Cate Street Capital pays US$1.4M in past-due property taxes, plus interest, for its Great Northern Paper mills in East Millinocket and Millinocket, Maine; town of Millinocket will return US$591,433 to Cate Street Capital, under TIF agreement

Maine , August 22, 2013 () – The Katahdin region's largest single taxpayer paid $1.42 million in property taxes it owed East Millinocket and Millinocket this week, but that money won't solve the towns' fundamental problems, officials said Thursday.

Wired to the towns on Wednesday, the money diminishes but won't end Millinocket's cash-flow crisis or East Millinocket's need to further reduce school spending, leaders in both towns say.

Concessions from unions or cuts to public worker retiree benefits or higher taxes eventually might be necessary to keep town governments and schools operational, they said.

But the $363,171 to East Millinocket and $1,066,350 to Millinocket in principal and interest payments in overdue property taxes paid by Cate Street and its subsidiary, the new Great Northern Paper Co., are welcome, leaders said.

"It helps a great deal," Millinocket Town Manager Peggy Daigle said Thursday. "We were getting fairly low in cash, but in my cash projections we will be in the negative zone by the end of September. We have to borrow money just to keep ourselves going."

"It is needed money. If we didn't have that I would be worried about cash flow," East Millinocket Selectman Mark Marston said.

A $3 million to $4.5 million cash shortfall and Cate Street's delinquency on its property taxes left Millinocket's town government living hand-to-mouth since June. The $1.06 million payment only adds $450,000 to town coffers, as the town's TIF agreement with Cate Street necessitates returning $591,433 to the New Hampshire-based investor, Daigle said.

East Millinocket doesn't have a TIF agreement with Cate Street. The town would face $5 million to $7 million in renovations to Schenck High School's roof, boilers and gymnasium floor, among other expenses. However, a Florida resident and town native who bought a winning $590.5 million Powerball ticket, the largest jackpot in U.S. lottery history, has offered to donate $2 million to repair the roof and gym floor, and is discussing more school repairs, Marston said.

Employing about 257 workers, Cate Street owns the Great Northern Paper Co. mill in East Millinocket, by far the town's largest single employment source, and its industrial park and shuttered paper mill in Millinocket make it that town's single largest taxpayer.

Daigle and Clint Linscott, chairman of the East Millinocket Board of Selectmen, were pleased that Cate Street had apparently rebounded well enough from some earlier financial troubles to pay what it owed.

"Just knowing we have it now is good," Linscott said of the tax payment. "The company has done the best they can on everything they could and everything they have said, they do, or they have done. They told me that they would pay in mid-August and they came through."

Company officials confirmed in May that poor market conditions for news- and book-print paper, which it manufactures in East Millinocket, had caused it to fall behind in its tax- and creditor payments.

Millinocket Town Council members were expected to set a 29.95 mill rate for the town, up from 26.4 mills last year, when they met on Thursday, Daigle said. Millinocket officials will meet with bankers early next week to complete the town's application for a Tax Anticipation Note of $1 million to cover town expenses over the next several weeks. Councilors also voted to set aside a $1 million cash balance this year.

Bankers have said that they would not issue Millinocket a TAN until Cate Street paid its taxes. A town Millinocket's size, which costs about $1.3 million a month to run, should have a fund balance of $3 million to $4.5 million, Daigle has said. The town is also pursuing sales of 11 of 38 properties whose delinquent owners have been foreclosed upon.

East Millinocket school officials are discussing with the family of Gloria MacKenzie the establishment of a trust fund by which she can allocate money for civic projects such as the repair of Schenck. That's the town's sole school building and houses the K-4 Opal Myrick Elementary School in its wing.

Both towns and Medway, officials acknowledged, face the same historically unprecedented problem -- a continuing decline in the region's population, school-age children, income levels, state aid and economic growth that makes schools and governments increasingly difficult to sustain. Yet Medway has never relied as much on paper mills for employment and income as its larger neighbors.

Millinocket needs to begin planning strategically to cope with its continued shrinkage, Daigle said.

"That is something that is long overdue and it needs to happen with the schools, the council, the people and the [town government] staff. We have to consider what is going on with businesses, here, too," Daigle said.

East Millinocket has already cut at least seven positions -- including full-time police, firefighter, tax collector and four Public Works Department posts, including public works director -- and stopped funding its library, which volunteers operate, Marston said.

Town roads have not been paved in several years, and Linscott and Marston provide day-to-day direction to public works as volunteers, said Marston. Both towns have closed their town offices an additional day a week.

Linscott said he believes that East Millinocket is in better shape than Millinocket. The town's new mill rate will be set in October and it is expected to rise beyond its current 23.3 mills, but not by much.

"As long as Great Northern is still there and we don't lose the school subsidy that we get, we can survive," he said, "but a long-term 30 mill rate is not sustainable for this town."


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