January 20, 2013

Augusta city manager: Tax hike, service cuts or both certain if state revenue-sharing cuts approved

'Gross insensitivity on the governor's part' would strip city of more than $2 million state dollars next fiscal year, William Bridgeo says

By Susan M. Cover scover@mainetoday.com
State House Bureau

AUGUSTA — When you add it all up, the city of Augusta would lose somewhere north of $2 million from city and school budgets next year if Gov. Paul LePage's state budget is adopted as proposed.

click image to enlarge

William Bridgeo

Contributed photo


The Maine Municipal Association on Friday released a list of the effects associated with the two-year suspension of the state’s revenue-sharing program, as proposed by Gov. Paul LePage. 

The figures below reflect the two-year total of what local cities and towns traditionally have received, which is 5 percent of sales and income tax revenue collected. In the last two-year budget cycle, cities and towns received only 3.5 percent of the revenue.

Augusta: $5,051,325

Belgrade: $385,501

Chelsea: $585,808

China: $716,404

Farmingdale: $419,065

Fayette: $194,876

Gardiner: $1,792,657

Hallowell: $547,569

Litchfield: $553,596

Manchester: $459,364

Monmouth: $739,212

Mount Vernon: $254,603

Pittston: $345,607

Randolph: $328,244

Readfield: $547,520

Vassalboro: $555,045

Waterville: $4,713,121

Wayne: $209,725

West Gardiner: $407,484

Windsor: $445,935

Winthrop: $1,169,070

Source: Maine Municipal Association

City Manager William Bridgeo has composed a memo to city councilors giving some details about the effect of the proposed cuts:

• A $1.6 million annual loss because the city would receive no revenue sharing funds;

• Between $250,000 and $350,000 in additional cost because local schools would be required to pick up half the cost of teacher retirement contributions;

• The loss of about $115,000 because the state now wants to keep excise tax revenue from tractor trailers.

Those numbers do not include money that could be lost because the state is proposing to change a business tax reimbursement program and institute a cap on General Assistance reimbursements.

The combined city and school budget is about $51 million.

"So as you can see," Bridgeo wrote to councilors, "with gross insensitivity on the governor's part to the plight of Maine's 496 communities, we have entered into a fiscal crisis circumstance where council's options look to be dramatic increases in property tax rates (which I fully appreciate are a very bad thing) or cuts in valued services to a community that has already struggled in this regard over the past four years, or some 'worst of both worlds' combination of the two."

The numbers would double if calculated to reflect the state's two-year budget cycle.

Also, Bridgeo used the revenue sharing figure based on what the city received last year, which was 3.5 percent of sales and income tax revenue collected. Traditionally, the state has shared 5 percent with cities and towns. Figures released Friday by the Maine Municipal Association show that Augusta's two-year receipt of revenue sharing at the 5 percent rate would be more than $5 million.

For local property taxpayers under 65, other factors also could increase tax bills.

The state budget proposes to limit two property tax relief programs only to senior citizens, which will mean others who now get a discount would see their property taxes increase.

The state budget proposes to make the homestead exemption apply only to those over 65 or veterans. In Augusta, it's estimated that 2,800 people no longer will be able to get the exemption. Those who no longer would be eligible for it would pay 9 percent more in property taxes. Bridgeo's numbers show that an average single-family home in the city is valued at $123,000.

Also, LePage is proposing to eliminate the Maine Residents Property Tax and Rent Refund Program — commonly known as the "circuit breaker" — for anyone under age 65. This state-run program is for those whose property tax is more than 4 percent of household income or the rent they pay is more than 20 percent of household income. Bridgeo said he does not have statistics about how that would affect city residents, but he said Friday that "hundreds" of people who live in the city will lose benefits if the program is eliminated for everyone under 65.

Sawin Millett, LePage's budget commissioner, said during a recent budget briefing that the state is trying to deal with declining revenue and increasing costs at the Department of Health and Human Services. He said the governor included an extra $16.8 million in the budget, which is money he hopes will be applied to revenue sharing as lawmakers work out the details of the budget.

"We've had to make some difficult choices in this budget," he said. "Revenue sharing suspension for two years was the last decision we had to make and wish that we didn't have to."

(Continued on page 2)

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