Board opposes change to homestead exemption

PRESQUE ISLE – Citing major negative effects on local farmers and potato industry businesses, officials with the Maine Potato Board this week opposed the homestead exemption portion of state legislation known as LD 1.

While they did not take a stance on the rest of the newly approved legislation, officials did say during their Wednesday board meeting that the changes to the homestead exemption outlined in the bill would deal a significant blow to the farming and business communities.

One measure within LD 1, a state plan to provide immediate property tax relief, changes the state’s homestead exemption program by allowing up to a $13,000 tax exemption on a single home. Prior to the change, eligible homeowners could exempt only $7,000 from their tax bill.

The change that worries the Maine Potato Board – as well as the Aroostook Municipal Association which brought the issue to the industry group – is that the state will reimburse municipalities for only half of each claimed exemption, or $6,500. Under the old homestead program, the state reimbursed towns for 100 percent of exemptions. The rest of the money now must be made up within the municipality, most likely by nonhomestead property owners such as farmers and businesses, town officials claim.

The resulting tax shift from residential homeowners onto nonexempt properties was referred to by one town official as “shift and shaft budgeting.”

State officials, however, reiterate that LD 1 will provide immediate property tax relief for Mainers. One legislator also pointed out that the bill in its final form received support from the business-oriented Maine State Chamber of Commerce.

Maine Potato Board members listened to a presentation on the effects of LD 1 by Caribou City Manager Stephen Buck prior to making their determination.

For Caribou, Buck explained, the homestead change will bring about an estimated 1.25 mill shift, or about $329,000, away from homeowners and onto farm and business owners. The average farmer, he estimated, will be paying an extra $4,000 because of the shift.

Each community will be affected slightly differently because of its valuation and the number of homestead exemptions it has, but Buck said no Aroostook County town he knows of has escaped a mill rate increase because of the change.

“It’s an outrage that the state chose to shift this [this way],” Buck said. “All those impacted by the shift should be contacting their legislators.”

Buck pointed out that the legislation already has been approved but is not scheduled to go into effect until September. He and other municipal officials are hoping that major opposition, even this late in the game, will help to effect some changes in the legislation.

“No change can or will occur unless you adamantly communicate your feelings on the issue,” Buck said to the board.

After Buck’s presentation, the board asked several questions, including whether the $350 million in new education funding, another change expected under LD 1, will balance out the loss from the homestead exemption.

“We didn’t come out ahead of the game,” Buck said, indicating the same has been true for many other northern Maine municipalities. “The theory hasn’t met the application; when the rubber hits the road, we’re not seeing any financial benefit.”

And even if communities lost in homestead exemption reimbursements but gained back in school subsidies, “you’ve still shifted the burden from the homeowner to the business community.”

Board discussion on opposing the bill was fairly brief. Board member Andrew Yaeger said he thought the board needed to express its non-support of the proposal as it stands now. President Donovan Todd III said by the looks of the legislation, “we’re all going to have to stand up at some point,” it was just a matter of who would stand up first and get the ball rolling.

Yaeger moved that the board state its opposition to the homestead exemption portion of LD 1. The motion passed unanimously.

MPB Executive Director Don Flannery asked Buck for some figures and examples to bring to state officials in Augusta about how farmers and businesses really would be affected by LD 1.