Media Archive

Towns fight to get B&A money

Article from The Piscataquis Observer, Vol. 165, No. 3, January 15, 2003

By Jessica Lee
Staff Writer

The towns of Milo and Brownville are fighting a surcharge that would reduce the money paid to the communities, as a result of the Bangor & Aroostook Railroad System bankruptcy and sale.

Trustee James Howard, a Boston-based attorney, is seeking a 35 per-cent surcharge on all secured debt, such as back taxes owed by the former railroad.

All B&A assets are in the process of being sold to Rail World Inc. of Chicago,Ill. and its affiliate, Montreal, Maine & Atlantic Railway LLC.

According to Milo Town Manager, Jane Jones, the town's board of selectmen were to get an update on the trustee's surcharge request at a Tuesday night meeting. She said the town has filed an objection to the surcharge in the U.S. Bankruptcy Court in Portland, on the grounds that it would grant special tax privileges to the buyer. A hearing on the objection is set for Wednesday, Feb. 12.

Milo is owed an estimated $300,000 in back taxes and costs related to a credit enhancement agreement between the town and the former company, Jones said.

"As a town manager and tax collector, I do not believe the proposal can be allowed to stand," said Jones. "I feel it has the potential of shaking the very foundations of our tax structure."

She said that if the bankruptcy court allows the surcharge to go into effect, the B&A's new owners are receiving a tax cut, while the towns pay for the bankruptcy.

"We've always held the position that [the money owed by B&A] is legally due and payable," Jones said. "We have provided services to the company and done that all in good faith. All of our budgets and town activities since 1999 are based on that premise and we had no reason to think otherwise."

In 2002 alone, Jones added, the town paid roughly $21,000 in legal fees to deal with the B&A bankruptcy.

Brownville, as well, is fighting the surcharge, which would reduce the amount paid to the town from about $30,000 to $20,000, according to Sophie Wilson, town manager.

"It's our position that the debt is a secured debt and we would have received it one way or another," Wilson said. "We're drafting a motion in response [to the trustee's request.] When everything is said and done, we would hope there is a much smaller surcharge imposed by the court."

Both towns are represented legally by Jonathan Huntington, an attorney with Baton Peabody in Augusta.

Wilson said the Town of Brownville has incurred more than $5,000 in legal fees in 2002, as a result of B&A bankruptcy proceedings.

NOTE - This article reflects the views of the author and not necessarily those of the TRC Alliance Team.