January 30, 2013

Maine towns assess tax impact if LePage's budget approved

It's too early to know the specifics, but the proposed cutoff of revenue-sharing would shift costs to homeowners, officials say.

By Matt Byrne mbyrne@pressherald.com
Staff Writer

As legislators prepare to consider Gov. Paul LePage's proposal to suspend revenue sharing with cities and towns for the next two fiscal years, municipal officials in southern Maine are preparing for an impact that could force tax increases and service cuts.

While some say it's too early to tell the true cost to cities and towns, others see little chance of escaping at least some of the shift in costs to local governments and property taxpayers.

Next week, independent Sen. Dick Woodbury of Yarmouth will begin a series of meetings in several suburban communities to discuss the state budget and get residents' feedback about their priorities.

"I think there is a lot of brainstorming going on to identify alternative approaches," said Woodbury, who said he is optimistic about producing compromises. "This budget has created some opportunities for innovative thinking about how we finance government."

Yarmouth will host the first session, on Monday, with other forums planned in Cumberland, Falmouth, Gray and North Yarmouth.

Town officials from throughout the region said it's still too early for local governments to determine the exact impact of the governor's proposal to suspend revenue sharing for the two years starting July 1. But most said the effects could fall squarely on homeowners.

As in recent years, cities and towns would have to balance possible cuts to services and programs with possible increases to property taxes.

Yarmouth Town Manager Nat Tupper said he will be interested to hear how attitudes about local government have changed and what residents say about the shifting of state budget problems onto property taxpayers.

The state has reduced revenue sharing in the past to close budget shortfalls, but the idea of suspending it altogether came as a surprise.

"It's been pretty disrespectful and pretty hostile for several years, and I'm not talking just about the current governor," Tupper said. "(LePage's proposal) doesn't change the dynamic, it just adds to the resentment and difficulty."

Portland Mayor Michael Brennan has vociferously opposed the cost shift to cities and towns.

"I hope the Legislature looks at a more reasonable, tempered approach ... and chooses not to balance the budget on the backs of municipalities," said Brennan, a former lawmaker.

Since LePage introduced his budget on Jan. 11, Brennan has said the suspension of revenue sharing could be a nonstarter for legislators.

In Portland, where revenue sharing accounts for $6.1 million of a projected $162.5 million budget, the property tax rate would have to jump roughly 81 cents, to $19.63 per $1,000 of assessed valuation, to offset the loss, according to figures provided by the city. That would add $162 to the annual tax bill for a home assessed at $200,000.

"We certainly have a long discussion and debate ahead of us," Brennan said.

In his weekly radio address Saturday, LePage stood behind the temporary elimination of revenue sharing, which would save the state a total of $200 million over two years. He said towns and cities must share the burden and operate more efficiently.

Some managers, including South Portland City Manager Jim Gailey, said they doubt the suspension really would be temporary, citing similar promises when Gov. John Baldacci used portions of revenue-sharing to help balance the state budget.

In South Portland, the loss of revenue sharing and other possible cost shifts would push the tax rate up as much as 83 cents, to $17.33 per $1,000 of valuation, Gailey said. That would add $166 in taxes on a house worth $200,000.

Asked if he believes that LePage would restore the funding after two years, Gailey said, "I just don't see that happening."

Municipal governments have had a string of trying budget years, as the economic downturn of the past five years has in some cases caused layoffs and service reductions.

"You're supposed to do your job in good times and in adversity," said Falmouth Town Manager Nathan Poore. "Unfortunately, adversity has been a little bit long-running now."

In Gorham, the potential loss of $1.6 million in revenue sharing would cause a property tax increase of $1.21 per $1,000 of valuation, adding $242 to the tax bill for a $200,000 home, said Town Manager David Cole.

In Westbrook, planners have itemized the cost of each of LePage's proposals. The city would face about $1 million in additional costs to fund teacher pensions, and a loss of as much as $783,000 from business equipment tax reimbursements, said City Administrator Jerre Bryant.

Windham Town Manager Tony Plante said the size of the potential revenue cuts, including the loss of revenue sharing and other proposals, could force redefining cuts to local government.

Taken together, the governor's proposals represent a 10 percent reduction in municipal funds, Plante said.

"I would advocate for eliminating some things altogether to do the remaining things well," he said.

-- Staff Writers Randy Billings and Leslie Bridgers contributed to this report.

Staff Writer Matt Byrne can be contacted at 791-6303 or at:

mbyrne@pressherald.com 

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