2015-12-25 / Community

Kennebunkport considers local-option tax

By Wm. Duke Harrington Staff Writer

KENNEBUNKPORT — A recent preview of the upcoming municipal budget sent selectmen in an unexpected direction in search of extra revenue, and it’s a path they seem intent to pursue – a local-option sales tax.

At the Dec. 10 meeting of the selectmen, Town Manager Laurie Smith presented the current breakdown on municipal spending, a chart of potential tax rates in future years – assuming annual minimum budget increases – and lists of strengths and challenges in town hall, which could send those mil rates lower, or even higher.

Currently, Kennebunkport has about $17 million in annual expenses. The county expects about $1 million for its services, while the schools collect about $8 million. In the current year, about $500,000 is for the school construction bond, while the rest goes toward operating costs. The town itself spends about $7.8 million, with about $6 million dedicated to current-year operations, and the rest spent on capital projects and debt service.

But the rub is that of the $17 million Kennebunkport spends each year, all but $2 million is raised in local property taxes.

In her chart of future tax rates, which she jokingly called “the ghosts of Christmases future,” Smith assumed annual budget increases of 4 percent per year.

According to the website inflationdata.com, the rate of annual inflation over the last decade has ranged from 0.8 to 4.1 percent. That means that by most accounts, a certain increase in municipal spending is expected each year just to keep pace with inflation. There also are contracted labor increases and other factors cooked into the annual budget before it even gets to where selectmen and budget board members can even begin to start paring things down. And some things, like labor contracts and so-called fixed costs, such as electricity and fuel, lay beyond their reach.

All that had Selectman Patrick Briggs shaking his head over Smith’s future ghosts.

“It looks kind of dire,” he said.

Still, Briggs noted that Smith’s mil rate projections did not include increases in property values, which can help to mitigate taxes on homeowners whose assessments remained the same, helping to reduce the overall mil rate.

Smith said Kennebunkport does tend to see about $10 million in new valuation each year, between increased assessments and new construction. However, that’s only about 0.5 percent of the town’s total assessment, she said, meaning it doesn’t move the needle very much.

Another factor involves the state legislature increasing the $10,000 property tax exemption given to Mainers on their primary homes. The exemption, which is taken off a home’s assessed value when calculating property taxes, is poised to increase to $15,000 next year and $20,000 in 2017. However, as Smith pointed out, the state only pays for half of the exemption, meaning the town has to pay for the other half. The result is to effectively shift that tax burden to businesses and people whose primary homes are either out of state, or elsewhere in Maine.

Or, to put it another way, Smith said – because the town is paying for half of the homestead exemption, wherever it ends up getting applied – of the $10 million in expected new value, “we’re going to lose a little more than $3 million right off the top.”

Kennebunkport went though a townwide reassessment in 2009. Since then, annual adjustments have the town at 100 percent of assessed value. By comparison, only 42 percent of actual market value was reflected on assessment records in the 2008-2009 tax year. The reassessment sent the mil rate plummeting, from $16.15 per $1,000 of assessed value to $6.34. But that didn’t result in a tax decrease because homes started getting taxed at their higher, actual market value.

However, since 2009, the mil rate has climbed from $6.34 to $7.70. That means that the owner of the median single-family, assessed at $300,000, gets a property tax bill of $2,310.

A 4 percent increase would add $92 to that tax bill, and so on each year, according to Smith’s trend line.

But 4 percent may be just a starting point. There are new things to spend money on every year. At the Dec. 10 board meeting, Selectman Allen Daggett said the town needed to spend more on clearing back trees from the edge of town roads, while Selectman Stuart Barwise suggested appropriating $20,0000 to help build public rest rooms at Goose Rocks Beach.

The concern for selectmen is that the new comprehensive plan, drafted in 2012, showed that, as of 2008, 67.3 percent of Kennebunkport residents were “unable to afford” that median home. Since that time, home prices have continued to climb, with the Portland Press Herald pointing the finger at the Kennebunk/Kennebunkport area in a Nov. 11 report, naming the two communities as the ones with the highest average home listings in Maine, at $517, 513.

Meanwhile, despite recent increase in the mil rate, the town already tries and does more with less, Smith said, noting that the planning and code enforcement office is currently working understaffed by at least one half-time position.

“We are seeing a lot of pressure that we cannot provide the level of service that we once did,” she said. “Staff feels it across the board with all town employees, they’re feeling that pressure. The thing is, there’s a little bit of pressure in a lot of various place, just not enough yet to hire a new person.”

With the future looking “dire” as Briggs put it, David James, spokesman for the Kennebunkport Residents Association, took the podium to offer a solution.

“The one thing you’ve got that I don’t think you’re effectively exploiting, is the tourism industry,” he said.

Noting that the recent Christmas Prelude was “the busiest ever,” James said, “That’s all good and it brings a lot of money into the town, but I’m not sure we’re taking advantage of that and using it to help bring in some revenue to the town.”

James said Kennebunkport should create a local sales tax in stores, and in restaurants and hotels, to help shift some of the tax burden to tourists, who tend to increase the need for infrastructure and services.

However, Smith pointed out the town cannot charge such a tax without permission from the state legislature. A bill to allow a local-option sales tax is a perennial sighting under the capital dome, but it gets shot down every session, she said.

The most recent attempt, sponsored by state Sen. Linda Valentino, of Saco, died in the taxation committee this past May on a majority ought-not-to-pass vote. Rep. H. Steadman Seavey was among those opposing the bill.

Still, selectmen were undeterred.

“We’re not the only town that’s faced with this,” Briggs said. “If we can make a concerted effort and bring other towns on board, then we have a greater chance of success. The benefits are tremendous.”

“While it would be a great boon to the town, that would be a pretty steep uphill battle,” Daggett said.

Briggs suggested creating a coalition of towns, perhaps led by the Chamber of Commerce, to help lobby the state legislature to finally pass a local-option sales tax.

However, while Barwise agreed on the need, the Chamber, he said, would be unlikely to take the lead.

“Until we get some sort of presences, or someone who will advocate for us at the state legislature, we’re not going to get anything from the state,” he said.

“The Chamber is going to resist that and fight back hard, because they’re funded by the people who really, really really, don’t want that,” he said.

Still, not all local business leaders are automatically opposed to the idea of adding a local sales tax to customer bills. Sheila Matthews-Bull, who chairs the board of selectmen, also runs the Rhumb Line Resort.

“I’d like to see the state taxes not so much on our industry, and then we’d be able to have a town tax,” she said. “I would like to see that balance.”

At a town hall meeting in Rockland in November, Gov. Paul LePage said he could envision signing a local-option sales tax into law, if such a bill ever landed on his desk.

“I think it’s a consumption tax and I prefer that over an income tax,” he said. “However, a local option sales tax is going to create dire competition among communities and the losers are going to be the smallest communities. They’re going to get hurt hard because they are going to be paying and they don’t have any chance of getting it back.

“But I will tell you this,” LePage said, “something I’ve always said, what I’m willing to do is to take a look at our tourism budgets, the 40 million people that come to Maine this year, and where they spend the money is where the money should be going for the community.”

While no decisions were made at the Dec.10 selectmen’s meeting, and no sales tax could be instituted in time to impact the next annual budget to be debating starting in March, selectmen agreed to pursue the issue as far as they are able.

“We can’t just discuss this at a bi-monthly meeting of the selectmen,” Briggs said. “Let’s not just leave it here. Let’s take it a step further. Let’s continue this. Let’s not let this end here.”

Staff Writer Wm. Duke Harrington can be reached at news@kennebunkpost.com.

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