The city where Gov. Paul LePage made his political name, Waterville, will get $670,000 more in state aid next year than it initially expected after a change in law that passed despite the governor’s firm objection.
The Elm City will get more than a tenth of the $5.9 million that Kennebec, Franklin and Somerset counties will receive in 2015 under a new law that restores money for cities and towns, according to a Kennebec Journal and Morning Sentinel analysis of data provided by the Maine Municipal Association, an advocacy group for cities and towns.
Under the law, L.D. 1762, Maine’s communities will get $60 million in 2015, up from the $20 million that preceding law would have allowed.
Kennebec County will get $3.5 million more, while Somerset and Franklin counties will get $1.6 million and $731,000 more, respectively. Sagadahoc County will get $1 million more, while Lincoln County will get $724,000 more.
Elsewhere in Maine, Cumberland, the state’s most populous county, will get nearly $8.7 million in new money; while York, Penobscot and Androscoggin, the second-, third- and fourth-largest, will get $5 million, $5.5 million and $4.2 million extra, respectively.
Even with that, the association estimates that the state will be paying municipalities only about a fifth of the “revenue sharing” that it agreed to pay in 1972, when a law passed that said Maine would give 5 percent of income and sales tax revenue to cities and towns to help offset property taxes.
Mike Roy, Waterville’s city manager, was hired by LePage in 2005 when LePage was the city’s mayor. Since then, Waterville has lost 17 of its 126 employees and the city’s slice of state aid has shrunk from a high of $2.8 million in 2008 to $1.1 million now.
Roy thinks the city has cut about all it can.
“There’s one thing you have to remember about the city of Waterville, one very important thing: We had Paul LePage here for eight years,” he said. “A lot of things were done. A lot of cuts were made.”
Not âjust goodwill gesture‘
Pushback from the local level, at which many of Maine’s cities and towns cut or flattened spending last year but still increased taxes because of less revenue sharing, is assuredly the reason why a bill to restore much of the funding passed in the Legislature overwhelmingly in February, with about two-thirds of Republicans and all Democrats supporting it. LePage allowed it to go into law without his signature.
The money is significant for Maine’s service centers, which typically have higher property tax rates than their rural neighbors, although places with higher property valuations typically get less than lower-valued communities.
In this region, Augusta will get $712,000 more; Gardiner, $263,000 more; Skowhegan, $250,000 more; and Farmington, $230,000 more. Administrators in all area service centers said there likely would have been tax hikes without the restoration, most of them between 3 percent and 4 percent.
“Augusta, as a municipality, does a really good job at keeping our municipal finances in order,” said Rep. Matthew Pouliot, R-Augusta, who supported the bill. “There’s not a lot of meat on the bones anymore.”
However, the new money is still well under the amount municipalities should get under the law. Eric Conrad, a Maine Municipal Association spokesman, said the state is paying 47 percent of that requirement this year — an all-time low, according to a graph in a recent association newsletter. It will drop next year.
Still, “any amount that is more than what we had is welcome,” said Stefan Pakulski, town manager in Readfield, which will see $72,000 more than expected next year.
Conrad said the 1972 law was a recognition that cities and towns perform important tasks for the state, as that’s where elections and vehicle registrations are done and where tax revenue is generated.
“It wasn’t just a goodwill gesture,” he said. “It was far more than that.”
Support bipartisan but tepid
However, the increase in aid has been one of the most hotly debated topics in Augusta over the past few weeks, fueled by LePage, Waterville’s mayor from 2003 until just before his gubernatorial inauguration in 2011.
The Republican blasted Democrats at a news conference last week for using money from a state reserve fund in the law to restore most of the $40 million in aid to cities and towns for the 2015 fiscal year.
But LePage, who suggested eliminating revenue sharing entirely in his last proposed budget bill, has long countered that argument by saying towns simply could cut spending in lieu of tax hikes, an argument that has been echoed by some Republicans but rejected by municipal interest groups, saying cities and towns mostly operate at bare-bones levels.
While most Republican lawmakers voted for the restoration, some admitted feeling handcuffed by the vote. During floor debate, one GOP senator called his vote in favor a “surrender” to the bill’s politics, saying it forced legislators to support the bill or be seen as hostile to cities and towns.
As LePage did, Republicans who voted against the bill cited the raid of the state’s Rainy Day fund as the reason why they opposed it, though Democrats included a mechanism in the law that would replenish the fund. LePage is proposing to replenish the fund by using unspent state education funds and savings in an account for state employees’ health insurance.
A Democrat-led task force ended its work in December without going forward with a plan to restore the $40 million in revenue sharing by overhauling elements of Maine’s tax code.
With little political support, majority Democrats turned to $21 million from the Rainy Day Fund and $19 million from other sources, which Jodi Quintero, a spokeswoman for House Speaker Mark Eves, D-North Berwick, said was a more politically palatable way to shepherd through restoration.
Still, Quintero said Democrats will put forward ideas to close certain tax exemptions for businesses to fund money for cities and towns in the future.
While Pouliot, the Augusta Republican, said he wasn’t thrilled about tapping the reserve fund, it was “all we had to work with” to restore the money.
“And when you’re in the minority, you have to play with the cards you’re dealt sometimes,” he said.
Possible âdire financial straits’
Still, Rep. Dennis Keschl, R-Belgrade, a member of the Legislature’s budget-writing committee, opposed the way it was funded.
He said he supports funding revenue sharing, but that the state should have left the reserve account alone to help fund currently identified budget shortfalls. That, he said, could later yield a better way to fund revenue sharing for the long term.
“It was foolish to do it the way it was done,” Keschl said.
Still, Democrats pounced on that argument in recent days, noting that LePage has proposed taking from the state’s Rainy Day Fund before. Assistant House Majority Leader Jeff McCabe, D-Skowhegan, said on this issue, there was “suddenly an outcry” from Republicans who have supported taking from the fund at other times.
Noting that LePage spoke harshly against revenue sharing cuts while Waterville’s mayor, McCabe said in his town, “revenue sharing is key to prevent property tax spikes from happening.”
In 2011, when the last municipality-specific full-value tax property data were collected by the state, no city or town in nine of Maine’s 16 counties had higher property taxes than Gardiner, where taxpayers paid approximately $20 for every $1,000 of property they owned — about $3,000 in annual taxes on a $150,000 home, about $1,000 above the state average.
For next year, City Manager Scott Morelli is already facing a budget shortfall that could amount to $600,000 or more. Without the money, some the highest property taxes around could be higher — perhaps by more than $100 on the median home, he said.
“We were in a tough financial situation anyway; and without this money being restored, we would have been in very dire financial straits,” Morelli said.