The biennial budget approved by Maine’s legislature last month reduces the state revenues cities and towns use to maintain services and makes them more dependent on property taxes, which is a “credit negative” for the local governments, according to debt-rating agency Moody’s.

Moody’s said the designation of a “credit negative” does not mean that the credit rating or outlook changed, but indicates the impact of a development as one of several factors affecting credit quality of a municipality.

Over the past decade, Maine has distributed an average of $110 million annually to municipalities, Moody’s said. In fiscal 2013, however, the amount declined to $95 million and will fall to $65 million in fiscal 2014 and $60 million in fiscal 2015.

In fiscal 2014, municipalities will be given more flexibility to adjust property taxes to offset the reduction in state revenue sharing.

“While this will provide local governments with some budgetary flexibility, it passes the burden to property taxpayers when, statewide, Maine’s economy remains weak, job growth is subpar and the demographic outlook is unfavorable,” Moody’s said in a report.

“Maine’s local governments are already challenged to attract commercial taxpayers to diversify their primarily residential tax bases; rising property tax rates will only increase this struggle,” Moody’s said.

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