WINDHAM – Windham Town Manager Tony Plante has proposed a 4.7 percent increase in the municipal portion of the property tax rate.

The town budget accounts for about a third of the property tax rate. The remaining portions of the tax rate are determined by the Regional School Unit 14 budget and county budget, both of which have yet to be determined.

In total, Plante’s proposed budget would increase municipal spending by 1.2 percent, to $14,513,843. The increase is driven by employee contracts, inflation, and a strategic decision to stop drawing on surplus to account for lost municipal revenue sharing.

The council has seven weeks to pick over the budget, Plante said. On Saturday, June 14, Windham voters will have a chance to weigh in on the budget at the annual town meeting.

An expected long-term decline in state municipal revenue sharing is driving the town’s budget considerations. While in fiscal year 2013, the town received $1,027,862 in municipal revenue sharing, the town’s share from the state program declined to a projected $688,000 this fiscal year, according to Brian Wolcott, Windham’s finance director. Plante has forecast that the town will receive $669,014 in municipal revenue sharing in fiscal year 2015, and within two years, he does not expect to include municipal revenue sharing in his proposed budgets at all.

Next year, instead of drawing on the surplus to make up for lost revenue sharing, the town will hike property taxes, at least according to Plante’s proposed budget, Wolcott said. In fiscal year 2014, the town forecast that it would spend about $750,000 from surplus in order to make up for the steep decline in revenue sharing. Under Plante’s proposed budget, the town will only use $200,000 of surplus.

Wolcott said bond-rating agencies prefer municipalities to maintain growing surpluses. Last year, Wolcott said, town officials decided to limit the use of surplus in the coming fiscal year.

“We’re going to be much less dependent on that revenue source this year,” Wolcott said. “An increasing level of fund balance (surplus) tells the rating agencies that we’re going to be in a good position to repay our debt.”

In response to an increasingly “unreliable” municipal revenue-sharing program, Plante wrote in his memo to the Town Council that was included in his budget, he plans to phase it out from budgets by fiscal year 2017.

Plante formally presented the budget to the council Tuesday night.

“It is prone to being used to balance the state’s budget at the expense of local property taxpayers,” he wrote. “As a result, it no longer seems responsible for the town to plan on receiving it, and I propose to phase it out of the budget over the next two years.”

The town’s excise taxes, which are derived from vehicle registrations, are down from a peak of $2.7 million before the 2008 financial crisis, Plante wrote. The town received $2,634,770 in excise taxes in fiscal year 2013, and Plante forecast excise tax revenues of $2,665,000 in fiscal year 2015.

“Excise taxes have recovered somewhat as the economy has recovered, though still not to pre-recession levels,” he wrote.

In general, Plante wrote, revenues continue to suffer due to macro-economic forces beyond the town’s control.

“Since 2009, changes in the overall economy and the town’s revenue picture have resulted in reductions to staffing, office hours, programs and services,” Plante wrote. “The state’s persistent budget problems have, in turn, resulted in proposals that turned many cities’ and towns’ budget processes upside down. The situation is somewhat stable at this point, but only at a level that represents a significant reduction in revenue to the town.”

Furthermore, Plante wrote, municipalities have few options for generating revenue using mechanisms other than the property tax.

“Maine’s cities and towns have little leeway when it comes to generating non-tax revenue,” Plante wrote. “Intergovernmental revenue, such as revenue sharing, at least as recent history shows us, is unpredictable and unreliable as well as being outside the town’s control. What comes in, comes in. Similarly, excise taxes, registration and other state agent fees are set by the state, limiting revenue potential to efforts to improve collection, such as follow-up with owners of unlicensed dogs to pay registration fees and penalties.”

In his proposed budget, Plante also attached an option in which the town does not increase taxes. The “zero tax increase model,” which Plante did not recommend, could lead to a deficit of nearly $360,000, he said.

“The deficit is the direct result of the reduction in municipal revenue sharing from the state of Maine, following multiple years of raids by Legislatures and governors of both major parties,” Plante wrote.

The Windham Town Council will spend the next two months going over Town Manager Tony Plante’s proposed municipal budget, which increases town revenues by 1.2 percent. 

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