LD 1660 affects real people

For at least the third successive year, Gov. John Baldacci and several legislators are pushing to exempt much of the personal property tax that municipalities throughout the state rely on to support local services. Generally, personal property is classified as property with value but not considered real estate.

Creating exemptions to eligible businesses means different things to different communities. If you live in a community that is only moderately affected by this measure, the losses will me moderate. If you live in a community with a heavy industrial or commercial base, the losses will be catastrophic.

The exclusion of this tax is being perceived by the governor and some legislative leaders as being the salvation of Maine’s economy, the cost of which will be placed on the back of Maine citizens. While businesses like this idea, their real concerns are focused on energy and regulatory stability.

This effort represents a tax shift mostly from large out-of-state corporations to our communities, and it will have a powerfully negative impact on the local government tax base. The personal property tax exemption this bill would create is really a way to get the state out of a very unpopular direct business reimbursement program known as BETR (Business Equipment Tax Reimbursement), which will cost this year close to $80 million. The BETR program encourages eligible businesses to submit vouchers to the state for reimbursement of the local tax paid

on new equipment investments.

The adoption of LD 1660 will place more tax burden on the residents of our communities.

What is structurally wrong wit this concept is that many cities and towns have also reimbursed these same companies for some or all of their taxes on new investments through the Tax Increment Financing Program called TIFs. With this combination, some businesses received as a rebate an amount of money that exceeded the taxes they paid on the new value in the first place. The provisions of LD 1660 does away with the BETR program and exempts qualified businesses from paying any local tax on future equipment enhancements as well as any business personal property put in place since 1995.

The TIF program that many communities have used to attract and nurture business development is neutralized. Most of the benefit inherent of the TIF program will, essentially, go away.

Using current tax policy as it was intended, the town of Skowhegan committed revenue from a TIF arrangement with Sappi Fine Paper to make bond payments for a sewer line extension and for the development of an industrial park. But if payments for a sewer line extension and for the development of an industrial park.

But if LD 1660 becomes law no future payments from the TIF are possible. The town will have to add $200,000 to its operating budget to make the debt payments.

Then how do the affected Maine communities recoup their losses as a result of this bill? There is a provision in Maine’s Constitution that calls for the state to reimburse municipalities not less than 50 percent of revenue losses that result from tax exemptions enacted by the Legislature. Any amount reimbursed of 50 percent is at the discretion of the Legislature now and in the future.

But we cannot depend on future appropriations to keep communities whole from the losses anticipated from this legislation.

What bothers many municipal officials is that we have been left out of discussions on this issue from the start of this ill-conceived idea. Offers were made to jointly study this issue only to have them rejected. A few weeks ago, at the last minute, Maine Municipal

Association was asked to assemble a working group of local officials to offer input concerning this issue.

We look at this 11th-hour invitation as a cursory attempt to pacify municipal officials. The state does not have a long-term tax strategy so how could nine municipal officials develop a plan to replace millions in lost revenues in three or four meetings.

Compromise is complicated and it cannot happen overnight. Neither the governor nor those legislative leaders seem to be interested in a trade-off. If this exemption is so important to the state, then why not engage in a dialogue so meaningful results can occur.

An appropriate conversation could include the state assuming some other governmental responsibility that is currently supported by local taxes. As an example, should the state take over the responsibility of operating the county jails, then the resultant savings to municipalities may make up the difference of lost personal property tax revenue.

Additional negative impacts will result if this bill is passed. Besides the direct tax losses that towns like Jay, Livermore Falls, Lincoln, Madison, Millinocket, Rumford, Skowhegan, Madawaska, Baileyville, Westbrook and others will experience, the base cumulative property value of these towns will gradually decrease.

Contributions to school districts and county government are predicated on a state established base property value of each community. When one community looses value, a shift occurs in the other communities to compensate for that loss. As Skowhegan’s tax-base decreases, Skowhegan’s contributions to schools will also decrease.

Other SAD 54 communities will pay a larger amount for education to compensate for that loss. The same applies at the county level where smaller rural communities will pay a greater share of county government costs.

Facing a recently approved and expensive bond issue to replace a century-old jail, residents of Somerset County will not look favorably upon yet another tax burden or the state leaders who are responsible for bringing it about.

LD 1660 is not a municipal issue. Cities and towns do not pay taxes. Cities and towns collect taxes to support services for their citizens.

This bill affects real people – families, single people, the young and the elderly will all bear some of the burden of this exemption. There is no way around this fact and we know that we cannot take our future on a promise of full reimbursement by the state.

Phillip M. Tarr is the town manager of Skowhegan.