Bar Harbor plans for worst if tax cap is approved

BAR HARBOR – The town could eliminate its annual road maintenance program and all reserve accounts for major purchases and still have to increase fees by more than $1 million a year to make up for lost property tax revenue should the tax cap referendum pass on Nov. 2.

And that doesn’t include deep service cuts at the Conners-Emerson Elementary School, which would split a $4 million budget deficit with the town if the so-called Palesky tax cap referendum passes.

Although even tax cap supporters agree a key provision of the referendum is unconstitutional, Town Manager Dana Reed outlined for town councilors last week the impact the referendum would have as it’s now written.

“If we’re counting on the Legislature to fix it or throw it out,” Reed said of the pending referendum, “I think that’s a real joke. They just don’t get it in Augusta, so I definitely would not depend on them. I’m not going to figure it’s going to happen.”

Tax cap supporters have accused municipal officials around the state of using scare tactics in an effort to defeat the referendum, which they claim is the only way to get property taxes in Maine under control.

The tax cap proposal would roll back property values to 1996 levels, but assess homes that were bought or built after that year at full market value.

Earlier this year, four of the seven justices of the Maine Supreme Judicial Court, in an advisory opinion only, said the rollback is unconstitutional because it does not allow for the fair and equalized assessment of property taxes.

The Maine attorney general has made the same conclusion.

Another major component of the referendum would set a limit on the amount of money a municipality could raise to 10 mills, or $10 per $1,000 in property value.

If the rollback is indeed thrown out, Bar Harbor could stay below the 10-mill cap based on the town’s full market value, which would spare the town and its elementary school a massive loss of revenue but also would rob property owners of tax relief.

Bar Harbor will raise $10 million in property taxes this fiscal year, on a total budget of $14.6 million. Nearly 70 percent of the budget is spent for elementary and high school education and county government.

Reed said he was nervous that only four of the justices opined in the advisory ruling, arguing the court could rule differently once the remaining three justices weigh in on the matter.

Even under the best-case scenario, Reed said, the town likely would lose what relatively meager state funding it gets for education and general revenue sharing, assuming the state would try to offset some of the property tax loss.

Reed listed $900,000 in town budget cuts and $1.1 million in increased fees that would be required under the “as written” or worst-case Palesky impact.

The new fees could include raising $500,000 by assessing a square-foot charge for annual fire protection and another $500,000 by charging a $2.50-per-bag fee for trash disposal.

Reed said the Palesky proposal, which has been dubbed by municipal officials as a “meat ax approach,” should be called the Pulaski proposal instead, naming it for a kind of ax used in firefighting.

Councilor Matt Horton called the Palesky measure “an affront to the town meeting form of government – one of the most fundamental aspects of democracy in New England.”

Reed noted that future proposals to raise local taxes or fees would require a two-thirds affirmative vote under the Palesky plan, which Reed said could lead to “tyranny by the minority.”

Ivan Rasmussen, who serves on several town committees, noted that the Palesky referendum needs only a simple majority to pass, yet it sets a higher standard for future local elections.