WATERVILLE — Gov. Paul LePage’s proposal to allow communities to levy property taxes on nonprofit entities to make up for the elimination of state revenue sharing funds is a bad idea, several city and area nonprofit officials said Monday.

“We’re not at all — in any way, shape or form — in support of that proposal because of one very key, important reason, and that reason is that we earn the revenue sharing money that we’re due,” City Manager Michael Roy said. “We spend money so that the state gets sales taxes and income taxes. We deserve to be paid for that work that we do to create those revenues.”

Roy cited as an example Selah Tea, a cafe located on Main Street downtown. The cafe sells food and other items, collects sales taxes and turns those taxes over to the state.

The city plows the road in front of Selah Tea and if a disturbance occurs there, police respond. If there is a fire, the fire department responds, Roy said. The city also coordinated a forgivable loan program for business.

“We do the licensing and permits, victualer’s license,” Roy said. “The city does all of those things, so I would ask the governor, ‘What is it the state of Maine does for Selah Tea?’ They do nothing. They want 100 percent when we’re in fact spending money to get sales taxes, so that’s why we’re not at all in favor of any switches in taxation to compensate for lost revenue sharing. That revenue sharing is rightfully ours.”

Roy says he sees a real problem with deciding what nonprofits get taxed and which ones do not.

“Let’s face it — they all receive services,” Roy said. “Are we going to say churches are more important than colleges? The Boys and Girls Club is more important than the colleges?”

He also points to the fact that while Waterville has a lot of nonprofit organizations, a town such as Winslow does not and would take a financial hit because it has fewer nonprofits to tax.

“They’re not going to have the opportunity to tax nonprofits, so it’s a much better deal for service centers,” he said.

State planners have identified some Maine communities, including Waterville, as “service centers,” based on criteria that includes providing employment for people from other communities, having a retail sales base that attracts people from out-of-town, and being home to social, cultural, health and financial services with regional appeal.

Roy said there are about 150 service centers in the state and 350 communities that are not service centers.

Colby College supports entities such as the Mid-Maine Homeless Shelter, Waterville Public Library and Waterville Main Street, Roy said, and if Colby had to start paying a huge tax bill, those places would be affected. Taxing nonprofits could put a larger burden on nonprofits that rely on MaineGeneral and Inland hospitals, as well as Colby and Thomas colleges, he said.

“I think the very basic point is that we spend money to create sales taxes and increase tax receipts for the state of Maine,” Roy said. “We deserve some of that back.”

Jeff Austin, lobbyist for the Maine Hospital Association, said hospitals are “very disappointed” in the proposal.

“It’s not the first time that it’s been proposed,” Austin said. “Every time it’s been proposed, it’s been rejected by the Maine Legislature, and virtually no other state in the country takes this approach with the hospitals. It’s a sick tax. It’s a tax on people when they need medical services.”

The Hospital Association represents all of the state’s 36 general and two psychiatric hospitals. The only two not represented are the state-owned Dorothea Dix and Riverview facilities.

MaineGeneral spokeswoman Joy Leach referred questions to Austin, who said it is not possible for hospitals to pay taxes. They pay more than $100 million to the state to help fund Medicaid programs, and the federal government makes hospitals accountable for money they lose treating Medicaid patients. The hospitals earn their nonprofit status by paying for more than $100 million a year in charity cases.

Hospitals have other expenses, such as electricity and nurses’ salaries, and the Medicaid budget includes five or six different cuts to hospitals and a couple of increases to programs hospitals participate in, with some cuts directly to hospitals.

Inland Hospital spokeswoman Sara Dyer said officials there are still learning about the governor’s proposal and encourage people to look at the significant community benefits the hospital delivers through its mission of care and service.

“Inland Hospital already pays property taxes on many parts of our business, including physician practices ($99,000 in 2004),” Dyer said. “We also pay a hospital tax to the state which was increased 20 percent in 2014 ($876,000 in 2014). In addition, we provided more than $3 million in free care to those in need last year. Inland also provided more than $80,000 to local organizations to help support economic and social initiatives that improve health and overall quality of life.”

At a time when there is intense pressure for health care institutions to better coordinate care and health improvement despite receiving lower reimbursements, Dyer said, another tax would impact Inland’s ability to invest in the community.

Waterville Mayor Nick Isgro also rejected the idea of taxing nonprofits.

“While I applaud the governor for presenting a bold plan to update an antiquated tax system that doesn’t work, I strongly disagree that the answer to local municipalities is to tax what, in some cases, have been our anchor institutions,” Isgro said. “Waterville, in particular, is on the verge of some amazing collaborations that will be far more economically stimulating to the local economy than an annual tax revenue.”

Given that the minimum value of property owned by a non-profit before it would pay a property tax is reached in relatively few communities, the governor is recognizing that service center communities such as Waterville subsidize surrounding towns that use its roads and services but pay much lower tax rates, according to Isgro.

“That’s a starting point for what I hope is an open dialogue as we move into the legislative session, and I look forward to working with both the governor and our legislators on these complex issues,” he said.

Colby College issued a statement Monday saying that from the beginning — before Colby was called “Colby” and before Maine was a state — the College and Waterville maintained a synergistic relationship, which continues.

“This commitment on Colby’s part is evidenced in many ways and is continuing to grow under the leadership of President David A. Greene, who has begun considering ways in which Colby can invest significantly in the city in the coming years,” the statement said. “We believe strongly that anchor institutions can support the growth of communities and that they do that best by paying close attention to their mission and working with city leadership to stimulate economic growth. Colleges have long been engines of economic growth, and Colby is committed to supporting Waterville’s growth and prosperity.”

Beyond the Waterville focus, Colby makes Maine students a priority in its admissions efforts and continues to recruit and enroll a large number of students from Maine, often as many as 250, the statement said. “Of them, 72 percent receive financial aid (as compared to 40 percent of the student body as a whole), and of those who receive aid, 57 percent receive grants of more than $40,000 per year. Maine students excel at Colby and the College benefits from the unique perspective they bring to the classroom and campus life. In his inaugural address President Greene reaffirmed the College’s commitment to Waterville, and we look forward to that commitment resulting in positive changes for the city and its people.”

Farmington Town Manager Richard Davis said that, in his understanding of the proposed state budget, there does not appear to be any strong advantage to the expanded ability to tax the properties of nonprofits compared with getting money from the state’s municipal revenue sharing program.

“There’s probably no real advantage to Farmington and may actually be a disadvantage in additional expenditures and cost burdens on those organizations,” he said.

Davis serves on a legislative policy committee with the Maine Municipal Association and said another challenge to the proposal would be whether it would fly politically in other towns that have no major nonprofits.

“They would just simply lose revenue sharing. The impacts are different on each town,” he said.

He said the town does not have updated assessments on the major nonprofits in the area, but as of ten years ago, Franklin Community Health Network was valued at $8 million and the University of Maine at Farmington was valued at $45 million.

Staff writer Kaitlin Schroeder contributed to this report.

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