Cities and towns say reduction in state revenue-sharing only part of pain in governor’s budget

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AUGUSTA — In a radio address to be broadcast Saturday, Gov. Paul LePage charges a statewide organization of towns and cities with misinforming the public about the impact of a proposed $200 million reduction in state revenue-sharing.

“Unfortunately, information distributed by the Maine Municipal Association is not accurate and completely self-serving,” LePage said in the address that was taped and released Friday.

“MMA claims that municipalities will lose $284 million over the next two years,” he said. “What they don’t tell you is in previous years, revenue-sharing has never been fully funded, dating back to my predecessor. While I would like to share more money with towns and cities, we simply do not have it.”

LePage goes on to detail that as a percentage of cities’ overall budgets, the state revenue-sharing portion is relatively small. In Portland, for example, revenue-sharing — taxes collected by the state and shared with municipalities — makes up 2 percent of the city’s overall $291 million budget, the governor said.

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“As mayor of Waterville for eight years, I was able to balance budgets, while reducing property taxes,” said LePage, a Republican. “Working together with a Democratic City Council, I was able to reduce spending and lower taxes. A temporary loss in revenue-sharing does not mean that property taxes will automatically go up. That is a local choice.”

The governor noted that local governments could consolidate services to save money.

MMA spokesman Eric Conrad said the organization is standing by its statements and numbers.

Revenue-sharing is part of a state law passed in 1972 to help reduce the burden of property taxes. The original law directed the state to share 5 percent of its revenues with local governments.

Conrad said LePage, in his address, overlooks several other parts of his budget proposal that would affect Maine towns and property taxpayers.

Among those are provisions to eliminate parts of a property tax relief program for homeowners known as the Homestead Exemption. That program allows homeowners to subtract the first $10,000 of assessed value to lower their tax bills. For example, a person with a home valued at $150,000 would only pay property taxes on $140,000 worth of value, with the state making up the difference to the town or city. The governor’s proposal ends the program for all taxpayers under the age of 65. 

Another tax-relief program for lower-income families and individuals known as the circuit-breaker system reimburses a property taxpayer or renter if the amount of their property taxes or rent exceeds a certain percent of their income. In total, the program cost the state about $43 million during the last two-year budget cycle.

Other programs that provide businesses with personal-property tax relief for investments in new equipment also would be eliminated under the governor’s proposal, Conrad said.

“The way we view it is there is going to be widespread pain, if you will, or increases in property taxes that are going to affect small businesses and homeowners; there’s just no doubt about it,” Conrad said. “There’s just no doubt this is going to transfer the cost of running state government, not local government, state government from income taxpayers at the state level or state sales taxes to property taxpayers who are already overburdened.”

Conrad said towns and cities would have no choice. To keep up, they would have to increase property taxes and reduce services. 

Another shift in the LePage budget would take the excise-tax revenue paid to towns when the registration on a large commercial vehicle is renewed and send it to the state.

Last year, Auburn took in more than $148,000 from this excise tax, while Lewiston collected about $91,000.

Conrad said the proposed changes, including a proposal to shift 50 percent of the cost of teachers’ retirement pensions to local school districts, would leave Maine cities and towns facing nearly $420 million in lost revenue.

sthistle@sunjournal.com

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