AUGUSTA — Sen. Roger Katz told city councilors the city would lose more than $1 million a year because of the elimination of state revenue sharing proposed by Gov. Paul LePage as part of his two-year budget, but he said he doesn’t think revenue sharing will be eliminated.

Katz, R-Augusta, Rep. Donna Doore, D-Augusta, and Rep. Lori Fowle, D-Vassalboro, met with city councilors Thursday to discuss the city’s potential $2.2 million loss of annual revenue from the state and its effect on local property taxpayers, if all the changes in the governor’s proposed state budget pass as proposed.

Gov. Paul LePage’s two-year budget proposes to eliminate state revenue sharing to municipalities in its second year and change how some business equipment is taxed, which, when combined with other proposed changes and an anticipated $1 million drop in state funding for Augusta’s schools, could leave the city with a loss of $2.2 million in revenues to cover in its budget, Augusta officials said.

Katz, a member of the Legislature’s Appropriations Committee, predicted the governor’s revenue sharing proposal will not pass in the Legislature.

“I just don’t think it will be eliminated,” said Katz, a former Augusta mayor, noting he and other legislators have heard from city and municipal officials about how cutting revenue sharing would affect their communities and taxpayers.

With few other revenue sources available to the city other than property taxes and with local budgets already trimmed over the last several years of cost-cutting, the state cuts could have the biggest effect on property taxpayers, who’ll be asked to pick up more of the tax burden, city officials said.

LePage has said municipalities should respond to the proposed loss of state revenue sharing by cutting their spending, not increasing property taxes. But city councilors said the city already has cut its budget over the last several years, consolidating services and laying off city and school employees. Most local spending, they said, goes to core services such as plowing roads, paying police officers and running schools.

“We may look at significant cuts to our city government at the same time we’re looking at a significant increase in property taxes and, overall, seeing the community go into decline,” Ward 2 Councilor Darek Grant said of the proposed state budget’s effect on the city. “It’s frustrating to all of us.”

Grant said he gives kudos to the governor for offering a bold proposal, but said it is likely to lead to property tax increases statewide, because Augusta and probably other municipalities don’t have room to cut in their budgets.

“I do take offense that (he says) we’re big spenders at the local level,” Grant said. “When our budget is put together, we ought to make an extra copy and send it to the governor and ask him, ‘Where do we cut?’ ”

Katz said the governor’s proposal is a fundamental reform of Maine’s antiquated tax system. In general, he said, it would lower income taxes and increase and broaden the sales tax. However, he said he and others think the governor’s proposal would place increasing pressure on property taxes. And that, Katz said, would put the “three-legged stool” of the income, sales and property tax even more out of balance toward property taxes.

But Katz agrees reform is needed.

“If you take a step back and look at it, the state is not doing well overall,” he said. “Maine will continue to fall further and further behind. It is not a matter of should we be doing things differently; it’s a matter of how should we be doing things differently.”

Ralph St. Pierre, finance director and assistant city manager, said the proposed elimination of state revenue sharing alone would mean the loss of about $1 million in state revenue received by the city.

St. Pierre also said proposed changes to how business equipment is taxed, making more items exempt from the tax, could cost the city hundreds of thousands of dollars a year in lost revenue.

A proposal to eliminate the homestead exemption for homeowners younger than 65, while doubling the homestead exemption to $20,000 for homeowners 65 and older, St. Pierre said, also would have the effect of increasing the property taxes of most homeowners younger than 65 in Augusta.

The governor’s plan also would allow municipalities to tax certain nonprofit organizations. His plan targets nonprofits with a property valuation of more than $500,000, which are now exempt from paying property taxes. The city would assess property taxes at 50 percent of the rate charged to for-profit entities.

If all of the changes contained in the proposed state budget pass and the city covers the cost by increasing property taxes correspondingly, St. Pierre estimates the owner of a $125,000 home in Augusta would see his or her property taxes increase by $173, or 8 percent, if the homeowner is younger than 65. Property taxes of a homeowner 65 or older who takes advantage of the homestead exemption would decrease by $228, or 10.6 percent.

School officials in Augusta also recently learned that the school system would get about $1 million less in state funding next year under the proposed state budget, compared with what it received this year.

Last year, Augusta schools got about $13.3 million in state funding, and according to the preliminary state funding projections put online Feb. 19 by the state Department of Education, Augusta will get about $12.2 million in state funding based on LePage’s proposed two-year state budget.

State officials said $535,000 of Augusta’s drop in state school funding was the result of a proposed increase in the property tax rate municipalities statewide would be expected to contribute as their share. The change would require approval by the Legislature to be enacted.

Anastasio said another large part of the drop in state funding is a $425,000 cut in state funds for the Capital Area Technical Center. He said the state money for technical centers was based on their budgets of two years ago, and three years ago Augusta cut a number of programs at the regional technical center, both to save money and to eliminate programs that no longer fit with the center’s mission. The state has cut funding because those programs no longer exist.

Keith Edwards — 621-5647

kedwards@centralmaine.com

Twitter: @kedwardskj

Copy the Story Link