AUBURN – Tax reforms at the state level could have city taxpayers caught in the middle, city councilors and school officials said Monday.
The state is still figuring out some of the details about L.D. 1, Laurie Smith, acting city finance director, told a joint meeting of the City Council and Auburn School Committee.
L.D. 1 is a state tax reform package that caps municipal, county and school spending increases, puts the burden for the homestead exemption on municipalities and changes state revenue sharing rules.
“But we have nothing concrete to react to yet,” Smith said. “You need to keep in mind this is a moving target for us.”
Under L.D. 1, local spending is capped at the growth factor – calculated by adding state income growth to local property growth. That’s multiplied by the previous year’s tax assessment. Smith figured it would allow the city an additional $1.6 million compared to the previous year.
Next, Smith said the city needs to back out revenue sharing and increase costs from the homestead exemption. Under L.D. 1, the exemption nearly doubles from $7,500 to $13,000. The state only reimburses the city for half, however.
“The state hasn’t funded that tax reform. They’ve just left it on the backs of the municipalities,” City Manager Pat Finnigan said. She estimated the homestead exemption change alone could cost Auburn about $700,000.
“That comes from cuts in services or increased taxes,” Finnigan said.
School officials are equally concerned about the new Essential Programs and Services model that funds schools based on standard, statewide costs per student. Some special programs and extra costs might not be funded.
“Everything is driven by the number of students and a weighted cost for different kinds of students,” said school Superintendent Barbara Eretzian. The model looks at the number of students across the district, not at individual schools. That could hurt Auburn, which has several neighborhood schools with small populations.
“There are increased administrative costs that could be a concern,” Eretzian said.
Taken together, the reform packages look to make this year’s budget difficult, Mayor Normand Guay said.
“It was said earlier that our state legislators didn’t understand what they were voting on when they did all this,” Guay said. “I certainly hope they didn’t, because if they did, shame on them.”
Councilor Belinda Gerry said legislators and Gov. John Baldacci had let taxpayers down.
“Voters wanted the state to do something,” she said. “I don’t think they were aware the state was just going pass the problem back to us.”
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