2014-11-20 / Front Page

Tracking TIFs

Volk Packaging, longtime company, backed by TIF
By Ben Meiklejohn
Staff Writer

BIDDEFORD – In 1995, the city established a Biddeford Industrial Park Redevelopment District to provide tax increment financing to Volk Packaging Corporation. The company was the first tenant of the industrial park when it was created in 1968 and, in 1995, was poised to commence a multi-million dollar expansion project.

The company was hoping to move out of its 65,000-squarefoot facility into another building in the park owned by a plastics company, Waterbury Companies, which had ceased operations four years earlier. Volk Packaging Corp. would purchase the 54,000-square-foot Waterbury building and expand it by adding a 77,000-square-foot warehouse and 10,000 square feet of office space – totaling 141,000 square feet. The additions were projected to cost more than $2 million; the company would also purchase new equipment and machinery worth $1 million.

In the original proposal submitted by the city of Biddeford to the Maine Department of Economic and Community Development in 1995, the Volk Packaging Corporation expansion was characterized as depending on “the participation of the city in a Tax Increment Financing district, which offsets a portion of the development costs, by investing a percentage of the new taxes generated by the project back into the development.”

As the development project increased the property’s value, the city would set aside a portion of the property taxes resulting from the increased value to be given back to the company. The company would pay the full taxes on the original value that the property was worth before the development project began. The portion of newly generated taxes that would be returned to Volk Packaging Corp. was scheduled as follows: 90 percent in the first 10 years, 75 percent the following four years, and 50 percent in the final six years of the TIF district’s 20-year life.

Volk Packaging President Derek Volk said the city’s support helped the company to stay competitive and grow.

“It was critical to our efforts not only to grow, but to even stay alive. That was pretty significant,” Volk said.

The city and state approved the credit enhancement agreement with Volk Packaging, but by the time construction began and the company prepared to move, it wasn’t until 1998 that the TIF kicked in and the 20- year lifeline started to tick. In 1998 the combined value of real estate and taxable personal property and equipment owned by Volk Packaging at its new location was nearly $1.8 million.

The 1995 financial plan for the TIF projected that Volk Packaging Corporation’s development project would increase the property value by nearly $5.5 million and generate $1.2 million of new tax revenue for the city over 20 years, with $900,00 to be returned to the company and more than $300,000 to go in the city’s general fund. The projections were made assuming the company would invest $3.1 million in developing the site, and the mil rate would stay at $17.50 per $1,000 valuation.

Additionally, the city projected that sheltering the new value of the property in the TIF would save the city more than $525,000 combined from losses in state subsidies and increases in county taxes that would have been incurred over the 20 years had the property not been designated as a TIF.

Economic and Community Development Director Daniel Stevenson said when the city makes projections for TIF districts, it tries to project conservatively, assuming minimal or no increases in the mil rate, so that the city doesn’t depend on revenue that may or may not materialize.

Now in the 17 year of its 20-year life, the TIF has produced more income for both the city and Volk Packaging Corp. than was originally projected. Although the company anticipated spending $3.1 million to develop the property, Volk said the company spent $5.52 million in construction, purchasing new equipment and moving costs.

“It cost close to a million dollars just to move the machines,” Volk said. “We brought in a company out of Indiana that specializes in moving corrugated equipment. If you lay that equipment down, and it’s off by a hair, you’ll never get a box out of it. It has to be perfectly level.”

Volk said since moving, the company has bought six new box-making machines, each one requiring two or three people to operate. The latest purchase in April was for a machine that makes a specialized box that is bringing new business to the company.

“It’s the first one of its kind anywhere in the country and we have an exclusive for it in New England,” Volk said. “It makes a very unique box that no one else can run.”

In 2014, the assessed property value for Volk Packaging Corp.’s facility and equipment was $10.1 million. With only three years left in the TIF, the company has generated nearly $1.8 million in new tax revenue for the city, with $1.4 million returned to Volk Packaging Corp. and nearly $400,000 going to the city’s general fund.

The increased value of the property beyond original projections realizes even further savings than the $525,000 tax shift projected in the 1995 financial plan. In a previous interview, Stevenson said it is almost impossible to backtrack the exact amount that TIFs save the city from subsidy reductions and county tax increases on a peryear basis because the state’s formula for how it allocates subsidies changes in almost every legislative session.

Volk said Biddeford’s TIF helped his company to grow and remain competitive and, in turn, Volk Packaging Corporation is able to reinvest back into the community.

“We’ve increased the property value and hired quite a few people who I could for certain say we would not have if we had not moved into this building, which we needed the TIF to do,” Volk said. “Frankly, I don’t know if we’d still be in business (if the company didn’t move).”

Volk said the company contributes $4 million per year directly into the local economy through its expenses, not including payroll for more than 80 employees.

“(The TIF has) been very positive for us. It’s allowed us to grow our business on the machines we were able to purchase, it allowed us to survive tough times and continue to grow and to continue to make sure we do the most with what we were generously given by the city of Biddeford,” Volk said. “We take it pretty seriously. We’ve never had any thoughts of leaving. It’s not free money – it’s money that we give back to the community with jobs and growth and tax dollars.”

Finance Director Curt Koehler said there is a process the company has to go through with the state to get qualified for the TIF money, in accordance with the credit enhancement agreement. Koehler said the annual TIF payments are not intended to fund development costs on an annual basis, but rather, are provided to defray the costs already incurred by the developer, who usually has to expend the project costs up front.

“It looks more like it’s paying their debt service,” Koehler said.

Although Stevenson was not working in Biddeford in 1995 when the city approved a credit enhancement agreement and TIF with Volk Packaging Corporation, he said it is an anchor business in the community that established itself and successfully expanded as a manufacturer in the city in a time when manufacturing was on the decline.

“I think people realize that Volk Packaging is such a large, well-respected business in the city that puts a lot of payroll in the city,” Stevenson said.

Volk said the company spends as much money as it can with local businesses, whether it’s for hardware, clothing, plaques and awards, or legal fees and insurance, and contributes to local charities in Biddeford and Saco almost every week. Volk said the city helped the company to prosper and, in turn, it’s the company’s responsibility to contribute back to the local economy.

“(The TIF is) an investment by the city of Biddeford to Volk Packaging, “ Volk said. “The way we look at it, the city of Biddeford is saying to us, ‘We believe in you and we want you there,’ and our job back is to grow our company, use the money wisely and reinvest it in the community.”

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