AUBURN — It is budget season again, which for municipal leaders means more late nights and head-scratching over how to make the numbers work.
Auburn City Manager Peter Crichton said he supports the idea of a local option sales tax to help offset rising property taxes. Sun Journal file photo by Russ Dillingham
The leaders of Lewiston and Auburn told members of the business community Thursday morning the process has become more challenging as less money is directed back to municipalities, causing more reliance on local property taxes.
For places such as Lewiston and Auburn, which are considered service centers, leaders say it has created a troublesome gap in local tax rates compared to the cities’ rural neighbors. Officials are hoping for alternatives such as a local option sales tax to close the divide.
Ed Barrett, Lewiston city administrator, and Peter Crichton, city manager in Auburn, told an audience at the Lewiston-Auburn Metropolitan Chamber of Commerce breakfast Thursday that decreased revenue-sharing and other issues are impacting service centers disproportionately.
They are looking to the Legislature for help, not just to increase the amount of revenue-sharing returned to locals, but also by considering other measures such as a local option sales tax.
Crichton said he would support a local option sales tax in Auburn if legislation under consideration in Augusta ultimately passes. There are two bills that would give municipalities the option of implementing a local sales tax.
Crichton said based on projections from the Maine Municipal Association, a 1 percent local sales tax would equal $7.6 million annually in Auburn.
“That would pay for the new high school,” he said Thursday, referring to the roughly $16 million in local costs proposed for a new Edward Little High School.
“I know for some of you this is something you don’t want to hear, or you’re resistant to, but we have to do things that are transformative,” he told the chamber audience. “We have to think about what can we do to make big change.”
Maine is among only 12 states that do not allow local option sales taxes, according to the Tax Foundation, a nonprofit, Washington, D.C.-based tax policy think tank.
During the presentation, Barrett said that following the recession in the late 2000s, the state set a precedent of using a larger portion of revenue -sharing to balance the state budget — about $466 million that was not sent back to municipalities. He said in that time frame, Lewiston went eight years without an increase in the operating budget and cut positions, but still saw steady tax rate increases.
He compared Lewiston’s current “full value” tax rate of $23.66 per $1,000 of assessed valuation to neighboring towns of Turner, Poland and Minot, which are hovering around $14.
“This has a distorting effect on people’s decisions and where they want to live, especially first-time homebuyers,” he said.
Barrett said a “full value” tax rate is “the state adjusted rate that takes into account our below market assessed value so that mill rates from various communities can be compared.”
Revenue-sharing was established in 1972 as a way for the state to help municipalities pay the cost of services such as schools, roads, fire and police departments, because state law prohibits municipalities from levying a local sales tax.
The state is supposed to provide 5 percent of sales, income and corporate taxes to municipalities, but lawmakers haven’t hit that level in more than a decade.
Under Gov. Paul LePage, the level was 2 percent.
According to Barrett, Gov. Janet Mills’ administration has called for that to be bumped to 2.5 percent, and then 3 percent the following year, which he called “a step in the right direction.”
Barrett said based on the revenue-sharing law, Lewiston should be getting $7 million this year, but is instead receiving $2.9 million.
Crichton told the chamber that Auburn is in a similar situation. He said that at the same time revenue-sharing has declined, state exemptions such as the Homestead exemption have increased, and municipalities are only being reimbursed for part of it, which skews the city’s overall valuation.
“It makes it very challenging for us to pay for the services we need to provide citizens,” he said.
Crichton said there are 71 communities in Maine that are considered service centers. As of 2017, those communities produced 80 percent of the retail sales in Maine and feature 77 percent of wage and salary jobs in the state. That means thousands of people commuting on city roads to get to work — roads that have to be plowed by local public works crews.
“All you have to do is drive up Court Street in Auburn every day and you see that issue,” he said, adding that as budget season progresses, “there are a lot of tough decisions that have to be made.”
The Maine Municipal Association estimates that if cities elect to add a 1 percent tax, Portland would take in the most, raising about $16.8 million. Bangor would be second, taking in $13.7 million, followed by South Portland with $10.6 million, Augusta with $8.3 million and Auburn with $7.6 million.
The proposed legislation before the taxation committee is set for a hearing March 27. According to Crichton, the legislation, if enacted, would require municipalities to hold a referendum to allow the local tax.
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