Deorganization

(from Maine Townsman, February 2004)
By Mike Laberge, Freelance Writer   

       The town of Atkinson has no fire department or elementary school. The place consists of a lone general store, a handful of farms and about 200 modest homes. Most people work in the woods or commute to jobs in Milo and Dover-Foxcroft.

       Yet, folks in the rural town pay a tax rate nearly as high as in Maine’s largest communities. Atkinson’s tax rate stands at $19 per $1,000 of assessed valuation. Portland taxpayers, by comparison, pay $26 per $1,000. With costs rising and the tax base narrowing, leaders of the Piscataquis County town of about 300 residents see little choice but to disband, after 185 years.

       “What else can we do?” asked Dave Kinney, one of the town’s three selectmen.

       In central and northern Maine, rising property tax rates and shrinking tax bases have led some communities to consider dissolving their municipal governments. With tax rates in some of the state’s smallest towns rivaling those in the Portland suburbs, deorgan-ization has become a growing topic of conversation among rural Mainers desperate for property tax relief.

       “This is a last-grasp solution for them,” said Bob Doiron, supervisor of the unorganized territory for the Maine Revenue Service.

Doiron said he receives a handful of inquiries annually from communities considering deorganizing. Some people have suggested that Atkinson may be the start of a trend if the Maine Legislature approves deorganization – and local voters go along.

       The state, according to Doiron, now oversees about 9 million acres of unorganized territory, or roughly half of the land in Maine. There are 420 unorganized townships – a number that rivals the state’s 492 organized municipalities (cities, towns, plantations and Indian nations).

       Maine Revenue Service bills township residents for basic services that include education, administration, social services and land use regulation. Counties, in turn, charge for road maintenance, law enforcement and even trash collection.

       For those basic municipal-type services, township residents pay a fraction of what their municipal counterparts pay. Tax rates in the unorganized territory range from $5.97 per $1,000 of assessed property valuation in Hancock County to $10.21 per $1,000 in Franklin County. The statewide average municipal tax rate (full value) is about 17 mills.

       Property owners in the unorganized territory essentially benefit from an economy of scale. The territory has a valuation of nearly $2 billion, allowing the state to spread its costs over a huge tax base. “The tax base is so much larger than the municipal tax base,” Doiron said.

       State officials are reluctant to expand the unorganized territory, for fear of increasing administrative costs. Although most townships have few residents, Atkinson’s deorganization would create one of the most heavily populated townships in the unorganized territory.

       At a recent legislative hearing, Doreen Sheive, fiscal administrator for Maine’s unorganized territory, said she worried about the precedent such a move would set. “If this is the only answer they see, what is going to happen to the state of Maine?” she asked a legislative committee considering the Atkinson proposal.

HARD TIMES

       Proponents of deorganization say a rising tax rate has backed Atkinson into a corner. “They don’t have any money; they’re broke,” said Rep. James Annis, a Republican from Dover-Foxcroft, who sponsored the bill that would allow the town to dissolve.  “They’re up to 19 mills now. There’s nothing there in town.”

       As a selectman, Dave Kinney knows that as well as anyone. Conservation agreements — chiefly the state’s tree growth and open space programs — cover nearly two-thirds of the town’s 23,225 acres. Such programs force municipal officials to shift the burden to other taxpayers.

       “Our problem  — what people are saying to me — is the imbalance,” Kinney said. “It shifts the burden from the larger landowners to the smaller landowners.”

       About three-fourths of Atkinson’s $276,000 tax commitment goes to School Administrative District 41 in Milo, which educates the town’s 52 school-age children.  With a narrow tax base and little control over education costs, municipal officials must spread any increases among the few properties taxed at full value. A rise of as little as $14,000 can boost the town’s tax rate by one mill.

       “We’ve kind of lost control of our tax base — what little there was to begin with,” said Kinney, a former dairy farmer now on active duty with the Maine Air National Guard.

       Two years ago, a similar deorganization proposal failed on a 144-86 vote — eight votes shy of the two-thirds majority needed for approval. But the financial issues remained, and proponents last year again collected enough signatures to force the Legislature to consider allowing the town to deorganize.

       Under deorganization, Atkinson residents would pay the tax rate for unorganized townships in Piscataquis County — just $7.57 per $1,000. That is less than half of the town’s current tax rate.

       Although Gov. John Baldacci opposes the town’s deorganization, proponents vow to press ahead with the issue. The Legislature’s State and Local Government Committee has had a public hearing on the Atkinson bill, but the measure had yet to emerge from committee when the TOWNSMAN went to press.  At a special town meeting on February 11, Atkinson residents voted 48 to 15 to approve an amended deorganization plan — reacting to comments at the public hearing — that switches the designated school systems from SAD 68 back to SAD 41.  That amended plan will now be the one that the Legislature will act on.

       “I feel that we’d be just as well-served if we were part of the county unorganized territory,” Kinney said, adding that he met recently with aides to the governor, hoping to convince them of the town’s dire straits. “I don’t see that there’s any help in sight.”

VIEW FROM MADRID

       Five years ago, the outlook was just as bleak in Madrid, a Franklin County community of about 180 residents that ultimately chose deorganization. The town’s tax rate was approaching $19 per $1,000, largely because of rising education costs. In a place with no commercial development, leaders saw no end in sight.

       “Nobody wants to see a town go under,” said Patricia Thompson, who was the town’s tax collector and treasurer before deorganization. “We really didn’t have much choice.”

       As in most small towns, education costs accounted for the lion’s share of Madrid’s municipal budget. The town, with no elementary school, paid tuition to SAD 58 to educate its 30 school-aged children. With a total valuation of $11 million in town, adding just two children to the school system could raise the tax rate by one mill.

       “We had no tax base, and 75 percent of the land was in tree growth,” said Reuel Thompson, a logger and former first selectman in town.

       Sharp cost increases drove the deorganization campaign. Most years, Madrid’s tax commitment for roads, schools, administration and county services ranged from $140,000 to $160,000. Leaders saw the writing on the wall when, shortly before deorganization, the bill for education alone was $190,000 — which Reuel Thompson believes was driven by special education costs.

        “We had a lot of elderly people in town who really couldn’t afford it,” he said.

       High turnover in municipal government was another problem. Thompson was a selectman for six years, and his wife was tax collector for nine. With a small population, Madrid relied on a pool of dedicated people like the Thompsons to get things done. “We had three clerks in three years,” Reuel Thompson said.

       In 1999, with their backs against a wall, proponents collected signatures from about half the number of people who had voted in the previous year’s gubernatorial election, sending the deorganization request to Augusta. Lawmakers approved the request, and selectmen put the issue to a vote in 2001. 

       “We needed a two-thirds vote, and it was exactly two-thirds,” Patricia Thompson recalled.

       Madrid officially went out of business, after more than a century. The town office and other municipal assets were sold, and employees were laid off. The community became Madrid Township. “I know there are still some people not thrilled about it,” said Patricia Thompson, who works now for a property-rental company in Rangeley. “But that’s the way it goes.”

       Little has changed, the Thompsons say. Franklin County maintains the roads, and the Phillips Fire Department protects the township. A state-certified agent in Avon, about 10 miles away, registers cars and trucks. SAD 58 still educates the town’s children. The state’s Land Use Regulation Commission handles development issues. Voters go to Phillips, the next town over, to cast their ballots.

       Residents receive their tax bills from the state. But instead of shelling out nearly $19 per $1,000, they pay only $10.21 per $1,000 for the same basic services as before. “Our taxes have gone down, and our roads are still getting plowed,” Patricia Thompson said.

       Her husband, too, believes that Madrid is better off as an unorganized township. “Ninety percent of the people I talk to now are well pleased with it,” Reuel Thompson said.

HOLDING ON

       Today, three years later, the Washington County town of Cooper faces a similar crossroads. First Selectman Jon Reisman said the tax rate in the town of 110 residents is approaching $24 per $1,000. It would have been higher, but selectmen used money from surplus to offset spending.

       There is a lone store in town, and the volunteer fire department is barely surviving with six active members. The town maintains its roads, keeps a transfer station, and sends children to schools in Woodland, Alexander and East Machias. Seven employees — three assessors, three selectmen, and a combined tax collector, treasurer and clerk — run the government.

       Cooper has an annual budget of $340,000, two-thirds of which goes to education. Rising real estate values don’t make things easier. Property values around Cathance Lake have jumped in recent years. Homes once valued at $80,000 now are selling for three times that amount, town officials say, a trend fueled largely by buyers from away. With the town’s valuation rising, the state has reduced Cooper’s share of general-purpose aid. That, in turn, has shifted costs to local property owners.

       “The town has held on,” Reisman said. “But the mill rate …”

       Many people in town, Reisman said, view deorganization as inevitable. Still, there are mixed feelings.

       “On principal, I’m against it. But in reality, I’m for it,” said Town Clerk Kathleen Hull. “We’re kind of forced into a corner. We have a township right next door, and their taxes are, like, one-third of ours.”

       Township 14, with fewer than 50 residents, deorganized more than a decade ago. County government maintains the roads and even collects the trash, Hull said. The state handles the rest — and sends residents a bill for a fraction of what Cooper residents pay.

       Another Washington County town, Centerville, will give up its municipal charter and dissolve on July 1. The community has just 16 residents.

       Such comparisons make deorganization appealing to leaders of Cooper. The town first tried to deorganize in the late 1990s, after the tax rate reached $19 per $1,000. Proponents collected enough signatures to place the matter before the Legislature — where it died after municipal officials clashed with the Maine Department of Education.

       The agency had proposed sending Cooper’s grade-school children to Edmunds Consolidated School, a state-run school about 20 miles away. Most youngsters now go to school in Alexander, just 5 miles away. “It was unacceptable,” Hull said.

       With the town and Department of Education at odds, lawmakers rejected the town’s request to deorganize.

       This time, Cooper intends to be more aggressive. At town meeting in March, selectmen plan to ask residents to appropriate $10,000 from surplus for legal fees and lobbying services. “My view is, if you’re doing to do this, you’ve got to have a full-time advocate in Augusta,” Reisman said.

       If town meeting voters approve the request, proponents would begin collecting the necessary signatures to authorize a petition to the state. Financial desperation has forced the town to keep trying. “I think it totally depends on the Department of Education,” Reisman said. “We’re prepared to go to court, if needed.”

       Without serious property tax relief, deorganization is likely to become increasingly attractive to small towns like Cooper struggling to pay the bills. “If we could afford it, we’d like to remain a town,” Reisman said. But that appears unlikely. “With a tax rate above 20 mills, it’s just not affordable, for the level of services,” he said.