On Tuesday, Nov. 4, voters overwhelming approved Question 3, which asked for permission to issue bonds for small-business loans in an effort to revitalize main streets, strengthen rural economies, and create job growth in Maine.
Every municipality in Lincoln County and 61.78 percent of voters across the state voted yes.
Coastal Enterprises Inc., a nonprofit currently based in Wiscasset that specializes in rural business development and financing, was a major force behind the campaign to pass Question 3. The road to get the bond issue on the ballot, however, was rocky, and the future of the bonds is still not guaranteed.
“I was pleased, very pleased,” Carla Dickstein, senior vice president for research and policy development at CEI, said of the vote. “But we still have hurdles.”
Question 3 asked for $4 million of bonds to be sold to support the Commercial Loan Insurance program, which provides a safety net for financial institutions extending small-business loans, and $8 million of bonds to be sold to support the Regional Economic Development Revolving Loan Program, which extends loans to small businesses through Maine’s regional economic development agencies.
Both are government programs housed in the Finance Authority of Maine. CEI serves as a financial intermediary for the Regional Economic Development Revolving Loan Program and provides area businesses that meet the program’s guidelines access to loans that are not otherwise available to them from conventional lenders.
Both the Commercial Loan Insurance program and the Regional Economic Development Revolving Loan Program have been influential in helping small businesses secure the money they need to grow. Due to a veto from Gov. Paul LePage in April, the bond issue almost did not appear on the ballot.
Bonds are a type of debt security, which is oftentimes explained as an IOU. They are sold by an issuer – a corporation, government, or municipality – to raise money for a specified project. The bond buyer is, in essence, loaning money to the bond issuer with interest.
Government and municipal bonds are considered by many financial analysts to be one of the safest forms of investment. The interest rates they carry are considered a guaranteed return for investors, according to the Wall Street Journal Investing How-To Guide.
In order to issue bonds, Maine’s legislators must pass a bond package through the House and Senate, then get voter approval. Despite easily passing through the State House, legislation containing the bond package was vetoed by LePage in April.
In his veto message, LePage wrote, “We must get off the routine of borrowing for everything. I support providing flexible capital for Maine small business. However, I believe that borrowing money on the backs of all Maine taxpayers is not the right way to go.”
LePage said he supported the portion of the legislation that provided $4 million to the Commercial Loan Insurance program. However, he objected to the bond issue for the Regional Economic Development Revolving Loan Program, because, he wrote, “the mechanism by which the $8 million portion of this bill is disbursed to the small businesses does not yield the highest return on Maine taxpayers’ investment.”
His veto was overridden by the Legislature.
Dickstein explained that many equate bond issues to an increase in Maine’s debt. “I see it, and many others, thank goodness, saw it as an investment,” she said. “You’re investing in Maine’s future. You’re putting together assets that will have a return.”
“What was really interesting out of the election,” she said, “is that [the bond issues] passed. All of them passed. With all of the other votes that were taken, people were favorable to the bonds.”
The Regional Economic Development Revolving Loan Program has been in existence for nearly 20 years and was crafted, in part, by CEI President and CEO Ron Phillips. Rynel Inc., a Wiscasset-based manufacturer, is one of the program’s success stories.
James W. Deter is the former president of Rynel and the current business development director for Molnlycke Health Care, a Swedish firm that acquired Rynel in 2010.
In his March testimony to support passage of the legislation that led to Question 3, Deter said, “A first REDRLP loan 16 years ago allowed us to set the stage for future growth. We are now the number one hydrophilic foam manufacturer in the world, with a multimillion-dollar manufacturing facility in Wiscasset … REDRLP funding is critical to our expansion to date, and will be an important part of Maine’s viability in attracting and retaining capital, investors, and businesses.”
The passage of Question 3, however, is just an initial step in the process of issuing the bonds to fund the Regional Economic Development Revolving Loan Program. After voter approval, the governor will determine which projects he will move forward in the bonding process.
“The fear, the question now,” Dickstein said, “is will he sell the bonds?” Explaining that in 2012 Governor LePage threatened to not sell voter-approved bonds, Dickstein said, “it’s always a big question mark what he’s going to do. Is he going to sell them? And when? It’s a big question for us.”
The governor’s press secretary did not respond to a request for a comment.
