Municipal Bulletin Board
(from the April 2006 Maine Townsman)

LD 1 and the Property Growth Factor Calculation

The calculation of the Property Growth Factor under LD 1’s municipal spending limitation system can be confusing. The Homestead Exemption changes in 2005 have added to this confusion.

Municipal officials who take the “shortcut” method of determining their “new value” (subtracting the 4-1-04 municipal value from the 4-1-05 municipal value and calling the difference the town’s “new value”) would be underestimating their “new value” total unless they have accounted for the changes in the Homestead Exemption. As part of the LD 1 legislation last year, the Homestead Exemption was increased to $13,000 with only $6,500 of that tax loss being reimbursed to the towns.

The simplest way of dealing with this “new value” calculation problem is to add the unreimbursed Homestead Exemption amount onto the 2005 Municipal Valuation before subtracting the 2004 Municipal Valuation. By doing this, you will have an apples-to-apples comparison of valuations. The difference between the two valuations will be a rough estimate of your “new value”.

This calculation is available on the 2004 and 2005 Municipal Tax Rate Calculation Forms supplied by Maine Revenue Services. From the 2004 form, use line 3, “Total Taxable Valuation”; from the 2005 form, use line 5 “Total Valuation Base”. In 2005, one-half the Homestead Exemption ($6,500 per qualifying property) is added to the total taxable value of the municipality.

The “new value” is the numerator in the Property Growth Factor calculation. The denominator is the 2005 Municipal Valuation (Total Taxable Valuation – line 3 – from the 2005 Municipal Tax Rate Calculation Form).

The Homestead Exemption changes do not affect the Property Growth Factor calculation if you determine the “new value” based on individual property records. This “long-form” method of calculation your municipality’s “new value” is more precise; however, for towns without any changes to their valuation from year-to-year other than “new value” changes, the “short-cut” method is an acceptable alternative. Just make sure you have considered the changes to the 2005 Municipal Valuation caused by the Homestead Exemption.

For more information on the municipal spending limit calculation under LD 1, see pages 20 and 21 of the February, 2006, MAINE TOWNSMAN.

LD 1 and "Net New Funding"

During this session, the Maine Legislature passed an emergency bill that removes state funding for General Assistance from consideration when a municipality calculates the "net new funding" component of LD 1's Municipal Spending Limitation.

This change applies to the spending limit calculations by municipalities in 2006.

There is also a bill to eliminate URIP (local road assistance) from the "net new funding" calculation, but that has not been enacted yet and if it does get enacted, it is not likely to be emergency legislation. Therefore, municipal officials will still want to consider URIP funding in their 2006 spending limit calculations.

NOTE: If you have any questions regarding LD 1, call or email Mike Starn,, or Geoff Herman, at MMA. Tel: 1-800-452-8786.