JAY — The town is seeking to get $600,000 back from the state and to change the state Adjustment for Sudden and Severe Disruption in Valuation law for other towns who may have to file for financial relief.

When town leaders used $2.25 million in undesignated funds in 2021 to keep the property tax rate from rising by $8.80 per $1,000 of assessed value following a digester explosion at the Androscoggin Mill in 2020, they didn’t realize it would mean a $600,000 reduction in state revenue-sharing this year.

The tax rate still increased by $3 per $1,000 of valuation in 2021.

Two bills have been sponsored by legislators to try to address the situation. The bills are expected eventually go to a public hearing before the Legislature.

Town Manager Shiloh LaFreniere and the Select Board are hoping residents will testify on the measures either in person or in writing.

The town has filed for the state’s Adjustment for Sudden and Severe Disruption in Valuation four times and will again because of the loss of valuation from the mill and the mill closing permanently in March. The last time it filed was in 2021.

One of two wood pulp digesters exploded April 15, 2020, leading Pixelle Specialty Solutions to permanently idle one paper machine, lay off workers and cease making wood pulp. Pixelle had continued to operate two specialty paper machines using purchased pulp until March when it shut down permanently.

The valuation program, if a town qualifies, affects the amount of money the town receives in state aid to education and state revenue-sharing.

Jay is facing challenges in regard to its tax base because of the mill closing, LaFreniere said.

“When state revenue-sharing projections came out recently, we were surprised to see that our projected amount had dropped from last year,” she said.

She and the town’s assessing agent, Paul Binette, asked several questions of Maine Revenue Services and the state treasurer’s office about how the formula works and what numbers play into it. They learned that making use of the undesignated balance — the town’s savings — to help stabilize the tax rate for residents in years when there were big valuation losses actually hurt the town financially, LaFreniere said.

“Last year, we were projected to receive $1.4 million in revenue-sharing,” she said. “This year it is projected at $1.1 million. Had we not utilized the funds from our undesignated fund balance in the 2021-22 tax commitment, our projected revenue-sharing would be $1.7 million,” she said.

“Needless to say, $600,000 would have a huge impact on our taxpayers next year as we face the increased tax rate due to the mill closure,” LaFreniere said. “We are confident that this is not the intent of the program to penalize communities that have been fiscally responsible and saved funds so that they can offset an extreme impact on their residents, but unfortunately that is what happened.”

Following the digester explosion, the town lost over $200 million in valuation.

“Our total town valuation base went from $596 million in our August 2020 commitment papers down to $388 million in August 2021,” which is over a 2% loss from a single taxpayer, LaFreniere said.

The town applied to the state under the Sudden and Severe law after it committed taxes in 2021 and its valuation was adjusted.

“Unfortunately, the way the law works, the additional revenue-sharing and aid to education does not take effect until the following year,” LaFreniere said.

“When we committed taxes in August 2021, we were faced with a huge funding gap for one year,” she said. Town officials dipped into the undesignated fund to lessen the tax increase. The rate was set that year at $20.50.

“We had to do it,” LaFreniere said. “Even if the law doesn’t get fixed, we will have to do the same thing again” because of the gap year.

State Rep. Sheila Lyman, R-Livermore Falls, is sponsoring the bill to address the recent mill closure in Jay by providing money to offset the loss of property tax.

Several co-sponsors of the legislation signed on.

Sen. Lisa Keim, R-Dixfield, will submit the bill to make the long-term fix of an amendment to law. It would direct Maine Revenue Services to recognize the specific funds that a town uses to mitigate an extreme tax increase in the year following an event that qualifies for sudden and severe loss.

“We realize that this will have little effect on most communities, but for those that find themselves in our situation, it will be huge,” LaFreniere said.

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