AUBURN — In a preliminary look at the 2019-20 budget, City Manager Peter Crichton laid out the biggest factors, including how a large increase in property valuation has been overshadowed by state exemptions.
During the workshop discussion Monday, Crichton said the city is starting its budget process earlier than past years. Each department will soon send him requests for the annual Capital Improvement Plan, followed by department budget meetings in February.
But, ahead of that, Crichton told the council that state tax exemptions like the Homestead Exemption are outpacing new growth in city valuation, which plays a role in the annual budget process. The city has recently put an emphasis on increasing valuation.
Since 2014, Auburn’s total valuation has increased by $112 million, but with state exemptions factored in, the city has actually lost value — down to $1.96 billion from $1.98 billion.
According to the Finance Department, in those four years exemptions grew by $132 million.
The state’s Homestead Exemption provides property tax relief for certain individuals who have owned homestead property in Maine for at least 12 months. Property owners receive an exemption of $20,000, meaning they are taxed on $20,000 less than their property’s assessed value. The program previously set the exemption at $10,000.
Crichton said the issue is certainly not unique to Auburn. The city is reimbursed based on the value after the exemptions, which he said “doesn’t cover what we need to have real growth.”
“That’s a problem in terms of what we’re trying to do with our budget,” he said Monday.
This year’s municipal and school budget is roughly $86.7 million.
Each year Maine Revenue Services certifies the full equalized value of all real and personal property, which is subject to taxation under the laws of Maine for all cities and towns in the state. Those valuation figures are used for numerous purposes, such as county tax assessments, municipal revenue-sharing and school subsidies.
Asked by councilors how the city can tackle the exemption issue, Crichton called it “a long-term issue.”
“It’s not going to be solved overnight,” he said, adding that the city should work with the Legislature to increase municipal revenue-sharing and discuss the impact of exemptions on property valuation.
Heading into creating the budget, Crichton listed other factors, such as a recent compensation study commissioned by the city after labor union contract disputes last year.
City staff and personnel account for 47 percent of the municipal budget.
He also listed education, revenue-sharing, joint services and implementing Auburn’s strategic plan, once completed, as factors in fiscal year 2019-20 that begins July 1.
Crichton said he will give a Capital Improvement Plan presentation, followed by a presentation of a draft budget in March.
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