WATERVILLE — Municipal officials and some residents reacted with skepticism Wednesday to comments Gov. Paul LePage made in his State of the State address that singled out the city while pushing for his tax overhaul plan.

Maine’s Republican governor, who is a former Waterville mayor, used the Tuesday night address to talk up his $6.3 billion proposed budget, which includes controversial plans to reduce and eventually eliminate the state income tax while also scrapping state revenue sharing to cities and towns.

LePage said communities can make up for the lost state revenue by cutting expenses and taxing nonprofit organizations, while he also proposed to increase the sales tax and tax certain goods and services.

During his address to the Legislature, LePage said revenue sharing money is used by towns and cities to “grow the town office” and pay dues to the Maine Municipal Association. LePage, who was Waterville’s mayor from 2003 to 2010, spent part of the speech using the Elm City as an example.

“In Waterville, the city manager worries about a $1 million loss in revenue sharing,” LePage said in his address. “Neighboring Winslow gets $500,000 in revenue sharing. But residents of Waterville and Winslow are paying $17 million in income taxes. I ask them: Would you trade $1.5 million to keep $17 million in your pockets? I’ll take that deal any day.”

“That’s not the right question,” Waterville City Manager Mike Roy said Wednesday. “The right question is, ‘Do towns and cities work to earn revenue sharing?’ And the answer has to be yes. Therefore, we would like our 5 percent (of revenue sharing) and the other 95 percent the state can use to provide the income tax break that they’re talking about, but not with our 5 percent.”

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State law says the state of Maine is required to transfer 5 percent of money raised from sales and income tax to town and city governments each month. But over the last several years, LePage has made cuts to revenue sharing and is now proposing to eliminate the concept all together.

At one time, Waterville got $2.9 million in revenue sharing. The city now gets about $1.1 million, Roy said. The decline in revenue sharing forced the city to increase property taxes, he said, and “we haven’t had severe program cuts yet, but it would certainly be a possibility.”

Some residents in Waterville also expressed doubt over LePage’s proposals to eliminate income tax and cut revenue sharing, saying they felt that municipal services would still need to be paid for and that money would still be coming out of their pockets.

Nicole Sulea, who lives in North Anson but owns Heirloom Vintage on Temple Street in Waterville, said she feels property taxes are already too high.

While it would be nice to not pay income tax, she wasn’t sure how it would work. Without municipal revenue sharing, Sulea said she felt towns would be scrambling to pay for services.

“We always hear proposals, but it always seems like we’re paying more,” she said. “We have to pay for services one way or another. What I would love is to have a business climate that would attract more young people and entrepreneurs to the area.”

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Waterville’s tax rate is $27.40 per $1,000 of property valuation, meaning the owner of a property valued at $100,000 pays $2,740 in property taxes. At this time five years ago — just as LePage had departed as Waterville’s mayor to become governor — the city’s tax rate was $24.15 per $1,000 of property value. The owner of a property valued at $100,000 paid $325 less in taxes under that lower rate.

When LePage took office in 2003, the city’s property tax rate was the same as it is now: $27.40.

In next-door Winslow, also referenced by LePage Tuesday, Town Manager Michael Heavener also agreed that the state should not make further cuts to revenue sharing.

“We all know municipal revenue sharing helps control the local property tax,” he said. “It allows us, the town, to keep the mill rate low, and if you take that revenue away, you have to make it up somewhere.”

Heavener said he would be opposed to raising property taxes, because it could have a negative effect on the elderly and people on fixed incomes.

“I don’t know enough about what he’s proposing,” Heavener said. “I think a lot of us are hoping that the Maine Municipal Association is going to go through the budget, and we’ll be hearing as time passes what the impact will be. But if the end result is that property taxes are going to have to go up, I don’t think that’s a good strategy at all.”

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Waterville Mayor Nick Isgro, a Republican, said he agreed with LePage that income tax should be reduced or eliminated, calling it the “greatest prohibiter of wealth accumulation by ordinary people.” Even so, Isgro said the city should still be entitled to state revenue sharing.

“It’s the municipalities that are plowing the streets, paving the roads and policing the streets and putting out fires and picking up the trash,” he said. “Those are all things the municipalities are doing. The state doesn’t do anything to make sure customers are going into these places to shop.”

“I’m all for reducing income tax,” he added, “but if we’re really looking at sales tax as a source of revenue, if anything it should highlight more what municipalities are doing to help generate that.”

Waterville resident Cheryl McKenney, who is retired, said many people would probably benefit from a lower income tax, although as a retired person it wouldn’t make a big difference to her. However, she does not want to pay higher property taxes to make up for the loss in state revenue.

“If there are services that are needed and not enough money to pay for them, that would be bothersome to me,” she said. “We can’t have people getting hurt or in accidents and no city services to respond.”

Another resident, Elizabeth Rackliff, 32, said she doesn’t mind paying income tax because it goes to support city services.

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“I pay my taxes and I don’t mind. I would rather pay taxes than go without vital services,” she said.

But without revenue sharing, Rackliff questioned how the city would survive. “If property taxes go up, rent will go up. The cost of pay-as-you-throw (trash collection) would increase, everything would increase to replace that revenue,” she said. “How would we support our city?”

If the state could prove that eliminating revenue sharing would result in the ability to also eliminate income tax — as the theoretical question posed by LePage suggests — then maybe it would be good, Isgro said.

“We do fare better with more money in people’s pockets, but the caution to that is you’d have to prove that’s going to happen,” he said. “We’re all waiting to see what the real mathematical effect will be on property taxes. If I have a few hundred dollars extra in my pocket from income tax, but my property tax bill doubles, I disagree with that.”

Rachel Ohm — 612-2368

rohm@centralmaine.com

Twitter: @rachel_ohm


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