Cate Street Capital had never before run a paper mill, and arguably the company’s biggest reason for coming to Maine is to try a commercial untested technology without contractually guaranteed customers or suppliers.

But the New Hampshire investment group, its subsidiaries and its investors have received at least $142 million in tax breaks and a guaranteed loan from Maine and the federal government since 2011, officials say.

According to a count compiled from company, town and state officials and previous newspaper articles, Cate Street subsidiary Great Northern Paper Co. LLC received $10 million in federal New Market Tax Program credits and $40 million in state new market credits since it reopened the East Millinocket paper mill, restoring 257 full-time jobs, in September 2011.

Thermogen Industries, the subsidiary charged with installing New England’s first and as-yet commercially untested torrefied wood pellet plant in Millinocket, received $40 million in state and $27 million new market credits and on Oct. 17, a $25 million bond or loan guarantee from the Finance Authority of Maine under FAME’s Major Business Expansion program. The mill is expected to create 36 fulltime jobs and indirectly create or sustain as many as 184, FAME officials have said.

Is that too much money for 293 direct jobs? State and Cate Street officials don’t think so.

“These programs exist to stimulate investment and development in areas that need it most, and we know from working with community and political leaders that we are all pulling in the same direction to help Northern Maine embark on a new, sustainable path to prosperity,” Cate Street Capital’s President and CEO John Hallè said in a statement released Thursday.

“Creating jobs and diversifying the Katahdin region’s economy has been the primary focus of Cate Street Capital’s efforts with Great Northern Paper and Thermogen. We’re proud to have worked with local, state, and federal officials through public-private investment programs to accomplish our mission,” Hallè added.

‘A real opportunity’

The East Millinocket mill recently celebrated its second anniversary, but the Millinocket mill, which closed in 2008 and Cate Street had hoped to revive, remains shuttered. The Thermogen mill is due to open next fall, if its financing package is completed and it can begin construction this winter, company officials have said.

For northern Maine, the potential risk of the investments is worth it, said Doug Ray, spokesman for the Maine Department of Economic and Community Development, the state’s primary business development agency.

“Maine has a real opportunity to be on the cutting edge of an exciting new technology and an entire new industry,” Ray said of the plans for torrefied wood, a type of biocoal intended for power plants.

“It’s OK to take some risks sometimes to get ahead,” Ray added. “The FAME board [of directors] did its due diligence, and this [project] is something that is very important to Maine — to use biomass and residual tree wastes to create a renewable substitute for coal.”

The board voted 8-5 to support the bond, with some misgivings. Board member Patrick Murphy called the $25 million bond “an awful lot of money” for 36 direct jobs. He argued that a $16 million bond would have reduced taxpayer exposure if Thermogen defaults by a $9 million amount that Cate Street’s bank would have assumed.

Gov. Paul LePage supported the FAME bond award. He said that Maine must invest aggressively in cutting-edge technologies and carry some risk because it can no longer expect traditional industries to fulfill all of the state’s needs.

Cate Street leaders have made tax deals from the federal to the most local levels. The New Market program was established by Congress in 2000 to spur new or increased investments into operating businesses and real estate projects located in low-income communities, according to a U.S. Treasury Department website at cdfifund.gov.

The program attracts investment capital to low-income communities by permitting investors to receive a tax credit of 39 percent of their original investment. The credited investment cannot be redeemed until seven years of investment lapse. The state modeled its New Markets program after the federal government’s.

East Millinocket and Millinocket town governments also in effect contributed tax dollars to Cate Street. Millinocket agreed to charge the company $1.4 million and East Millinocket $700,000 in property taxes for several years.

Cate Street officials have said that the Millinocket industrial park and No. 11 paper machine still on it are significantly overvalued, but the set multiyear tax bill prevents those towns from drawing more revenue from Cate Street through mill-rate increases.

The Katahdin Avenue property is also in a Tax Increment Financing zone. That means that the property taxes it would pay to Millinocket, and Millinocket would pay to the state, are invested by Cate Street back into the property and by the town back into economic development initiatives.

Millinocket Town Manager Peggy Daigle acknowledged that torrefied wood is a risky investment, but said the tax breaks given the pellet mill are a crucial element to hopes that it will revitalize a substantial portion of northern Maine’s economy.

“I think we [in the Katahdin region] could not survive without those incentives because we would not see those industries coming to our towns,” Daigle said.

If it works

It is difficult to overstate the region’s economic difficulties and the value of Cate Street to it. The Katahdin region has endured historically unprecedented losses in population and state aid that have left its leaders struggling to pay basic bills. Unemployment is typically double the state average and drives the communities’ youth elsewhere. Leaders in East Millinocket, Medway and Millinocket have had to lay off workers and cut town office hours to keep their property tax rates under $30 per $1,000 of valuation.

Prior to Cate Street’s restart of the East Millinocket mill, a dozen potential investors came to the region with promises of cutting-edge technology, and seeking tax breaks, without ever delivering all they promised.

Avenger Boats Inc.; Brims Ness; Ad Time; Maine Monolite LLC. and Re-Gen are the names of some of the companies that never got off the ground in Millinocket or failed after their launch.

Although Cate Street has had some trouble paying its creditors and was about a year behind in its property taxes to the two towns, many Katahdin region leaders consider the company bona-fide because it actually runs the East Millinocket mill and has invested millions of its own dollars into its efforts.

“Some of it [Cate Street’s value to the region] is psychological,” Daigle said, adding that the pellet mill’s success would “give everyone a boost to realize life isn’t over here. Hopefully it will bring back some younger people back to the area.”

If torrefied wood is a hit, Cate Street leaders have promised to build four more machines each employing 20 to 25 people in Millinocket and three more in Eastport. That’s a big deal, given that most economic impact surveys estimate at least four jobs indirectly created for every manufacturing job directly created. By that score, the 293 jobs created or promised by Cate Street equals 1,172 jobs.

The state government’s forest products industry advisor, Rosaire Pelletier, told FAME that Cate Street’s pellet mill and all the investments promised by torrefied wood could create as many as 1,500 jobs across the state.

If it works.

And as Cate Street officials work toward creating their torrefied wood plant, Ray said, an international firm state officials hired, Investment Consulting Associates, will be reviewing the state’s 58 economic development programs to see how many of them fulfill their goals.

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