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Vermont rescinds tax credits for 10 companies

A state agency that tries to encourage economic development by granting tax credits took the extraordinary step Wednesday of rescinding credits it had
given to 10 companies.

By:
David Gram
Rutland Herald

Fred Kenney, executive director of the Vermont Economic Progress Council, said the panel had rescinded only about five tax credits in its previous four
years of existence. Those were mostly in cases in which companies had modified their applications and the original was thrown out, Kenney said.

Included in the 10 were a number of companies in southern Vermont. They were:

u Knight Industries Inc., Rutland, about $239,000. The company said it would not use the credits.

u MacDermid Inc., Springfield, $121,000. The company did not file the required activity report.

u Saint-Gobain Performance Plastics (CHEMFAB) Inc., Bennington, $239,000. No reason given.

Wednesday’s action came as an economic downturn continued its grip on Vermont. Several of the companies that had their tax credits rescinded had
failed to deliver on the promises of expansion and job growth they had made to win the council’s earlier approval of the credits.

"There were varying circumstances under which these rescissions were done," Kenney said. "It’s not like they (recipient companies) did anything
wrong."

In many cases it was merely that companies decided they couldn’t go forward with planned projects.

Glen Wright, chairman of the council, said in a statement that the rescissions "were made either by request of the recipient due to changed
circumstances or for noncompliance with Vermont law."

Once authorized, the credits "can only be claimed when the applicant performs as expected and makes an investment in Vermont," Wright added.
"When those expectations are not met we may rescind the award."

One piece of good economic news that emerged from VEPC’s meeting Wednesday was the announcement that Tivoli Inc., a maker of metalworking
tools in Derby Line, had been granted tax credits worth about $450,000. The company expects to add 54 jobs to its current work force of 143 in the next
five years.

The two largest rescissions were:

* A $1.7 million tax credit for American Paper Mills of Vermont Inc., in Gilman, which closed earlier this year, idling about 115 workers;

* A $1.1 a million tax credit to Burlington-based G.S. Blodgett Corp., a commercial oven maker that instead of expanding laid off 75 people — about a
quarter of its work force — in January.

Kenney said the state wasn’t out any money in those two cases; while the tax credits had been authorized, they had not been taken by the companies.

The council, known as VEPC, or "Vep-C," was created as part of the 1997 Act 60 education funding reform law amid hopes that it would help spread
economic development around the state.

Businesses apply for the credits by promising to generate a certain amount of economic activity. The credits are granted through reductions in the
recipient’s Vermont corporate income tax during a five-year period and-or through reductions in the statewide property tax created under Act 60.

Businesses getting the credits also must meet other criteria, including passing a "but-for" test, in which it is determined that but for the tax credits, the
business expansion would not occur. While the council approves the credits, the Tax Department administers them, and the law requires that
companies deliver on their promises before collecting the credits.

Kenney said Wednesday’s decisions by the council had "absolutely nothing" to do with the fact that state Auditor of Accounts Elizabeth Ready wrote to
VEPC last week, saying she was about to begin an audit of the agency.

VEPC came under fire in 2000 after then-Auditor Edward Flanagan issued a report saying some companies had gotten tax credits that would have
expanded anyway, and media reports made similar charges. The Legislature passed a law designed to apply more scrutiny of the council, including an
audit every two years.

"We’ve known this program was going to be audited this year since the year 2000, when that legislation passed," Kenney said.

Since its inception, VEPC had granted about $78.6 million in tax credits to about 100 companies by the end of last year; $13.4 million in the credits had
actually been taken by companies. The rescissions made Wednesday totaled about $4.6 million.

Other companies that had credits rescinded included:

* American Flatbread Inc., Waitsfield, about $67,000. Its planned project is not going forward.

* North East Precision, St. Johnsbury, about $324,000. The company will not use the credits.

* Sheftex USA, St. Johnsbury, about $275,000. The plant is closed.

* Vermont Fastener Sales Corp., St. Albans, $157,000. The company did not file the required activity report.

* Vermont Fasteners Manufacturing, St. Albans, about $364,000. The company did not file the required activity report.

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