Message or meat ax? Palesky tax cap stirs deep debate

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Carol Palesky’s name won’t be on the November ballot.

Nonetheless, the grandmotherly Topsham accountant could be the most powerful – or, some say, dangerous – force in Maine politics this year, as voters consider the sweeping 1 percent property tax cap with which her name has become synonymous.

On its face, Question 1 is simple: “Do you want to limit property taxes to 1% of the assessed value of the property?”

The answer, most agree, is anything but simple.

To its supporters, the cap sends a stern message to state lawmakers who failed to adopt comprehensive tax reform in the last legislative session.

It provides a dose of “tough love” to local officials suffering from an “addiction to property taxes,” as charged in a recent campaign advertisement from the emphatically named group, Tax Cap Yes!

Most importantly, its author said, the cap provides long overdue relief to property owners – including longtime Mainers along the state’s high-priced southern coast who have struggled to keep pace with steadily climbing tax bills.

“The people want this,” Palesky said. “And I tell people it’s their last chance.”

Palesky’s prediction of an Election Day victory runs counter to recent polls showing growing opposition to the cap. Its critics appear to have effectively eroded the cap’s initial popularity as Election Day nears by painting a dire picture of everyday life in Maine’s towns and cities should it pass.

Even Palesky’s detractors concede the need for tax reform but, to use Gov. John Baldacci’s favorite euphemism, her plan offers a “meat ax” approach, they say.

Local police and fire departments would be slashed. Teachers would be fired. Garbage pickup would stop or be funded through fees, and snowplowing curtailed or concentrated on major roads. Art, music and drama classes would fall by the wayside to cut costs in the wake of an estimated 30 percent – or $600 million – reduction in revenue statewide.

“People need to know there is a cost to this proposal,” said Ed Barrett, the city manager in Bangor, one of the cities expected to be hardest hit by the cap. “That cost is people and services if it passes.”

Scared insolvent

“Scare tactics,” Palesky said of such predictions. Although conceding that jobs would be lost, she insists most of the savings can be found in bloated government operational budgets or superfluous town departments.

Furthermore, many towns, when estimating the costs, aren’t factoring in the increased school funding expected with the June passage of a referendum requiring the state to fund 55 percent of local education, she said.

Referendum or not, Bangor is one city not counting on extra money from the state next year, as lawmakers there attempt to close a $1 billion budget shortfall.

As a result, Bangor officials estimate the Paleksy cap would require $20 million in cuts from the $71 million city and school budget.

On the city side, officials say both the police and fire departments would be cut in half, and two fire substations closed. There would be no more school crossing guards, and the library’s budget – along with its hours of operation – would be cut in half. The city’s public transportation system would shut down.

For Bangor schools, which would see an estimated $10 million shortfall, 120 employees – including 60 classroom positions – would be eliminated, as would many after-school programs including athletics, according to a letter sent home to parents from the school superintendent.

The cap’s supporters, including former state Sen. Phil Harriman, are quick to note that school enrollment has declined nearly 13 percent over the past decade while spending has increased. Why, then, he asks, have property taxes, most of which are devoted to local schools, continued to rise?

Although one of the cap’s chief public advocates, Harriman, a Yarmouth businessman, still calls himself a “reluctant supporter” and acknowledges some of the bill’s shortcomings.

But those, he insists, can be fixed by the Legislature, which undoubtedly would tinker with the citizen-initiated bill should it pass on Nov. 2.

The tax cap, Harriman said, is a needed catalyst for change.

“If we all agree there’s a problem, we need to step forward and roll up our sleeves and work on implementing solutions,” he said.

Sending a message

From within the Lincoln Street home of Redington and Susette Robbins, there comes a mixed message about Bangor property taxes.

“That’s his sign,” Susette Robbins, 61, said of the “Tax Cap Yes!” placard that adorns the front yard.

Around the city, the signs – which feature a rather resolute-looking moose named “Had E. Nuff” – are scarce when compared to those with such slogans as “Save Our Schools” and “Protect Public Safety.”

For Susette Robbins, the prospect of reduced police and fire services is enough to oppose the measure.

“It sounds like they know what they’re talking about,” she said of the repeated warnings of cutbacks from Bangor city officials.

Opponents like Susette Robbins say sending a message to Bangor city hall should come from local residents, not voters in York or Aroostook counties, all of whom will vote on Question 1.

And those dissatisfied with state lawmakers are sending the wrong message if they vote for the cap, which will concentrate more power in Augusta.

“It’s an expensive way to get your point across,” said Dennis Bailey, spokesman for the anti-tax cap group Citizens United. “It would be better to do nothing than have such far-reaching consequences.”

But Susette Robbins’ 63-year-old husband, Redington, who put up the pro-cap sign on their lawn, said he planned to send a message anyway.

“I look at it as more of a wake-up call,” Redington Robbins III said of his concern with rising property taxes at his home, which the couple has owned for 20 years, and at his father’s property in the coastal town of Cushing in Knox County.

Indeed, Maine’s tax burden – including its property tax burden, per capita – is one of the highest in the nation. And nowhere have property values risen more rapidly than along Maine’s coastline.

Experts attribute the increase, in part, to a gradual turnover of the state’s coastal property to out-of-state buyers, who, by and large, pay top dollar for the prime real estate.

Opponents of the cap say it’s those vacation homeowners who stand to gain the most from Palesky’s plan, citing a Maine Bureau of Taxation estimate that out-of-staters pay 20 percent of all residential property taxes here.

The resulting statewide shortfall, estimated at $160 million, would be filled by Mainers, forced to pay fees to some local services, according to Bailey.

“They’re going to be laughing all the way to Connecticut,” he said.

The details

The Palesky plan is modeled in large part after California’s Proposition 13, the 1978 amendment to that state’s constitution that limited property taxes to $10 per $1,000 of assessed value.

The proposed Maine cap, as written, would roll back values to 1996-1997 levels, and limit assessment increases to 2 percent a year while the property’s ownership remains in a family.

If a property is sold to a buyer outside the family, it could then be assessed at market value.

Already, a Maine Supreme Judicial Court majority has advised that at least part of the proposal – its provisions for establishing the value of property – would be unlawful.

The plan also allows towns to impose a tax beyond the $10 cap to pay for existing debt approved by voters. If a town wants to impose other taxes – a power they do not now have – or borrow more money, two-thirds of voters must agree.

As it stands, Bangor’s debt, which, like several larger communities is approved by the City Council and not voters, would not qualify under the Palesky plan.

In an attempt to qualify, just in case the tax cap passes, Bangor voters will be asked to approve the city’s existing debt on the local Nov. 2 ballot.

The Palesky proposal’s history includes at least three petition drives, one of which led to a nine-month prison sentence for Palesky after she was convicted of forging dates on some petitions in 1996.

Eight months ago, however, Palesky and her Maine Taxpayer Action Network turned in enough valid signatures to place Question 1 on the ballot.

Although she has been a persistent, albeit controversial, crusader for tax reform, she objects to those who refer to the plan as the “Palesky tax cap,” a moniker crafted by opponents, she said.

“The people who don’t like it just want everyone to think there’s just one person behind the whole thing,” she said in a recent interview. “That’s simply not the case.”

The California tax cap had a similar advocate in Howard Jarvis, who appealed to frustrated voters in his growing state, where coastal homeowners were seeing dramatic increases in their property tax bills.

Twenty-six years and three failed repeal tries later, Proposition 13 has become politically untouchable.

“Take the warnings of doom and gloom with a huge grain of salt,” said Joe Coupal, president of the Howard Jarvis Taxpayers Association, in an April interview. “They predicted everything would close under Prop. 13. Everything stayed open.”

But they stayed open at a cost, say opponents, and only with a major tax shift, including the large-scale introduction of fee-based services and the appearance of new state and local taxes to compensate for the lost property tax revenue.

Sacramento to Saco

One need not travel across the country to see the potential impact of a tax cap. But one does need to travel about two hours south and 25 years back in time.

In 1979, voters in the southern Maine city of Saco passed a similar property tax cap, limiting collections to $3 million, and allowing for a 2 percent increase each year.

The cap was spawned by displeasure over a 21 percent jump in tax bills after a revaluation and required officials to cut about $650,000 from the budget.

Before it passed, there were familiar allegations of scare tactics on the part of city officials opposed to the cap. Supporters, and there were many, became convinced the city could make the cuts without affecting essential city services.

Linda Valentino, a member of the city’s finance committee at the time, kept a scrapbook of the city’s experiment with the tax cap, repealed by voters there after only 16 months on the books.

While a direct comparison of the details of Palesky’s proposal and the short-lived Saco plan is problematic, Valentino’s book offers some insight into how a small city would deal with an 18 percent reduction in revenue.

“Budget knives cut near the bone,” reads one newspaper headline in the well-worn album. Some others: “Saco workers waiting for axe to fall,” and “Saco now serves new dish: Sacrificial lamb.”

Seventeen teachers were fired, as were 10 police department employees. The city abandoned its ambulance service, which was replaced by a private crew with longer response times.

Sports at the middle school were eliminated and, to save on electric and heating bills, the city’s schools were closed for three weeks in February.

There are still some in town who contend the cap would have worked if given a chance. Among them is the city’s mayor at the time, J. Haley Booth, who said in an interview last week that he supports the Palesky initiative.

“I was a capper. I am a capper,” said Booth, who has since moved to nearby Lyman.

But Valentino needs to look no farther than her scrapbook to make her decision about Question 1.

“We tried it,” Valentino told those at a recent forum upstairs at Saco City Hall. “It did not work.”