Letter to Lepage Requesting State Attorney General Challenge the Constitutionality of The Brunswick Landing Maine's Center For Innovation

INTRODUCTION: This letter was submitted twice on line. After receiving no response, I sent it certified mail and cc'd it to Attorney General William J. Schneide on March 23, 2011, also by certified mail.

Dear Governor Lepage,

Second Submission to make sure that it was received.

Re: Challenging the constitutionality of corporations chartered by special act of legislation.

Source: Maine State Constitution, Article IV, Part Third,Section 14

Dear Governor Le Page,

You have asked the business community for input concerning regulations that inhibit business growth but there is gorilla in the room that no one talks about, which is the escalating structure of corporations chartered by special act of legislation, which have increased dramatically since 1990.

As you know, having taken an oath to uphold the Maine State Constitution, Article IV, Part Third Section 14 of the Maine State constitution prohibits the charter of corporations by special act of legislation, with two exceptions. Although language used in some of the legislation attempts to suggest that the corporation being chartered satisfies either one of these exemptions, it is unlikely that the plethora of corporations chartered by our legislature could all satisfy one or the other of the exemptions. In my opinion, none satisfy the exemptions.

I am writing to request an investigation into the government chartered corporations, be they non-profit, quasi-public, or entirely state controlled corporations and whether they are called “the fund”, “the fund of funds” “trusts, or non-profit corporations. A corporation by any other name is still a corporation.

 A few years ago I encountered the Small Enterprise Growth Fund at the Juice Conference. It was there that I learned that the taxpayer invest 10% of the total amount of “the fund’s” assets in a “roll over fund” meaning a fund that keeps rolling over to re-invest in “the fund”. Conversely, the other 90% of investments from private “high growth” investors demand an “exit strategy” (typically selling the business) as part of the terms of agreement, in order that the high growth investor can make a profit.

Small business owners are well aware of “roll over investments”- this is a primary source of capitalization in the private micro-economy sector- it just means that self-generated profits are re-invested in the business as on-going operating capital. When the Small Enterprise Growth Fund uses tax payer money to underwrite its investments, it does by extracting capital investment funds from the entire economy.

What private sector corporation can use taxpayer funds as “roll-over” investment capitalization? When the legislature charters a corporation and in so doing assigns the use of taxpayer funds to be used as investments or as promissory notes to back up private investor losses (as in the case of last year’s “Fund of Funds” (LD1), they create an unequal competitive edge for the government sector over the private sector. Is not this a reason why, in the 19^th century, our legislature added Article IV, Part Third, Section 14 to the Maine State constitution prohibiting corporations from being chartered by special acts of legislation?

The Small Enterprise Growth Fund is but one building block in a steadily escalating network of corporations chartered by special acts of legislation. These corporations are aimed at underwriting a favored sector of the economy, which is composed of the high tech sector, the academic sector, the green energy sector, the health care industry, and data centers. Government chartered corporations are partially or completely controlled by the state and are granted a competitive edge over private sector competitors through the use of taxpayer dollars. All that the taxpayer gets in return for the use of our capital is a claim that the government is creating jobs in the private sector. When did it become the government’s role to manage the Maine economy?

The legislature has also devised ways for government chartered corporations to accumulate capital from foundations grants and private gifts, whether they be non profit corporations or merely “municipal corporations which are an instrumentality of the state” as in the newly chartered Brunswick Landing Maine’s Center for Innovation. This recently chartered corporation is authorized to seize private property by eminent domain. What do you find across the street from this newly chartered corporate state, complete with an airport, a campus for the University of Maine, and housing for the workers”- you find long standing micro businesses that are in the government’s un-favored economic sector! This expresses openly and clearly the attitude with which our legislature regards that part of the economy, excluded from its favored sector- The legislature would bulldoze it over so the land can be claimed for the ever expanding corporate state.

The charter for the Brunswick Landing Maine’s Center for Innovation is full of contradictions which have no other explanation than that they exist as a blatant attempt by our legislature to get around Maine’s constitution. “A municipal corporation” which is simultaneously an “instrumentality of the state” is a contradiction of terms. When, in the 19^th century, the legislature made an exception for municipal corporations, they did so because they had no other choice. Towns are municipal corporations but cannot exist until they are chartered. There for it is necessary that there be an outside authority which charters the town. This authority was granted to the state but the legislature wisely granted unto the “inhabitants of the municipality” the authority to amend the charter created by the legislature. The intent seems clear: a municipal corporation is self-governing. The state is not a municipal corporation and does not have governing authority within municipaliti

Whereas real estate deeds and towns have specific boundaries defined by longitudes and latitudes, the geographical location of the municipal corporation known as The Mid-coast Regional Redevelopment Corporation is identified as “within the geographic boundaries of Brunswick Naval Air Station” and also includes other geographically separate property that the authority determines should be part of the base .

Quoting from the legislation chartering this corporate state:

• "Brunswick Naval Air Station" or "base" means those properties and Facilities within the geographic boundaries of the United States Department of Defense naval air station at Brunswick existing on the effective date of this section "Base" also includes other geographically separate property that the authority determines should be part of the base if the municipality in which the property is located has chosen not to accept the property and use it for other purposes” (emphasis mine)

• "Real or personal property" means those properties and assets transferred by the United States Government or the United States Navy after the closure of Brunswick Naval Air Station.”

Since the above does not identify to whom the property was transferred, I am assuming it was the state. The state can constitutionally create a municipal corporation but I argue that municipal corporations are intended by the 19^th century authors of our constitution to have a geographical location, while the website for The Brunswick Landing Maine’s Center For Innovation describes it as a “non-local unit of government” 

The bylaws that the legislature created when they chartered said “municipal corporation” call it a “public municipal corporation”. What is the meaning of the additional term, “public”? Is it to mean that this is a town collectively owned by the people of Maine- i.e. the state? 

By what constitutional authority can the legislature create a state owned municipal corporation? The legislature inserted the word “public” into the bylaws of this corporation in an attempt to pull the wool over our eyes. The constitution clearly states that “the inhabitants of the municipality” have the power to amend the charter of a municipal corporation, but the legislature is attempting to alter this by including in the bylaws that the charter can only be amended in ways that are “consistent” with its own charter. This is a usurpation of the powers of “the inhabitants of the municipality”- which is not “the general public” but specific individuals and business which inhabit the vaguely defined territory of Maine’s new mini-corporate state.

The charter for this “municipal corporation” and “instrumentality of the state” has granted unto itself the power of eminent domain to seize adjacent property – Is this what is meant by the charter’s claim that “The authority is entrusted with acquiring and managing the properties within the geographic boundaries of Brunswick Naval Air Station’?

Given that our legislature has claimed in a vague and provisional manner that the geographical territory includes territory which it intends to acquire, then do the current “inhabitants of the municipality” include those small businesses and other private property that are the target of the Mid-coast Regional Redevelopment Authority’s self-claimed authority of eminent domain?

Is it not a mockery of the Maine State Constitution to include in a charter that it can only be amended in a way that is consistent with the states’ charter- which is arguably inconsistent with the intended meaning of Article IV, Part Third, Section 14 of the Maine State Constitution.

Governor LePage, you campaigned on the concept that it is not the government’s role to manage the economy- but the only justification that our legislature has given the public for the massive structure of corporations chartered by special acts of legislation over the last fifteen or more years is that the government is “creating jobs in the private sector”. This is also the way in which our media reports on Maine’s entrenched state capitalism. Note that “creating jobs” is not one of the two exceptions that the constitution grants to its prohibition against corporations chartered by special acts of legislati

I request that the Attorney general’s office challenge the constitutionality of the charter for The MIDCOAST REGIONAL REDEVELOPMENT AUTHORITY’ and that an investigation be initiated into the constitutionality of the entire network of government chartered corporations, to include making known the private investors who are the beneficiaries of our government’s wheeling and dealing.

I understand that the media has painted a picture of this scheme as seen through rose-colored glasses. If you believed the media, it is about creating jobs- end of story. There is much more to it than that. We are told it is only about “creating jobs for Maine”- but how are these investors being attracted? It is reasonable to speculate that they are being offered deals that they cannot refuse-paid for by the taxpayers of Maine.

 Cleansing Maine of unconstitutional state capitalism is a national media story. We may lose the “high growth investor” attracted by the get rich quick deals offered by our government but we may attract a new breed of entrepreneurs hungry for an honest, free and equitable environment in which to conduct business.

If we don’t do this now, in ten years our state may be taken over by mini corporate sates like the Brunswick Landing Maine Center For Innovation armed with the power of eminent domain to seize private property which is not “consistent” with its vision - that is if a Chinese embargo on rare earth minerals hasn’t caused its collapse- at the taxpayer’s expense.

LD1- A Transference of the Power of Taxation?

Letter submittted to the Boothbay Register
May 2, 2010- I am glad to say that this letter is published in the issue coming out on May 05, 2010.

This article was also published on The Augusta Insider. When The Augusta Insider "merged" with Pine Tree Politics all articles examining state capitalism in Maine were no longer available.

A Call For a People's Veto.
Dear Editor,

I recently submitted a letter, which was also sent to Senator Trahan, who did not respond. This letter concerned the use of taxpayer funding by the Small Enterprise Growth Fund and the proposed LD1 and LD1666. LD 1666 was rejected by the appropriations committee but subsumed into LD1 and then passed unanimously by both the House and the Senate and signed into law by Governor Baldacci.

The Maine Chamber of Commerce describes LD1 as “An Act To Stimulate Capital Investment for Innovative Businesses in Maine”. LD1 is marketed by the Small Enterprise Growth Fund with the following words “This program creates incentives for 20 Million Dollars in the Public Employee Retirement System that have already been targeted for equity investments to be placed in funds that are seeking to invest in innovative Maine businesses.”

I am not a legal expert but such expertise is not required to have general knowledge that when it comes to the law, it is the letter of the law that counts and not external promises or descriptions. When one reads LD1, one will find that in Section 6. Investment goals & guidelines, begins with the words “The purpose of the fund is to invest in a series of high-quality venture capital funds managed to produce a favorable aggregate return among diversified investments, to secure repayment of the amounts borrowed and to minimize the risk of tax credit redemption. Consistent with these investment goals, the board shall give preference to fund managers whose strategies include:

A. Maintaining at least a periodic presence in the State;

B. Actively prospecting for investments in the State;

C. Creating or retaining jobs in the State; and

D. Bringing to fruition the ideas, technologies and intellectual property produced by citizens and institutions of the State. “

The language is vague and suggestive, avoiding specificity and allowing great latitude in interpretation and application. In the phrase “Maintaining at least a periodic presence in the state”, the terms “periodic” and “presence” are left undefined, while the use of the words “at least” permits the “presence” in Maine to be a mere token. The non-existent parameters for retaining jobs in the state can be satisfied by the bureaucratic jobs within the SEGF. As for “bringing to fruition the ideas produced by Maine citizens”, there are no specifics about where and how these ideas will be brought to fruition. Since the current government management of Maine’s economy is invested in technological development and since LD1 Is very arguably a charter for a mutual funds corporation, the language of this bill all too easily enables ideas to be developed in Maine and brought to fruition in countries with low labor costs and minimal environmental restrictions, which produce that “quality” investment in the context of the profit motivation of mutual funds

The bill defines “lender” in such terms as would be otherwise be signified by the term “investor”. The preferred “lender” is The Maine Public Employees Management Fund, which, at first glance, has stricter investing requirements than are written in LD1. If the Maine Public Employees Management Fund declines to invest, “the Fund of Funds” can seek other investors.

In section 9, Audits and Reports, LD1 is suddenly written in very specific terms. Section 9 deals with the relationship between the director of “The Fund of Funds” and the SEGF . Section 9 leaves nothing to interpretation when it specifically defines the length of time that constitutes a period, showing clearly that the writers of this law know how and when to be specific.

One instance in which LD1 is very specific is in Section 7, Investment Restrictions, where the exact words are “The fund may not invest directly in individual businesses but only in venture capital funds…” And yet in promoting this bill it is specifically described as a bill to create funds for “innovative” Maine businesses. Other than a requirement to invest 30,000.00 annually in the Maine Patent Fund, there is no specific wording in this bill that requires more than a token investment in businesses located in Maine.

The SEGF promotes this government chartered mutual fund as a means to take the burden off the Maine taxpayer, when in fact it takes the burden of failure off the SEGF and the individual or institutional investors in ” the Fund of Funds” and places it on the Maine Taxpayer in the form of a “tax credit”, which has no specific relationship to “tax payer”. The “tax credit” is guaranteed by a certificate, for which the letter of the law provides no specific requirements or caps, leaving it solely to the discretion of the SEGF. The tax credit will be used to cover any shortfalls that the Fund of Funds runs up against and is said to be legally binding according to Article One, Section 11 of the Maine State Constitution.

I have to question whether the certificates can be legally binding on the Maine state taxpayer because LD1 states “The board (The SEGF) may raise capital for the fund by offering as security certificates issued by the board.”

The SEGF does not have a government website, which suggest that it is a private corporation which has been enabled by our legislature to advance it’s causes using taxpayer dollars to it’s advantage. Section 9 of the Maine State Constitution- Power of taxation, states “ The Legislature shall never, in any manner, suspend or surrender the power of taxation.” A private corporation cannot make binding agreements for the Maine State taxpayer. By obligating the taxpayer to cover shortfalls within the SEGF with “tax credits”, it is implied that taxes will have to be raised as a means of financing the “tax credits”- as needed.

The language of LD1 is very murky about identifying the authority that is granted power to define the terms of the “certificates” backed up by “tax-credits”. It is the job of the legislature to establish the terms of contract, but in the case of LD1 these terms are left undefined- or worse deferred to the SEGF in the following:

1. Credit allowed. A lender to the Maine Fund of Funds as defined in Title 10, section 396, subsection 5 is allowed a refundable credit against the taxes imposed by this Part in an amount certified by the Small Enterprise Growth Board as established under Title 10, section 384 as equal to the shortfall in scheduled payments on debt incurred to provide capital to the Maine Fund of Funds.

If the authority to define the terms of agreement remains with the legislature, then the legislature has granted itself the authority to negotiate business contracts, which belongs to the executive branch of government. The Maine State Constitution, Article IV, Section 14 states “Corporations shall be formed under general laws, and shall not be created by special Acts of the Legislature…” Our legislature seems to believe that it can get around the Maine State Constitution through carefully parsed language and that a corporation by another name is not a corporation.

Based on the LD1 vote, all incumbents should be voted out of office. This Act was passed by “the Rule of the Gavel” where by there is a call for objections and if there are none, all are considered to have voted yes.

Article IV, Section 18 of the Maine State Constitution outlines the process by which the people of Maine can veto bills passed by the legislature. There is a 90-day window of opportunity after the close of the legislative session. In LD1. the taxpayer carries the risk but not does not share in the gain. I have created a Facebook page, “Maine Citizens Against Government Chartered Corporations” to find out if there is enough support among the Maine people to warrant initiating a People’s Veto.

An additional effect of mobilizing a People’s Veto is that it would force government-chartered corporations as an election campaign issue. We know that all incumbents are supporting government chartered investment corporations but thus far, to my knowledge, none of the other candidates for state positions have spoken out on this issue, offering no guarantee that electing a non-incumbent would have any effect on moving back toward a constitutional separation between the state and the capitalistic corporation.

I have written on this subject for the online magazine, The Augusta Insider, under the title, “Socializing the Risk and Privatizing the Gain” This article provides links to the bill and the statute used to authorize it. I hope to encourage an open dialogue about what the actual letter of the law legitimizes and to encourage the citizens of Maine to become more actively involved in reading the bills being passed by our legislature rather than accepting the promotional words about said bills at face value, without further examination or debate. The Maine State constitution needs to be included in that debate.





Sincerely



Susan Mackenzie Andersen

East Boothbay, Maine