Legislators grapple with cost of curtailing revenue sharing cuts

By Mike Lange
Staff Writer

    AUGUSTA — To lawmakers like Rep. Kathleen Chase, the ranking House Republican on the Appropriations Committee, LR 2721 is a “a massive blow to Maine’s private sector economy that could mean many Mainers losing their jobs just as they’re getting back on their feet.” 

    But to many town managers, the proposed legislation to restore $40 million in state funding for municipalities will help them restore services that were eliminated during the first round of revenue sharing cuts.
    Basically, LR 2721 would take money from the state’s so-called rainy day fund and curtail some business tax breaks to keep the revenue sharing cuts from being implemented in 2015.
    A long and contentious hearing took place on Jan. 22 at the Statehouse, which included testimony from Greenville Town Manager John Simko and Milo Town Manager David Maynard on one side, and representatives of several major businesses on the other.
    Simko told the Appropriations Committee that Greenville’s revenue sharing has dropped from $165,140 in 2005 to $88,749 in 2013. “For a community our size (1,646 year-round residents), that is a significant loss of revenue,” Simko said.
    Simko pointed out that while Greenville’s assessed value in 2012 was $289 million — mostly due to the shorefront on Moosehead Lake — “our median household income was just $30,365, just 62 percent of the state median household income of $48,219.  In short, we have a lot of visitors and seasonal residents with high income but also a lot of low to moderate income residents trying to eke out a living in a poor economy in a very rural area.” 
    The Greenville town manager said that the gradual elimination of revenue sharing is equivalent to the town collecting $20 for the state “and the state has, in turn, taken $20 out of our pocket and now asks for more.” 
    But House Republican Leader Ken Fredette of Newport said that municipal government “has outgrown state government by over 50 percent in recent years. With a modest reduction in revenue sharing, local governments would be forced to be more accountable to their constituents for their overspending, and so they’re predictably resistant.”
    Commissioner Sawin Millett of the Department of Administrative and Financial Services (DAFS) additionally warned against tapping the rainy day fund.  He said Moody’s and S&P bond rating agencies both warned in May of last year that Maine’s budget reserves are low and that further depletion could result in a drop of the state’s credit rating.
    The Maine State Chamber of Commerce and representatives of Verso Paper and Barber Foods also voiced opposition to the legislation since it would change the way inventory is calculated for tax purposes.
    Linda Caprara of the Chamber testified that changing the way the business equipment tax reimbursement (BETR) program works would be detrimental to Maine’s economy. One provision would cap the BETR at 12 years “placing all of this property back on the tax rolls, and ultimately jeopardizing existing and future investment and jeopardizing jobs.”
    Maynard, however, testified that in order to attract new businesses and keep the ones they already have, Milo needs “a stable mil rate. The curtailment of municipal revenue sharing to Milo in 2013 and 2014, as current law provides for, has left the town facing a 2-mil increase in its property tax rate (from 20.35 to 22.3 mils) for its 2014 budget. In 2012, the town of Milo property tax rate was 18.6 mils.”
    Maynard added that in the 2014 municipal budget eliminates “all paving, all gravel road improvements and the loss of one full-time employee position from a staffing level already cut back in recent years. It also has forced the deferral of new equipment purchases for the year.”
    Citing the rebuilding of the community after the devastating fire of 2008, Maynard said that Milo “is working hard to attract new value-added manufacturing, distribution facilities, related business, and health services related facilities for location in its business park. What we desperately need at this time is a stable, reasonable tax rate that will go a long way to making business attraction possible.”
    At presstime, no decision was made on whether LR 2721 would advance to the full legislature for a vote.