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Northern Power Systems move leaves void

02/09/2007

By Lisa Loomis

The announcement last week that Northern Power Systems was pulling up stakes and moving its Waitsfield operation to Barre came as a surprise to local officials as well as company employees.

The move was announced at 2 p.m. last Wednesday, January 31, along with the news that 60 jobs would be cut as part of the move and that Northern Power Systems would be merged with Proton Energy in Barre. NPS and Proton Energy are both owned by Distributed Energy Systems.

Distributed Energy noted that it is making the change to reduce costs and improve sales, engineering, production, service and technology development. Their jobs cuts were effective immediately. Specific areas where jobs were eliminated were not disclosed.

NPS was purchased by Proton in 2003 after Proton created a parent company, Distributed Energy Systems, that would own both companies. In 2005 Proton purchased a 110,000-square-foot building in Barre where NPS and Proton will now be located.

NPS expanded in 2003, receiving local and state tax incentives as well as financial assistance.  The company built a new building at its then location in the Mad River Industrial Park in Waitsfield at that time.

As part of that project, NPS received state and local tax breaks which the Waitsfield Select Board discussed briefly during its February 5 meeting. Board members asked town administrator Valerie Capels for background on the tax breaks and she explained that she had talked to the Vermont Economic Progress Council (VEPC) about the situation.

In short, Capels said, the word from council director Fred Kenney is that until his organization receives official word that the company is moving and that jobs are being lost, there is no action to be taken.

Kenney, reached this week for comment, said that VEPC has two financial/tax agreements with NPS. The first was a tax incentive to NPR for providing job growth and investment in 1999. VEPC authorized a potential of $623,000 in corporate tax credits to the company for growth between 1999 and 2003. The tax credits could be earned over 5 years but taken over 10 years. To earn the credits, NPS had to create jobs, Kenney said.

"But if NPS reduced their full-time Vermont employment below a certain level, that could trigger a recapture of credits they have earned but have not yet used. The employment level we're looking for is one that falls below 75 percent of their highest level of employment during that five-year period," Kenney explained.

A second VEPC/Waitsfield agreement with NPS was signed in 2002 and that was a statewide education tax/Waitsfield municipal tax stabilization agreement - also based on job growth.

The building which has housed NPS is owned by the Central Vermont Industrial Corporation, an arm of the state's Central Vermont Regional Development Corporation. Although the agreements on tax stabilization were made for the building, in actuality they 'belong' to NPS, Kenney said.

"When they came in 2002 with their application for the new building, they had a whole new growth project, based on 2004 through 2013. The agreement we reached called for the property owners to pass through the property tax savings to NPS," he continued.

The tax stabilization, unlike the corporate tax credit, is tied directly to the Waitsfield location.

"If NPS pulls out of that building, the job growth and investment that justified the stabilization of the statewide education taxes are no longer there. And once we have notice of the loss of jobs from that site, we terminate the stabilization agreement," he continued.

Waitsfield's concurrent tax stabilization deal with NPS mirrored VEPC's and provided a 10-year abatement program where the company saved 10 percent of municipal taxes the first year, and saved an additional 10 percent in each subsequent year, until a decade had passed.

Select board members, this week, discussed whether the agreement called for any recapture of the abated taxes.

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