UNDER THE CAP

Legislators would have read the bill for themselves, but when they heard the leader behind the 1 percent tax cap initiative Monday they must have wondered whether they were all talking about the same legislation. Though they heard assurances that LD 1893 would cause barely a ripple of change in property-tax collections, they should know this is deceptive.

Carol Palesky testified before the Taxation Committee that her plan had been misreported. The initiative did not only hold property taxes to 1 percent of assessed value but also allowed for debt service, “which is going to bring the average up to $17 per $1,000,” or 17 mills. There are two ways to look at this conclusion, neither especially flattering to the tax cap.

The first is that the debt level assumed by Ms. Palesky is correct and the average mill rate in Maine municipalities would be 17 if her plan were to pass. The current average mill rate is 18, according to the Maine Municipal Association, so the average drop in property taxes under the plan would be slight. Debt, of course, carries interest payments, and if communities really do amass 7 mills of debt, they would be paying plenty of interest with their property tax dollars, leaving less money for services. This means that property taxpayers would get less for approximately the same price, which most people might think is a poor deal.

The other way to look at her statement is that it is wrong. Debt levels won’t be anything like 7 mills because LD 1893 requires a two-thirds vote of the public to support new debt, which is similar to saying it won’t happen. And it is worse than that because the only existing debt that can be added to the 1 percent cap is that debt approved by voters, but many towns do not put questions of debt out to voters; town and city councils debate and approve or reject these bonds. None of that debt, according to the legislation, could raise the cap.

In any event, Bangor’s current debt level is 3.1 mills, according to city Finance Director Debbie Cyr. In Portland, the debt level is around 2 mills. Presque Isle’s debt, says Finance Director Spike Savage, is less than 1 mill. These cities, all service centers, tend to carry more debt than municipalities on average. According to a survey by MMA, the average debt load for communities under 10,000 population is about three-fourths of 1 mill; for communities larger than 10,000, it is about 2 mills. Unless voters approve tripling or quadrupling of the local debt, they aren’t going to come near the rate asserted in Ms. Palesky’s comments to the Legislature.

It is disingenuous to argue that Maine property taxes are painfully high and at the same time claim that a dramatic step such as a 1 percent cap – even with a two-thirds voter override for new debt – would do anything but lower the level of collections substantially. It would, with harmful effect in almost all communities.