Bangor Savings Bank opposes ballot Question 1, the proposed Palesky tax cap, and urges all Maine citizens to look closely at the facts surrounding the proposal in deciding how to vote on this important measure.

Bangor Savings Bank does not frequently take a position on political matters, but our trustees have voted to take a public position on this issue because it has deep economic ramifications and would have a critical impact on the future of our communities and our state. We believe that responsible institutions and companies have an obligation to speak out in the public debate on matters of grave public concern. As a Maine bank, we feel this obligation even more deeply to the communities we serve.

We recognize that our employees, customers and neighbors have many different views on the tax cap referendum, and we do not presume to counsel others on how to cast their votes. However, we do feel it necessary to explain how we perceive the issue and its ramifications in arriving at our own position.

As a Maine bank that serves thousands of other Maine businesses and a broad cross-section of citizens, we understand and share the prevailing frustration many have with Maine’s high tax burden and challenging business climate. We support true tax reform to make Maine more competitive in retaining and attracting businesses, and to protect our neighbors struggling to stay in their homes in the face of escalating property tax bills.

The seriously flawed Palesky tax cap proposal will not provide the kind of relief Maine’s citizens and businesses want, expect and need. The Palesky tax cap would cut the property tax revenues for many local towns and schools by 30 percent or more. Such deep cuts would reduce vital services such as public safety and have severe negative consequences for public education, critical to our efforts to attract new business to the state and provide skilled workers for both new and existing businesses. These cuts would also affect important infrastructure and local economic development programs that are desperately needed to improve Maine’s prospects for economic growth.

Moreover, the cuts in tax bills under the Palesky proposal, while large, will not necessarily help those most in need of relief. Many communities in the state will see no cuts at all because they are already under the cap; the 30 percent of Maine residents that are renters will likely see minimal relief. In contrast, about 20 percent of the tax cut benefit will flow to out-of-state owners of second homes.

While imposing deep cuts at the local level, the Palesky proposal would do nothing to cap taxes at the state level. There is no guarantee that the state would step in to alleviate some of the adverse effects of the proposal, and if it did, that would result in a

tax shift rather than a tax cut.

Total tax burden could continue to rise, and there is no assurance that the new taxes or fees that are chosen would be more rational for Maine’s taxpayers and our economy than what exists today.

Relying on the state to make up for the loss of local services could fundamentally alter the character of our local communities by creating an unprecedented shift from local self-governance and local control to dependence on Augusta. Such a shift would greatly reduce the authority and responsibility that resides today at the local level, where many services are provided with a higher degree of accountability and frugality.

California’s 25-year-old Proposition 13, the nation’s most strict property tax cap upon which the Palesky proposal is modeled, has had mixed results at best. The state has seen the quality of its public education drop dramatically, seen major increases in state tax revenues (bigger tax increases than even Maine over the last decade), and has one of the worst business climates in the country. What a change for a state that has the seventh-largest economy in the world. Could Maine afford such a drastic downward spiral?

Ultimately, tax reform should be merely one piece in a set of focused, long-term strategies to promote Maine’s economic development. As a state, we must do better in articulating and sticking with this economic development strategy, and ensure that tax reform and tax reduction support it rather than undermine it.

It would be irresponsible to criticize the Palesky proposal without offering any ideas for a realistic solution. While we are not tax experts and don’t pretend to have all the answers, in our view a real solution must be built around some basic, common-sense principles: It must protect truly essential local and educational services; it must provide real tax relief rather than tax shifting, so it must address all levels of government; it should target the tax relief to the communities and households that struggle most with the property tax burden; and the resulting cuts in expenditures must continue to prioritize investments in the infrastructure and other tools necessary for sustainable economic growth. Capping the rate of spending growth rather than rolling back taxes to a completely unrealistic level may be a key element.

We are confident that Maine citizens understand that there are no quick fixes when dealing with very difficult, complex problems. We encourage all Maine voters to take the time to study this issue in deciding how to cast this very important vote. And we urge state leaders to set aside their differences to come together around common-sense fiscal reform and a focused economic development strategy.

P. James Dowe Jr. is president and chief executive officer of Bangor Savings Bank.