Waterfront property owners may not like it, but they’re accustomed to paying higher taxes than their inland counterparts. But when waterfront residents in Portland received revaluation notices from the city last month, their collective gasp was audible throughout Casco Bay. Many saw their valuations double and in some cases triple.
Increases like that are adding fuel to a referendum proposal by Maine Taxpayers Action Network, led by Topsham resident Carol Palesky. Generically referred to as the “Palesky Proposal,” its major features are to scale property values back to 1996 levels, then cap property taxes at one percent of that. Depending on when the Legislature schedules the vote, it will appear either June 8 (Primary Election Day) or Nov. 2 (General Election Day). With a week to go before its normal mid-April adjournment, the Legislature had yet to address the question. If the Palesky proposal passes, it will become effective in the fiscal years beginning in 2005.
Tax angst is in the air in Maine these days, but so far the Palesky proposal is the major offering to do something about it. A competing measure offered by the Legislature last November got fewer votes than Palesky’s proposal.
Critics of the tax cap proposal contend that its draconian cuts would have devastating effects on municipal and state budgets. But with revaluations and property taxes coming fresh on the heels of town meetings and local budget wrangling, the tax cap’s changes have improved.
“It’s getting a little scary,” said State Rep. Hannah Pingree (D-North Haven) interviewed in the last week of the legislative session. “People are getting panicked. If there is one session we have to deal with property taxes, it’s this one. The Legislature can’t leave [Augusta] without doing something. If it doesn’t, we’re going to be in major trouble.”
Portland island communities are different from those on Swan’s Island, Vinalhaven, or Long island. “The City Of Portland’s budget is so big and they rely on us to help balance the budget,” says Cliff Islander Roger Berle. “We feel more helpless than the town meeting communities,” he added, referring to the fact that most Casco Bay islands are part of larger mainland towns and don’t have their own town meetings. Berle is bracing for a lot of property turnover as a result of the revaluation.
Island and coastal communities with many summer homes tend to have lower mil rates; for some it is already below 10, so the one percent cap won’t have an effect. (A one percent cap translates to a mil rate of 10, that is, a tax of $10 for every $1,000 of property valuation.)
Selectman Dexter Lee of Swan’s Island says that seasonal homeowners stand to benefit most from the Palesky proposal. “Their property taxes are paying for services we residents use year round,” says Lee. “The dirty little secret is that the Palesky proposal will hurt residents more than the summer people.”
On North Haven, Rep. Pingree estimates non-residents account for 70 to 80 percent of the tax base. Cranberry Isle selectman Richard Beal offers similar estimates. “Cranberry has 128 residents and there are 414 properties. Very little of the taxes are paid by citizens who live here. Most – about 80-85 percent – are paid by people who don’t live here,” says Beal. But he adds, “If we were limited to a one percent tax cap, the voters here aren’t afraid to go out and bond what we want.” He cites a parking lot for Cranberry Islanders in Manset, and the fire department – “the first time in 173 years the town had assumed debt.”
But low mil rates won’t get islands off the hook if the Palesky proposal passes. There will be major municipal impacts statewide. For example, according to the Maine Municipal Association, Rockland could lose half its budget.
With the big budgets of Rockland, Portland, Lewiston and other service centers hemorrhaging because of lost revenues, Pingree predicts that towns will be looking to the state for aid. “It’ll make it hard to operate the schools and collect the trash,” she says. “You take the money away, towns will come to the Legislature asking for revenue. How will the state come up with it? We just spent a lot of this session reducing the budget.”
The state will be trimming too, and that could spell trouble for coastal towns. “There are a lot of state services that islanders rely on,” says Pingree, citing the MaineCare public health program, pharmacy and children’s health care programs.
State ferry service is 42 percent state-subsidized. Many town wharves are maintained with state funds as well. “A property tax that drastically cuts over a billion dollars in statewide tax revenue means that the state can’t provide direct services, like wharf maintenance, or the hospital at Pen Bay [Medical Center in Rockport],” says Kit St. John of the Maine Center for Economic Policy.
St. John, a vocal critic of the Palesky proposal, predicts that if state infrastructure on the mainland is severely impacted, the ripple effects will surely reach islands. “The state will try to step in and fill some of the gap, but will be unable to make up the difference,” says St. John. “The Palesky proposal is colossally poorly informed and ignorant of what state government does. If it sounds too good to be true, it is.”
The tax cap proposal is lifted wholesale from California’s Proposition 13, which many blame for that state’s bankruptcy. When boom years ended, revenues collapsed and so did the economy. Gov. Arnold Schwarzenegger is trying to raise $15 million in bonds this year to fill the gap. “That’s the model we’re being offered – a California solution with a Maine economy,” says St. John.
Maine Attorney General Steve Rowe has weighed in, saying he believes elements of Palesky’s initiative such as the rollback to 1996 valuations are unconstitutional. Palesky has offered it as a statute, not as a constitutional amendment. Typically, changes to the tax code require such an amendment.
The Legislature might yet adopt a measure to compete against the Palesky proposal in November. What shape that will take is anyone’s guess, but frustrated voters are feeling rebellious, and are threatening to “send them a message” by approving the one percent cap. Whether Legislators can roll up their sleeves and come up with a better solution remains to be seen. And time is running out.