In just a few weeks, the curtains will rise once again on the season premiers of the foremost form of direct democracy: the open town meeting. But as with many other institutions that have helped preserve the will of the people, it occasionally is imperiled by challenges.

One of the biggest in Maine is seemingly benign in its intentions but which in substance is undermining its existence in several communities: changing the time of year in which town meetings occur. This happens when towns move the meetings from March to June, a shift that accompanies a change from a calendar fiscal year to a July 1-June 30 fiscal year. Towns that do this typically see their town meeting attendance plummet.

It’s easy to see why June, with its longer daylight hours, outdoor recreation activities, graduations, weddings and vacations draws a more anemic turnout for public meetings, than those conducted in March. As a consequence, many of the towns that substitute the July year for the calendar soon abrogate the open town meeting altogether.

The dagger in the heart to open town meetings is but one of several pitfalls that await towns that ditch the calendar year in favor of a July fiscal system. Though over the last 35 years some 50 percent of towns have made the switch, many are bucking the trend and are holding out for a budget year founded on the calendar system. Besides the need to keep their town meetings as viable as possible, here’s a rundown on why many towns are still standing their ground:-

The July l fiscal year puts a town’s budget in the same year as its school budgets. Such budgets – with the loss of stimulus funding and other issues – are becoming increasingly volatile. Towns with July 1 fiscal years must absorb the sudden and abrupt school budget increases that are now occurring all in the same year. Those that have stayed with the calendar year system have the ability to delay half the increase until a second year. The town of Strong, for example, with a calendar year system, was given a whopping 20-percent increase in its school district assessment last summer. It was able to cushion the blow, however, by spreading half of it into the 2011 calendar year budget, meaning that its taxpayers will have until next November to ante up the balance. Those in neighboring Phillips, however, with a July 1 fiscal year, had to absorb its increase all in a single fiscal year.

The July 1 system requires half the taxes be paid six months earlier than under the calendar system with half to be paid usually in May, the nadir of Maine’s economic vitality. This is at a time farmers are struggling to come up with enough money to get their planting season up and running and are a long way from harvesting their crops. Loggers are in their worst time of year, mud season, while for the summer tourist industry, the first vacationers are fortnights away.

One of the most beguiling illusions created by a shift to the July 1 system is that it eliminates tax anticipation or short-term borrowing. While it’s true that because taxpayers front half the year’s taxes six months earlier in a July 1 system, there’s no need for towns to borrow money in anticipation of taxes, it’s a double whammy to the taxpayer when the local governments get off the hook for this borrowing by palming it off on the taxpayer.

The taxpayer suffers first by having to pay so much tax so early in the year. As if that wasn’t enough of a blow, the typical taxpayer is again wounded by having to pay an extraordinarily higher interest rate than the town, had the borrowing been left to the town. That’s because interest paid by private taxpayers to banks is taxable to banks while that paid by towns – and other governments – is not. The result is that the typical taxpayer is paying anywhere from around four to upwards of ten percent (depending on whether it’s on a mortgage, a home equity line or a credit card) while Maine towns now pay less than two percent.

The July 1 fiscal year and June town meeting date ushers in a system of premature decision making. In a July fiscal year/June meeting regime there is no town completed report on which voters can calibrate how the year about which they’re voting compares to the previous one. On top of that, such towns often don’t yet know just how the school district budget and state finances will impact the municipal budget since even they are often in a state of flux until July or later. Towns that meet in March, though already into the year on which they are making decisions, have a full opportunity to review the actual condition of the previous year’s finances including year-end audit reports.

Though the last 35 years has seen many towns adopt a July 1 fiscal year, some 240 have maintained their allegiance to the calendar system or one close to it (A Feb. 1 – Jan. 31 year is a popular variation). As long as the July 1 set up poses the risk it does to open town meetings and inflicts an increased burden on taxpayers while at the same time depriving them of a timely financial town report, many towns can be expected to uphold the traditional calendar system.

Paul H. Mills is a Farmington attorney well known for his analyses and historical understanding of Maine’s political scene. He can be reached by e-mail: pmills@midmaine.com.

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