AUGUSTA – If voters agree with a proposal to limit property taxes to 1 percent based on 1996-97 values, town and city budgets could be slashed by as much as 40 to 45 percent, Christopher Lockwood, executive director of the Maine Municipal Association, said Tuesday.

“It’s a drastic proposal, especially for service-center communities,” Lockwood said. “It would be an extreme choice of shutting down all municipal services or all education services.”

Lockwood offered what could happen to Lewiston if the referendum passed. In 2001 Lewiston collected $37 million in property taxes. The referendum would mean in 2006 Lewiston could only collect $15.5 million, less than half.

Those dollars support services such as schools, police, fire protection and roads. “Property taxes are the major funding source by far for those municipal services,” Lockwood said.

Passage would also mean $700 million would be removed from towns and city government across Maine, state economist Laurie Lachance said Tuesday. To make up that difference, the sales tax would have to be doubled from 5 to 10 percent, she said.

While Gov. John Baldacci wants towns and cities to restrain spending, he said municipalities could not afford the cuts the referendum would force. “It would be a meat ax approach. It’s not realistic,” Baldacci said. “It would be terrible in terms of local services that people expect.”

The fact that more than 50,000 people signed petitions to bring the question to the ballot “shows the frustration that people have in trying to get spending under control,” Baldacci said. “We’ve got this great collision at the ballot box between 1A and Carol Palesky going on.”

Palesky, the force behind the referendum, said Tuesday she chose to roll taxes back to 1996-97 levels because in the last five to 10 years property revaluations have unfairly “gone out of sight. They’re done every time a town or school thinks they need more money.”

Most taxpayers think the problem is at the state level and “not in their back yard,” but it is, she said. “It’s not that the teachers are getting the money. It’s not the firefighters. It’s the administrators. They’re hiring multiple, multiple, multiple administrators and are paying them big bucks.” In many cases municipal administrators are being paid $75,000 to $90,000 a year, she said, noting, “That’s more than the governor,” Palesky said.

Lockwood disagreed that the problem is in “back yards.” Towns and cities are doing a “Herculean” job of trying to keep costs down despite growing mandates from the state and federal government, he said, and despite the fact that the federal government does not pay its share of special education.

Referendum Question 1A, which will again be on the ballot this June because it did not get enough votes in November, requires the state to pay for 55 percent of education costs.

If 1A is passed in June and her property cap referendum is passed in November, “that’ll be wonderful,” Palesky said. Question 1A would force the state to pay more for education, “but our referendum will cap spending.”

Baldacci said he has been trying to urge the MMA and Maine Education Association to adopt some kind of spending cap, such as 4 percent, but there’s been “tremendous” resistance.

Baldacci acknowledged that in other states, such as California, voters capped property taxes despite warnings of losing services.

“Now the pressure is on us,” Baldacci said, adding he’s hoping that the Legislature will pass a property tax relief law that’s good for the entire state so that voters will reject both ballot questions.

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