MMA Project Helps Towns Communicate TABOR Impact

(from Maine Townsman, August/September 2006)
By Liz Chapman

The remote communities that ring the tiny town of Milo are stark reminders of how little some Maine towns have.

And because they have the least, these small towns — and hundreds more — stand to lose the most should the so-called “Taxpayer Bill of Rights” (TABOR) win voter approval on November 7.

With respect to municipal government, the rhetoric about out-of-control government spending and taxation rings flat in this rugged region of Piscataquis County, where poverty and penny-pinching have already taken a heavy toll on public roads, fire and rescue efforts and police protection.

What little tax dollars there are to spend is divvied up carefully and often after long community debates and planning. This summer, while tax activist Mary Adams pushes a new local and state spending cap, Milo town leaders are just happy to be upgrading the town’s only aerial ladder truck from a 1952 model to one made in 1982.

. . . hardly living high off the hog, or deep in the public trough, as TABOR supporters would have the public believe.

Town Manager Jane Jones, who says the region has been abandoned by the state, issued an open invitation to Adams to drive to Milo, talk to residents, take a look at the town budget and checkbook, and have at it.

“If Mary Adams or any other proponents of TABOR can show me how we could be more frugal, I would welcome it,” Jones said. “We won’t be going for muscle. We’re going to go for bone here, people. We don’t have anything left to cut” except essential services.

The 15-Town Project

Milo is one of 15 communities participating in a special project of Maine Municipal Association that hopes to illustrate to the public how financially thoughtful and thrifty local government leaders have been in providing essential services on a shoestring.

The study also will show how innovative towns have been in trying to meet their federal and state mandates while still providing the services that local residents demand. It will show that local voters already make the final decisions on town spending and taxes and that sometimes they say “yes” and sometimes they don’t.

Perhaps most important, our goal is to put a human face on this latest tax debate in Maine and help voters imagine what their communities might look like today had the TABOR spending limits been in force for the past 10 years.

Municipal officials will help their local residents better understand the price that comes with TABOR. Even a novice town meeting voter knows taxes can be cut and spending can be deferred – but at a cost.

MMA’s 15-Town Project will give those participating communities a chance to show how their towns might be different today: Would the library and recreation programs be cut? Will the town office be able to stay open five days a week? Would curbside trash pickup be eliminated?

The 15 communities also have agreed to take a look ahead to next year and give residents their best thinking on what further changes might result if TABOR passes in November.

Bad for Municipalities and Schools

The TABOR proposal has some very disturbing and harsh effects on local government, including:

• It establishes a municipal spending limit equal to the most restrictive of two formulas: the rate of inflation adjusted by the change in town population, or the percentage change in assessed value.

A serious flaw with using population change in the formula is the inaccuracy of population data collected during the years between the 10-year federal census. Without major changes (and expense) in the process for data collection, annual population estimates, as determined by the State, have been and will continue to be unreliable and inaccurate, particularly at the town level. Moreover, using change in population in a spending limit formula is very harsh on the small, rural towns in Maine that are actually losing population.

Using CPI (Consumer Price Index) in the spending limit formula is also troublesome because of the year-to-year inflation swings. A more predictable and appropriate growth factor is “total personal income” which is used in the LD 1 spending limit calculation. Total personal income has a direct relationship to tax burden, whereas CPI does not.

Change in assessed value is another poorly thought out component of a spending limit formula. Anyone familiar with municipal assessing in Maine knows that the valuation change from year-to-year, for most communities, is very small, unless a revaluation is conducted or factoring of values is done. With the new, going forward exemption of personal property from taxation, some communities could see a lower assessed value from one year to the next.

• It sets a spending limit for schools based on inflation plus student enrollment.

Schools could lose even more than municipal governments under TABOR, chiefly because many Maine schools are losing students and those declining school enrollment figures could push school budgets much lower. TABOR could be the beginning of the end for many small schools in Maine. K-12 education costs consume an average of 60 percent of municipal budgets in Maine. In many of the smaller, rural communities, education represents 80 percent of all local spending.

• It creates an expensive and unnecessary override process that begins with a two-thirds approval by the municipality’s legislative body (town meeting for most) followed by a town-wide referendum. The override would be required for any level of spending that exceeds the formula-driven spending limit, or for any new or expanded taxes or fees, or for an increase in the tax levy (mill rate).

Adams acknowledged in a recent interview with the TOWNSMAN that the overarching goal of TABOR is to make it almost impossible to obtain the two-thirds supermajority, thereby eliminating the need for a community-wide override vote. But more importantly to anti-government activists like Adams, TABOR would finally allow the anti-tax minorities to get their way, not by winning but simply by blocking the majority will of the people.

The referendum vote is an expensive and unnecessary part of the override process. It is unnecessary because towns can choose to have a referendum budget adoption process on their own, and several towns have done this. If every tax rate change and every user fee increase (e.g., a $1 increase in the building permit fee) is subject to a referendum override, this process could become very costly and time consuming.

• It creates an irrational and expensive process for notifying voters of a pending referendum vote.

Perhaps the most irrational aspect of TABOR’s override process is a requirement for a special mailing to every registered voter prior to a referendum vote on any proposed tax or user fee increase. The process is made more cumbersome with the requirement for a 500 (up to) word essay on both sides of a tax or fee increase question which would be included in the mailing to registered voters, at least 30 days before the election.

But again, as Adams herself noted, the goal is to stop the spending increases with the first vote, eliminating the need for voters at large to have their say.

For more specific information on the nitty-gritty language of Maine’s proposed TABOR law, please visit the MMA website at Information and news about TABOR are updated frequently and include the actual initiative language, a legal interpretation of the measure and a town-by-town listing showing the projected financial impact of TABOR on Maine’s municipalities and schools.

You also will find a link to the website for the political action committee (PAC) Citizens United to Protect our Public Safety, Schools and Communities. MMA is one of several organizations supporting the PAC. Citizens United is raising money for commercial advertising and holding events across the state to rally voters against the TABOR measure. MMA is independently providing information to its municipal members about the impacts of TABOR.

The price of TABOR

In undertaking the 15-Town Project, the MMA will be able to create a model, or workbook, for all municipalities to use as a guide in crunching your own numbers and illustrating to your own constituents what the community might look like today had it operated under the spending restraints contained in the TABOR referendum bill.

The workbook also will contain practical help in getting local and regional media interested in TABOR and how it will affect individual towns.

The workbook also will include some tips on how to effectively communicate directly with your local voters; a pithy, simplified explanation of the major elements of the proposed TABOR law; and a Q&A of the most frequently asked questions about the measure.

MMA also can provide one-on-one follow-up help to communities that need or want more assistance in their public education efforts in the weeks leading up to the November 7 vote.

The workbooks should be available to all municipalities by early to mid-September.

The 10-year look-back period is not arbitrary. The Maine Heritage Policy Center, which authored the Maine TABOR bill, has widely boasted that had TABOR been in effect during the past decade, Mainers would have saved a total of $450 million in state taxes.

That might sound great to those Mainers who pay only half-attention, or those who buy the TABOR argument sight unseen. But in using the MHPC’s own benchmark, the MMA project will show the flip side of the coin, which TABOR supporters like to ignore: that $450 million in tax savings also represents $450 million in fewer public services, deferred infrastructure work, investment and long-term planning.

“The future of Maine is the last thing (TABOR supporters) are worried about,” Jones said.

The 15 municipalities were selected for their diversity in geography, economy, size and service demands. Managers and other municipal leaders in every town interviewed to date for the project share many of the same concerns about the potential TABOR impact. But they also have their own special concerns as they relate to their own individual communities.

Richard Metivier, finance director for the City of Lewiston, is concerned that TABOR will not allow communities to capture the natural growth in the property tax base and property tax revenue which is imperative to covering annual inflation costs and investing in the city while still stabilizing the property tax rate.

Lewiston, long beleaguered for its high tax rate, has actually kept the mill rate steady for the past 10 years.

In Milo, town officials must worry about all of southeastern Piscataquis County for fire, police and rescue services. The closest ambulance service would take up to 90 minutes to get to the farthest corner of the county, Jones said, compared to a 20-minute response time by the Milo rescue teams.

Realizing that public safety is a top municipal priority, TABOR would require the town to virtually close its doors except for winter plowing and public safety services, Jones said.

In Bucksport, meanwhile, Town Manager Roger Raymond is unhappy with just the thought that his town council might not be allowed to maintain a healthy surplus, which is used for large one-time expenses, emergencies and property tax rate stabilization in the coastal mill town.

Raymond said that Bucksport saves interest because of its surplus, which also is used as cash flow in-between property tax collections, eliminating the Tax Anticipation Note (TAN) that was so common in the past.

Moreover, the town earned about $50,000 on its surplus last year – all with the full knowledge and approval of town meeting voters.

“I know TABOR can be defeated in Bucksport. What I’m worried about is statewide,” Raymond said.

Bean Counting

The MMA project hinges on our best estimates on the impact of TABOR, based on legal and other reviews done for or by the MMA staff. We are taking care not to be alarmists and to clearly note that our numbers are only estimates based on the unquestionably complicated TABOR formulas.

Kate Dufour, who does legislative financial analyses for MMA, has computed each community’s projected allowable spending increase (or decrease) for the most recently completed fiscal year, to be used as a guide in estimating the TABOR impact on future municipal budgets. Dufour has also done some school impact analysis. These data analyses and much more about TABOR are available on the MMA website.

Many local officials are stumped over why the Maine TABOR bill even includes municipal government. Of the 24 states that considered TABOR-type legislation last year (as reported in last month’s TOWNSMAN), only the Maine and Nevada TABOR bills target local government. All others take aim squarely and solely at state spending and taxation.

“I feel if we are doing our jobs properly, then we will produce a budget that will be approved at town meeting because we are trying to be in tune with the people we serve,” said Wilton Town Manager Peter Nielsen, whose town is included in the special MMA project.

“This business just gets harder and harder every year, with more expectations and more constraints,” Nielsen said. “A lot of people are struggling. I try to remember those people when I put my budget together.”