It’s been one of the most frequently asked questions during the run-up to the merger referendum: If one city is created, how will the existing debt in both cities be paid off, and what impact will it have on taxes?
For Auburn residents, the concern is that Lewiston’s debt load, at about twice Auburn’s, could fall onto their shoulders. Or that Auburn will end up with a property tax rate similar to Lewiston’s.
Merger opponents also say that a merger will cloud the future of big construction projects in the pipeline, including a new Edward Little High School in Auburn, or new parking garages in Lewiston. Will the debt from those new projects fall on one side of the river or on both?
As part of the Sun Journal series on the merger, we take a closer look at another complicated issue that’s been the subject of heavy debate between the competing merger campaigns.
Tax rate
Most residents who aren’t directly involved in either campaign — or are perhaps still undecided on the merger — want one question answered: How will a merger affect my taxes?
A social media comment posted recently from an Auburn resident asked, “So what would be the (property tax rate) for the new city? A meeting in the middle or at (the) Lewiston rate?”
According to the Joint Charter Commission’s consolidation agreement, which is the document citizens will vote on in November, each city’s existing debt before Jan. 1, 2020, will be paid off by the taxpayers in each previously existing city. This means that the two cities will continue to have separate tax rates until all previous debt is paid off.
The consolidation agreement details say that, based on 2016 numbers, Lewiston’s total bonded debt is $129.6 million, while Auburn’s is $56.3 million. In Lewiston, however, $38 million of the total debt is in revenue bonds for sewer and water utilities. Auburn’s utility debt is borne by the separate Auburn Water and Auburn Sewer districts.
Each city also has what’s known as long-term liabilities, such as insurance and pension costs. According to the consolidation agreement, those figures sit at $31 million in Lewiston and $16 million in Auburn.
Based on the debt load in each city, the Charter Commission’s consultant, CGR, calculated estimated tax rates for people living in each municipality following a merger.
They estimate, based on the combined assessed value and savings of a merger, that a consolidated city would have a tax rate of $17.26 per $1,000 of assessed valuation, before any debt is calculated. Adding in the separate debt service tax rates, according to CGR, would equal a $23.26 rate in Lewiston, and $21.94 in Auburn.
The current tax rates in the cities are $28.02 in Lewiston, and $22.99 in Auburn.
Questions
While the CGR report shows lowered tax rates under a merged city, even while paying off the existing debt, opponents of the merger have argued that the numbers are flawed.
Lewiston Finance Committee Chairman Robert Reed, a member of the Coalition Opposed to Lewiston-Auburn Consolidation, says the 2016 figures used in the study are already outdated, and that the rates for paying off the debt in both cities will not be consistent each year.
“They took a moment in time and decided over 10 years, this is the cost to each city resident,” he said. “(It) makes the reader think we just gradually take off the debt, but each year will be its own unique dollars, some years more, some years less.”
Reed also argues that the Charter Commission has shown no real plan for how the cities’ long-term liabilities will be paid for, which he says will likely have to be added to the debt total of a consolidated city.
There has also been a recent charge by merger opponents that the wording included in the official consolidation agreement could be misinterpreted, leaving residents alone to pay off the debt.
The section states, “After consolidation, taxes for the repayment of the bonded indebtedness of each of the now-existing cities on Jan. 1, 2020 shall be assessed solely against the residents of within the limits of each of the previously existing cities, such assessment to be in addition to all other real and personal property taxes.”
During last week’s merger debate, coalition member Bob Stone argued that the term “residents” excludes business and industry. In theory, he said, they could argue against paying their portion of the debt.
However, Chip Morrison of the Charter Commission said the term “residents” means all taxpayers. He also said the commission would take another look at the language and amend it if needed.
Impact on projects
Those opposed to the merger have also questioned how upcoming and significant construction projects could be affected by the merger, and specifically, who will take on the resulting debt.
Reed said during a recent debate that, if the merger passes, he’s worried about the potential for new debt to be taken on during the two-year transition process based on existing contracts, or that the two cities could force each other to take on the debt prior to the merger date, further straining relationships.
He mentioned projects including parking garages at Bates Mill No. 5 and plans for all-new fire department substations. In Auburn, the focus is on a new high school, though that project will be state-funded, unless residents decide to add amenities the state won’t pay for.
Auburn Mayor Jonathan LaBonte, who during a recent Great Falls TV broadcast on the merger declared his opposition to the consolidation, said he believed that if the merger passes, “I fully expect the (Edward Little) project to be delayed.”
He said a new consolidated city would have to unify its school department, and vision, before embarking on a new high school project.
LaBonte is also worried about existing contracts that could tie new debt to a merged city. He uses Bates Mill as an example, because of the Lewiston contract stipulating that the city build additional parking based on new tenants.
“Any contracts that were already in place become a contract of the shared city,” LaBonte said during the interview with coalition Chairman Jim Howaniec. “That contract ought to stick with the taxpayers that initiated that deal.”
LaBonte works for Gov. Paul LePage, who has been outspoken in his support for the Lewiston-Auburn merger.
arice@sunjournal.com
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