Excise tax dip hits towns

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PITTSFIELD – As a municipal rule of thumb, excise taxes generally dip in the first few months of every year. But they often rebound by May when people’s wallets have recovered from the holiday season, and many consumers have received their income tax refunds and are buying new cars, snowmobiles, boats or campers.

This year, however, many towns are experiencing a downward trend in excise taxes, with no rebound in sight and excise revenues far below predicted levels, particularly in rural communities where large fleets of vehicles are not housed and registered.

“We’d like to see people out there buying new cars, but we understand they are thinking about paying for heating oil for their homes,” Fairfield Town Manager Paul Blanchette said.

Fairfield’s excise tax revenues at this same time last year were up 3 percent. As of the end of this August, they had dropped 4 percent.

In coastal Camden, excise revenues dropped by $33,000, from $866,533 in 2006-07 to $833,969 in 2007-08, according to tax collector Theresa Butler.

And in Pittsfield, Town Manager Kathryn Ruth told town councilors this week, “I haven’t seen this kind of slump since 1991.” Pittsfield’s excise tax revenues are already more than $19,000 below what had been estimated for this year.

Excise tax levels are barometers of overall economic health that have implications for local taxpayers, since in many towns and cities, excise taxes are the second-largest revenue source after property taxes.

“Maine municipalities are not immune to the problems being discussed in Washington today,” Michael Starn of the Maine Municipal Association said recently. “When consumers are fearful of the economy and stop spending, sales tax goes down, excise tax goes down. It indicates an economy in trouble.”

A typical example is the city of Rockland. Its excise tax collections, based on a July-to-June fiscal year, dropped by $22,000. Tax collector Susan St. Clair said the city collected $940,000 in excise taxes in fiscal year 2007, while it collected $918,000 this fiscal year.

“Maine communities are really in a difficult position, and they will be facing some critical issues in the coming year,” Starn said. “Traditionally, these taxes are used for road improvements and both state and local governments already have serious infrastructure problems. It’s a double whammy: excise taxes are down and the costs of paving and road maintenance have gone through the roof.”

Pittsfield’s manager said that excise tax “is the largest revenue source outside of the property tax and because our excise tax generally comes in around $580,000 a year, it actually lowers the mill rate by 3.8 mills.”

Ruth said she hasn’t seen the excises taxes fail to rebound like this since the early 1990s.

“At that time, many communities had to significantly cut budgets to compensate,” she said. “We have tried to reduce spending as best as possible, which has been difficult with overdrafts in gas, diesel and heating oil. In the end, it is a matter of balancing the municipal budget just like a household has to do when costs rise and the income does not come in. We are cutting spending.”

While small rural communities appear to be losing revenue, some larger cities, such as Brewer and Bangor, are maintaining the same level of collection as last year, rather than gaining.

In Bangor, City Manager Ed Barrett said, “We have not seen any dramatic changes in collections in recent years.” Since 1995, the excise tax has nearly doubled in Bangor, from $2.7 million to $4.6 million.

“While we are not anticipating any significant growth in excise tax,” Barrett said, “we believe that this year will end at about the same amount as the last several years, and we anticipate that we will meet our revenue number. Given general economic conditions, we are continuing to monitor our collections – and the situation – on a monthly basis.”

David Little, treasurer and tax collector for the city of Bangor, said excise taxes are the city’s second-largest revenue source, and despite the recent economic downturn, excise taxes in Bangor continue on an even keel.

“We haven’t seen a drop. Ours have been coming in pretty consistently,” Little said, adding that the city registered a number of fleet vehicles, including those belonging to several rental car companies – most of which operate out of Bangor International Airport – and about nine other large corporations, including Bangor Hydro-Electric Co., Lynch Logistics and Cyr Bus Line.

In Bangor, the city registers about 25,000 vehicles annually. “It’s pretty consistent,” he said.

Little noted, however, that collections could plunge at any time. “We’re expecting one of these years it’s going to drop,” he said.

Brewer Finance Director Karen Fussell said the numbers also haven’t changed in her city for several years.

“We used to see growth each year,” she said. “We’re optimistic, however, that we won’t lose too much ground.”

In Machias, even careful planning couldn’t stop a shortfall. In 2006, excise revenue was estimated at $247,600; in 2007 that dropped to $240,000.

“We brought it back even further this year to $225,300,” Town Clerk Sandra Clifton said. “We knew people were buying smaller cars or holding onto their older cars, trying to save money.” Although totals for the year were not available, Clifton said excise taxes collected from July to September illustrated a serious dip.

“From July 1 to Sept. 10 this year, we collected $49,681,” she said. “Last year, for the same time period, we collected $54,964. This is not good.”

Mainers already drive old cars. According to the Maine Bureau of Motor Vehicles, 68 percent of the vehicles registered in the state are six years old or older, which is the bottom level for excise tax rates.

The excise tax was enacted as a Maine law in 1925. At that time, the Legislature decided the fairest tax assessment would be based on what the manufacturer suggests a vehicle sells for, according to the Maine Revenue Services.

Maine Municipal Association does not keep monthly figures on excise collection rates, Starn said. “We don’t know what each individual community is facing, but we are hearing there is big trouble everywhere.”

BDN reporters Dawn Gagnon, Diana Graettinger and George Chappell contributed to this story.

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