The city of Portland’s emergency homeless shelter in December 2024. Shawn Patrick Ouellette/Portland Press Herald

The city of Portland has filed a lawsuit against the Maine Department of Health and Human Services hoping to overturn a new rule that will cut millions of dollars in emergency shelter funding for the city.

The complaint was filed in Cumberland County Superior Court in Portland last week, arguing that the rule was not changed through the proper process and should be considered void. The city also asks for a temporary injunction barring the rule from being implemented while a judge considers the lawsuit.

No court dates have been scheduled yet.

If the rule holds, Portland leaders have said it will be difficult for the city to continue operating the shelter without a sharp tax increase or pulling from an emergency fund.

“We’re not just going to hope for resolution in the Legislature, we’re also going to seek an answer in the court. We’re not going to be passive,” Portland Mayor Mark Dion said in a phone interview Tuesday.

Rule 26 went into effect on April 1 and formalizes how the department determines shelter costs, 70% of which are reimbursed through General Assistance.

The city has said it costs $84 per guest, per day, to operate the shelter, but based on the new rule, the state said it should only cost $48 per guest per day.

The state is now using a standard known as the “zero-bedroom rate,” equal to that of operating a studio or efficiency apartment for each guest. That number is adjusted annually and is based on location-specific fair market rents established by the federal Department of Housing and Urban Development.

The state has said that Rule 26 simply formalizes an existing policy, but the city has argued that the cost of running such a large emergency shelter is not aligned with the zero-bedroom rate set by HUD.

A spokesperson for DHHS declined to answer questions about the filing because it is an active legal matter. The agency has not filed any responses in court.

THREE COUNTS

The city’s complaint outlines three requests. First, it asks that the courts overturn the adoption of Rule 26 because it should have been brought before the Legislature as a substantive policy change, rather than an internal hearing.

“If they adjusted schedules, that would be fair for the agency to decide. But this is more than that,” Dion said. “It should have gone to the Legislature. This was more than just a housekeeping rule.”

Dion argues that Portland has been substantially impacted by the rule change, especially when it comes to its budget and ability to provide shelter services.

The newly proposed city budget accounts for $12 million in state and federal funding cuts, including the General Assistance reimbursement changes resulting from Rule 26.

A draft budget presented by City Manager Danielle West proposes closing that gap by pulling $8.8 million from the city’s rainy day fund, while still raising taxes by 6.2%. Without the rainy day funds, city leaders said the tax rate could have increased by 15.1%

The complaint also asks for a temporary injunction to prevent the rule from applying to Portland. And it seeks to overturn a violation issued to the city in the fall that says its reported operating costs for the city shelter were too high.

Dion said the City Council unanimously decided to pursue legal action against the state after meeting with the city’s lawyer, Michael Goldman, in executive session last month. He said the session was focused simply on fighting to overturn the violation, but that the council ultimately agreed the city has legal ground to fight the rule change in court.

“This is a very serious decision, but the state’s actions have placed us in a very precarious position as far as the budget is concerned,” said Dion.

He plans to continue to petition the Legislature for more GA funding even as the case unfolds in court.

“I think most everyone has come to the conclusion that we are a service center city that, for all sorts of reasons, finds itself trying to discharge a state responsibility — so it’s a fair expectation that we get adequate funding from the state to carry out that responsibility,” he said.