ed Gagnon, town manager of Winslow (pop. 7,942), which has signed on to the feasibility study for a super park in Oakland (see below) at a cost of $2,352, says if he has any reservations, it is over the tax sharing aspect. It has "a way to go and might in fact be one of the biggest obstacles to the project," says Gagnon. He cites the fact that towns that are already financially strapped are being asked to put in large amounts of capital which they may or may not recover for 15 years or so and the fact that a lot of the revenue will go to the host city. "People in Maine are very conservative when it comes to spending taxpayer dollars," says Gagnon, adding that "the feasibility study should tell us how great a risk we will be taking with those dollars." Gagnon says he thinks Maine communities are more ready to collaborate on operational matters than they are on speculative matters.

Dwight Dogherty, who is the manager in Pittsfield (pop. 4,395), says for the moment his council has voted unanimously against putting $900 into the feasibility study for the proposed super park in Oakland. While Dogherty admits the concept of letting towns who have no existing infrastructure buy into a park elsewhere in their region is a sound concept, it may not be for Pittsfield, which already has its own industrial park. He says he does not see his town's park competing with the proposed super park in Oakland, nor does he see the types of jobs being proposed meeting the needs of his residents. "We are not looking for corporate headquarters and we have a lot of people who need basic jobs," says Dogherty. He also says he is concerned that the proposal basing representation on valuation may make the small towns feel squeezed out and that no one can predict when the revenue stream will start flowing. "It's like buying a pig in a poke," says Dogherty.

AN APPLICATION IN PROGRESS

When he put forth his "concept" for a Super Park, Levesque says he was careful not to be overly specific as to how to do it. He says he intentionally left that up to the applicants. He also says that some regions of the state are probably more ready than others to rally around such a proposal. His office plans to dangle one "carrot" a year so that other regions who aren't ready now will have an opportunity to apply in the future.

As this article was being written, it appeared there was one region of the state that was definitely ready to take on Levesque's challenge: the Kennebec Valley region, or more specifically the towns that make up the Kennebec Valley Economic Development District, which includes 68 cities and towns in Kennebec, Androscoggin and Waldo counties.

According to Craig Nelson, who co-chairs the People of the Kennebec, a regional economic consortium, which is leading the region on this grant, 24 municipalities in the region have already agreed to contribute to the cost of the feasibility study required of super park applicants and by mid- June the number should rise to 30. The list currently includes towns as small as Cambridge (pop. 506) and as large as Waterville (pop. 16,584)

Each has contributed to a so-called pre-development fund that will pay for a feasibility study of developing a super park in Oakland (pop. 5,966). As with the pre-development contribution, Nelson says state valuation will be the basis for any future cost sharing because of all the models it is the fairest. He also notes that it is the model that is the basis of all so-called special purpose districts in Maine.

But we are getting ahead of ourselves. The fact that the towns in central Maine are as ready as they are to undertake a feasibility study can be attributed to the fact that among other things:

•The region has had more than its share of plant closings in the past two to three years;

•The two major chambers of commerce - the Kennebec Valley Chamber of Commerce in Augusta and the Mid Maine Chamber of Commerce in Waterville - had joined forces three years ago to create "The People of the Kennebec" in order to stimulate growth in the area;

•The town of Oakland already owned 110 acres which it had sitting on the back burner waiting to be developed into a business park and there was additional land adjacent to it.

The jury is expected to be in sometime in mid-June, says Nelson on whether the super park concept is feasible in Oakland. "If it is, great and the towns will file their application," says Nelson; "if it isn't, the concept has fired up the imagination of an entire region."


Sidebar:

Kennebec Valley Regional Development Authority

In addition to raising funds throughout the region for the feasibility study, The "People of the Kennebec" and its super park steering committee have already introduced and gotten approval for emergency legislation establishing the Kennebec Valley Regional Development Authority, which would develop and manage the Kennebec Regional Business (Super) Park, as well as a wide variety of other economic development projects in the region. Some highlights of the legislation establishing the quasi-municipal authority follow.

•The intent of the authority is, among other things, to strengthen the financial condition of local governments within the geographic territory of the authority while combining resources and sharing costs for meeting regional economic development needs and challenges.

•The governing body of the authority shall include one member per town on the general assembly; members who have a state valuation that is at least five percent of the total aggregate state valuation of all members are entitled to one additional representative.

•The general assembly shall meet at least quarterly and provide for an executive board from its membership; the board shall have a minimum of seven and maximum of 15 members at any one time and shall exercise the powers of the governing body.

•A majority vote of the general assembly is required to borrow money and issue general obligation bonds. A referendum may be called on a bond issue by ten percent in the aggregate of the residents 15 days after the vote was first published; the general assembly will be required to reconsider their action and if their vote is not rescinded the question must be submitted to the residents at a special meeting

•To the extent that the directors should decide that the authority cannot operate within its income, the directors shall determine what sum of money shall be raised by taxation; the participating municipalities shall pay based on the ratio of their state valuation is to the total state valuation of all participating municipalities in the authority at which time the directors shall issue their warrants to the assessors of each participating municipality.

•Participating cities and towns in the Kennebec Valley have until June 30, 1999 to approve the legislation, which can only take effect if the municipalities have a combined state valuation of at least $3 billion and the total number of votes cast equals or exceeds 10 percent of the total votes for all candidates for Governor cast in each city.