Loss of property tax looms over mayors’ Question 3 concerns

Mayors of nine Maine cities have questioned whether lucrative property tax revenue will continue to flow into municipal coffers if voters approve a statewide ballot measure proposing a publicly owned electric utility.

The mayors of Auburn, Augusta, Biddeford, Brewer, Gardiner, Lewiston, Saco, Sanford and Westbrook said in an open letter Tuesday that they’re “painfully aware” that the Legislature could scale back or eliminate property taxes owed by Pine Tree Power, as the proposed utility is called, “just as has frequently occurred with state support for school funding and municipal revenue sharing.”

The group of municipal officials said Pine Tree Power, as a nonprofit, would be exempt from paying state income and sales taxes. Central Maine Power and Versant Power are, “by far,” Maine’s two largest property taxpayers and for some municipalities, the tax payments amount to 10% or more of budgets, the chief executives said. The utilities maintain lines and transmission corridors that cover thousands of miles of taxable property in Maine.

Question 3 proposes that Pine Tree Power takeover the assets of CMP and Versant and hire a third-party operator to maintain the grid. Proponents of the measure say doing so would create local control over the delivery of electricity in the state, improving reliability and lowering rates.

Central Maine Power paid about $68 million in property taxes to 368 municipalities last year and Versant paid more than $17 million in 2022, according to spokespeople for the two utilities.

Lucy Hochschartner, deputy campaign manager for Pine Tree Power, said in an email the law authorizing the public utility would be “explicitly protecting property tax revenue.” The legislation behind Question 3 that voters will decide Nov. 7 requires that the rates “and all other charges of the company” be sufficient to fully pay the cost of service, including debt and property taxation.

Pine Tree Power would be subject to property taxation “and must pay property tax in the same manner as an investor-owned transmission and distribution utility,” according to the law authorizing the ballot measure. Rates must be enough to pay property taxes.

The mayors are not convinced. “In the face of public pressure to lower rates, pay down debt or meet unexpected financial constraints triggered by a storm or other unexpected catastrophe, the Maine Legislature could readily eliminate the requirement that Pine Tree Power pay taxes,” they argue in the letter.

They also expressed concern about the debt incurred by buying the assets of the two investor-owned utilities. Estimates have ranged from $7 billion to $13 billion, but there is consensus that whatever the final price tag, it will likely be disputed in court for a number of years.

Willy Ritch, who is leading the opposition to Pine Tree Power, said in a statement the mayors have a “unique perspective” on how a public utility could drive up property taxes.

“I know the people behind Pine Tree Power have promised their scheme won’t hurt towns and cities, but the mayors who wrote this letter aren’t so sure about that,” he said.

The mayors stopped short of urging voters to reject the ballot measure.

“It’s not my job to tell people to vote yes or no on certain issues,” Westbrook Mayor Michael Foley said Tuesday in a phone interview, adding that the mayors believed it was important to share their concerns. His city collects about $1 million in property taxes annually from CMP, or about 2% of the city’s $48 million in total property taxes, he said.

The City Council of South Portland refused in a 6-0 vote Oct. 10 to sign the letter. City officials referred to their December 2020 backing of an effort to replace privately owned electric utilities with a power authority run by an elected board and buying out power companies, which is proposed in the Pine Tree Power plan.

The Maine Municipal Association, which provides professional services to municipalities and other local governmental entities in Maine, is neutral on Question 3.

“We try not to take a position on ballot measures,” said Elaine Aloes, president of the executive committee and chair of the Solon town selectboard. The group instead focuses on bond questions, she said.

“This is one we debated, whether to take a position,” Aloes said of Question 3. “We think people should make up their own minds.”