Lincoln County towns are scrambling to gauge the impact of Gov. Paul LePage’s biennial budget proposal, including possible cuts to services and property tax hikes.
The governor’s budget proposes to cut state contributions to education funding and slash several sources of municipal revenue.
Locally, town officials point to five aspects of the proposal as likely to have the most negative impact on municipalities.
The budget would cut state funding of education in towns with high property values, including several Lincoln County towns, by more than half, according to the Maine Municipal Association.
The budget would “completely eliminate” the property tax relief program known as municipal revenue sharing, according to the association’s analysis.
The budget would eliminate the homestead exemption for the majority of “homesteaders,” or people paying property taxes on their primary or sole residence.
The exemption deducts $10,000 from the value of homesteader properties. The new rule would actually raise the exemption to $20,000, but would limit eligibility to property owners 65 years of age or older.
The change would save the state money because it reimburses towns for 50 percent of the revenue towns lose as a result of the homestead exemption.
LePage’s budget would also require towns to give the excise tax they collect on tractor-trailers to the state.
The budget would require towns to pay up to 100 percent of teacher retirement contributions, an expense the state currently pays and has paid as long as the retirement system has been in place.
Town officials in Lincoln County have expressed concern about the possible impact of the budget on property tax rates.
Damariscotta Town Manager Matt Lutkus estimates the town would have to cut services, raise taxes, raid cash reserves or all of the above to compensate for an approximately $200,000 hit.
Damariscotta and most other towns are preparing their budgets for upcoming annual town meetings, but the possibility of deep cuts surrounds the process with uncertainty.
Lutkus plans to prepare two budgets – one as if all revenue sources are going to remain intact; one incorporating cuts in services to address the shortfall.
Bristol, Damariscotta’s neighbor to the south, is bracing for a similar impact.
“I would say, worst-case, we could lose $200,000 in revenue and there’s no question that would affect the mil rate,” Bristol Board of Selectmen Chairman Chad Hanna said at a recent meeting with members of the Bristol Budget Committee.
In Newcastle, Town Administrator David Bolling estimates a loss of $100,000-$130,000 in revenue and a correlating mil rate increase from $14.90 to $15.35, should the town decide to maintain all services.
The mil rate determines the amount of property tax per $1000 of assessed value. For example, the owner of a property with a town-assessed value of $100,000 would pay a property tax of $1490 under Newcastle’s current rate.
“A lot of those things by themselves are small, but in our budget, as tight as it is, they add up,” Bolling said at a Jan. 28 meeting of the Newcastle Board of Selectmen.
Down the Damariscotta River in Edgecomb, Selectmen Jessica Chubbuck and Stuart Smith, both prominent local Republicans, were no less critical of Gov. LePage’s plan.
“It’s going to directly hit us and directly hit the taxpayer,” Chubbuck said.
Edgecomb would lose about $51,000 in revenue sharing, which it would have to compensate for with a property tax increase, Smith said.
The loss of the homestead exemption, however, would have the biggest effect on Edgecomb residents, since 298 residents have the exemption, he said.
Governor LePage has fired back at legislators, town officials and the Maine Municipal Association for criticizing his plan.
He called the analysis of his budget by the Maine Municipal Association inaccurate and “completely self-serving” in a Jan. 25 speech.
LePage said revenue sharing typically accounts for 2-4 percent of town budgets.
“It is not impossible for local government to save money, consolidate services and identify priorities … it is reasonable to [ask] local officials to find alternatives,” LePage said.
LePage referred to his tax cuts in the speech, which some in the state have criticized as disproportionately benefiting the wealthy and creating the budget shortfall the governor wants to fill by cutting municipal revenue sources.
“I believe Mainers should be able to keep more of their hard-earned money,” LePage said.
Back in Edgecomb, Chubbuck and Smith disagree with LePage and say he should not take credit for a state income tax cut when it appears likely to lead to a property tax increase.
“That’s not a tax cut, that’s a tax shift,” Chubbuck said.
Chubbuck said she specifically asked LePage if he would shift the tax burden to small towns when the then-candidate was campaigning in Edgecomb.
“I’m personally in favor of cutting taxes, not shifting taxes,” Chubbuck said. “But he said ‘No, I’m not going to do that.'”
“He campaigned on not shifting taxes to local taxpayers,” she said. “When someone shakes your hand and looks you in the eye and says something, it should mean something.”
Chubbuck also takes issue with the governor’s claim that towns can consolidate services, “find alternatives” and “identify priorities” to save money.
“We’re pretty bare bones as it is,” she said. “We don’t even have a police department.”
Edgecomb residents already struggle to pay their taxes, Chubbuck said. “I would invite anybody from the state to come to this town and tell us where to cut from our budget,” she said.
Chubbuck, other town officials and residents from throughout the area will have an opportunity to air their grievances Friday, Feb. 15, at a forum organized by Lutkus, the Damariscotta town manager.
“There are clearly some tough decisions that need to be made in Augusta and it is important that local government and school officials have a voice in the deliberations of these vitally important financial matters,” Lutkus said in his invitation to other towns.
District 20 Sen. Chris Johnson, District 51 Rep. Mick Devin and District 61 Rep. Bruce MacDonald will attend the meeting. Local officials and the public will have an opportunity to speak about the potential impacts of the governor’s proposal.
The forum takes place at Skidompha Public Library, 184 Main St., Damariscotta, from 6-8 p.m., Friday, Feb. 15.
