Several municipally-related elements of Governor King’s proposed supplemental budget were presented for public hearing this week, including a supplemental appropriation for General Purpose Aid to Education (GPA), a package of changes to the farmland "current use" taxation system, and a phased-in 37% decrease to the state’s property tax on 2-way telecommunications personal property.

GPA. Education Commissioner Duke Albanese presented the Education and Appropriation Committees with the Administration’s proposal to boost the existing appropriation for GPA for next year by $12.6 million. The appropriation for this current year is $622.7 million. As it stands right now, next year’s GPA appropriation is $641.4 million. With the proposed supplemental appropriation of $12.6 million, next year’s GPA distribution would be $654 million, a 5% increase. Commissioner Albanese distributed a spreadsheet showing how that appropriation would be distributed to each of the state’s 285 school units.

Maine’s system governing the distribution of school aid has an intimidating lexicon of its own, but after you cut through all the "per pupil guarantees", "percentage reduction methods", and dueling "impact abatement" or "hold-harmless cushions", two observations can be made.

The first observation is that the state realizes it is not meeting its previously-established financial commitment to K-12 education, even by its own terms.

The second is that the state is unwilling to simply accept as a given that all $1.4 billion that are spend annually on K-12 education are necessarily worthy of subsidy. The Legislature is searching for a rational system of allocating GPA subsidy that avoids the pitfalls associated with both the incremental budgeting approach to GPA appropriations based on available revenues (which is how it has been done since 1991) and an expenditure-driven system (which is how it was done between 1985 and 1991).

At the public hearing, Commissioner Albanese said that the importance of the supplemental GPA appropriation is that it keeps the state on track with a 5-year plan, initiated in 1999, to increase the fundamental building block in the school funding formula called the "per-pupil guarantee". If Maine sticks with its plan, the "per pupil guarantee" in the year 2003 will actually match the average per-pupil operating cost in Maine. The supplemental increase is also necessary, according to the Commissioner, to advance the state’s plan to be paying the full state share of school "program costs" in 2003. Program costs are the special education, vocational education, and transportation components of the schools’ budgets. The GPA distribution law currently manipulates those actual costs through a "percentage reduction" formula so that it appears on paper that the state is paying its full share even though it isn’t.

The associations representing the school superintendents and teachers spoke in support of the Governor’s proposal, although in their testimony of support they called for much higher supplemental appropriations, between $43 million and $150 million. Much of the testimony from the school advocates centered around what is felt to be a 15-year old unfulfilled state promise to cover 55% of the costs of K-12 education (not including the state’s 100% contribution to teachers’ retirement).

MMA testified in opposition to the $12.6 million supplemental appropriation because it is clearly not enough to move the state toward majority funding for education. MMA pointed out that during the 1990’s, the average annual increase to GPA was 2% and the average annual increase in local spending for education was 6%. The MMA plan is to reverse the dynamic of the 1990s by seeking annual GPA increases of at least 6% for the next 10 years, which will hopefully result in smaller required increases in local school budgets for that period of time, so that the state will be at majority funding by 2009. To get to the 6% level for FY 2001, the supplemental GPA appropriation should be approximately $20 million.

The MMA testimony triggered a request for a breakdown of local appropriations during the 1990s along with GPA appropriations, and that information is included in the accompanying table.

Anyone interested in obtaining a copy of the Commissioner’s GPA distribution printout (the first of what is likely to be many), please contact SFR’s Tina Means at 1-800-452-8786.

Farmland Taxation. The Appropriations and the Taxation Committees hosted a public hearing on the elements of the Governor’s proposed budget relating to changes in the farmland "current use" taxation program. The supplemental budget bill proposed three changes, all of which are intended as strategies to preserve rural places and provide ammunition in the fight against sprawling land use development patterns.

Unfortunately, the Governor’s proposed budget doesn’t contain an "urban taxation" proposal to address the flip side of the sprawl dynamic, which is the urban flight from high mill rates that threatens the farmland in the first place. That proposal, known as Revenue Sharing II, is coming from other sources, including the Taxation Committee and a special legislative task force dealing with the issue of sprawl.

The farmland taxation proposal would do the following:

• Municipalities would be reimbursed, starting with the upcoming tax year that begins on April 1, for the lion’s share of the tax revenue they lose because of land enrolled in the farmland current use taxation program.

The reimbursement system would be entirely similar to the Tree Growth reimbursement system, The state would reimburse for 90% of the lost tax revenue, and the lost tax revenue is defined as the difference between the taxes actually assessed under the farmland program and the taxes that would have been assessed if the farmland was taxed at the municipality’s undeveloped acreage rate or at the undeveloped acreage rate for the region as calculated by Maine Revenue Services, whichever acreage rate is less. The fiscal note for this reimbursement is $290,000 for the first year.

• The penalty for withdrawing from the farmland taxation program within the first five years of enrollment would be reduced simply to the minimum penalty in the state’s constitution for withdrawing from a current use program, which is five years’ back taxes plus interest. Currently, a stiffer penalty applies for early withdrawal.

• The minimum acreage threshold for enrolling property in the farmland program would be reduced from 5 acres to 2 acres.

MMA testified in support of the first two elements of this proposal, but in opposition to the third element.

As to reimbursement, when tax exemptions (or partial tax exemptions) are granted by the Legislature and provided to a special class of property interests, the tax burden shifts in the municipality to those who are not eligible for the exemption. The prudence of reimbursing the municipality so as to mitigate the tax shift is self evident.

MMA also spoke in favor of reducing the withdrawal penalty to the constitutional minimum, even though that change could result in something of a short-term tax deferral program and increased municipal administration, and even though the municipalities, as a rule, believe that current use tax breaks should be designed to deliver long-term public benefits. In this case, the municipalities were persuaded by the agricultural community that the uncertainties of farming in Maine today are great, as is the degree to which a farmer’s assets are tied up in the land. Although farmers are in the business for the long-term, the potential is never far from the surface that they might not be in business in a few years because they have no control over a number of crucial variables, from weather to market to personal health. If the stiffer financial penalties for early withdrawal are creating an obstacle for a farmer to enroll in the program, the municipalities are willing to support the relaxed penalties in an effort to make the current use classification system work.

Where MMA jumped off the bandwagon was over the proposal to reduce the minimum acreage requirement to just 2 acres. That change represents an expansion of tax exemption program, and expanded exemptions (or partial exemptions) automatically trigger municipal opposition given the deteriorating condition of the municipal tax base.

Furthermore, with all the farmland registration and reverse setback proposals being considered this session (see related article in this issue of the Bulletin), and with the existing preemption on municipal land use ordinances governing farming practices under the "right to farm" law, the local administration of a current use farmland program for 2 acre garden lots is a significant and unwelcome mandate.

Telecommunications Taxation. The supplemental budget proposes to reduce the state-imposed mill rate on telecommunications personal property from the current rate of 27 mills to the state average full-value mill rate, which is currently about 17 mills, in a phased-in manner over a three-year period. When fully phased in, the reduced tax on the telecommunications industry will cost the state $6.7 million a year.

Because the revenue generated by this special state-imposed property tax runs to the state, the proposal doesn’t affect municipal government directly. MMA testified on the proposal in the "neither for nor against" category, only to point out that current law on the taxation of telecommunications property is crazy and begs a rational explanation. "One-way" telecommunications personalty, such as cable lines, is taxed by the municipality. "Two-way" or "interactive" telecommunications personalty is taxed by the state. As technology ultimately moves all telecommunications into two-way interactivity, the municipalities will lose that tax base over to the state.

For people concerned about the municipal tax base getting narrower because of total or partial property tax exemptions, the erosion of this element of the personal property tax base can now be added to the list. (GH)

Next Week-at-a-Glance

A very important public hearing is scheduled for Wednesday, February 2, at 1:30 p.m. in the City Council Chambers in Augusta City Hall.

The public hearing will be hosted by the Legislature’s Taxation Committee, and the subject of the hearing will be the Committee’s recently published draft report – Property Tax Exemption Review — which is the culmination of four months of the Committee’s labor and contains a package of recommendations associated with Maine’s law on property tax exemptions.

The first recommendation in the Committee’s report is supported by the entire Committee and calls for a targeted second-tier revenue sharing program that would provide direct state financial assistance to the municipalities in Maine that are providing services to larger regions or to support institutional-exempt properties within their borders.

The Committee’s report is also unanimously recommending the creation of a small working group with representatives of the Department of Environmental Protection and Maine Revenue Services to develop recommendations on how to remove the ambiguities, modernize, and clarify the legislative intent with respect to the pollution control equipment exemption.

The report also details recommendations that did not receive unanimous Committee support, including a package of changes that would create standards governing the exemption for "benevolent and charitable" institutions.

For any municipal officials interested in attending the hearing, a copy of the report can be obtained by calling SFR’s Tina Means at 1-800-452-8786, or downloading the report from where it is posted on the Internet at http://www.state.me.us/legis/ofpr/study.htm.

Comprehensive Planning. Another public hearing of municipal interest will be conducted by the Appropriations Committee in conjunction with the State and Local Government Committee on Monday, January 31, beginning at 1:00 p.m. in the Appropriation Committee’s temporary quarters in the Columbus Hall of the St. Paul Center (Oblate House).

The subject of this public hearing will be the proposed appropriation in Governor King’s supplemental budget of $2.7 million to support the development of municipal growth management programs.

Dog License Fees

At a public hearing on LD 2306, An Act to Amend the Animal Welfare Laws, it came to light that clerks have been given conflicting information relative to dog licensing fees, which were changed in the last session of the legislature. Though more changes are proposed for this session, please note that current law allows the following late fees to be charged. A late fee is charged for a dog renewal license issued after January 31. The municipal officers are authorized to issue a warrant after April 1 to compel the licensing of unlicensed dogs.

  For municipalities that do not  use the warrant process: $3.00

  For municipalities that do use the warrant process: $10.00 (at any time the fee is paid after the issue of a warrant)

The reason for the difference is to acknowledge the costs of the warrant process and to provide an incentive for its use on the theory that it results in better enforcement of licensing requirements. Any questions, call SFR’s Linda Lockhart at 1-800-452-8786. (LL)

Assessors Asked to Protect Farms

Earlier this week, the Department of Agriculture presented a farmland registration and setback proposal to the Agriculture, Conservation and Forestry Committee. The proposal is intended to be substituted for the carried-over bill LD 449, An Act Requiring Disclosures to be Made to Purchasers of Land Abutting Agricultural Land. The intention is buffer farm operations from incompatible development, but in its current form, it does so at great expense to municipalities and with significant impact to the landowners with property abutting farms.

The proposal may change as it is worked by the Committee, but in its current form it has two basic parts designed to protect farming activities.

The first is a registration of farmland through the Farm and Open Space Tax law. The Farm and Open Space law is a tax provision allowing farms to participate in a reduced property tax program. The program is currently available to farms of at least 5 acres in size that generate a minimum of $2000 per year in income from farming activities. It is generally believed that the current program is under-utilized by farmers because of the penalties for withdrawal from the program. There are many current proposals to reduce the minimum acreage to 2 acres, or to remove the size requirement altogether; to reduce or remove the income requirement; and to reduce the penalties to the minimums required by the Constitutional provision that allows this exception from the general requirement for ad valorem taxes. The Department of Agriculture’s registration proposal would provide some additional protections to all farms enrolled in the Farm and Open Space Tax Program.

The proposal would require that municipal tax assessors identify parcels of enrolled farmland on the municipal tax maps or maintain a list of enrolled farmland. When land that abuts, or is within 100 feet of registered farmland is sold, the seller must provide disclosure to prospective purchasers prior to execution of the purchase and sale agreement. The disclosure would include a form prepared by the Department of Agriculture and would inform prospective buyers about the activities that may occur in farming operations. Failure to provide disclosure would make the sales agreement voidable by the purchaser. The tax assessor would have to provide a list of enrolled farmland to Maine Revenue Services, and Maine Revenue Services would have to provide a copy to the Department of Agriculture.

The second part of the Department’s proposal is a "farmland adjacency setback law." This would essentially be a shoreland zoning-type law that would buffer land use activities away from the boundary lines. Setbacks of 150 feet from the property line would be imposed on parcels that are within 100 feet of farmland that is enrolled in the Farm and Open Space tax program. "Incompatible new development" would be prohibited in the 150-foot setback area. "Incompatible new development" would include:

• Residential buildings;

• School buildings, and any playgrounds, athletic fields or other school facilities;

• Commercial establishments dispensing or selling food; and

• Public and commercial campgrounds and picnic areas.

Further, no existing building could be expanded more than 100% or closer to the farmland than the existing building, and any existing structure destroyed by fire or other casualty would have to be reconstructed within two years or not at all.

Each year, the municipal tax assessor would be required to identify all parcels of registered farmland, determine which parcels of land within the municipality meet the definition of adjacent land, identify those parcels on tax maps or lists, and notify all property owners who are affected by the creation of setbacks. The notice would have to inform property owners of the creation of setbacks, the restrictions on the use of land, and the variance procedure. Variances would be determined by the municipal Board of Appeals.

Enforcement of any of the setback provisions could be initiated by municipalities, counties, or aggrieved persons. Penalties could include removal of the incompatible development and civil penalties.

The Department’s proposals suffer from major flaws. Municipal tax maps cannot be relied upon to make specific determinations of land that is "adjacent" or within 100 feet of farmland. Tax maps are for assessing purposes only and are not created to serve geographical concerns. Many farmland parcels, and developed parcels as well, have never been surveyed and do not have established, accurately mapped boundaries.

The setback provisions on abutting land sound much like resource protection zoning, but without consultation with local land use planners or local governments. Limitations on the use of the land would reduce its value, negatively impacting property tax revenue in the municipality with the abutting land.

Municipal mandates abound in the Department’s proposals, including the costs involved in creating and maintaining the listings, notifications, and the lost property tax revenue. The Committee should send the Department back to the drawing board. Farms are important to every municipality where they are located and municipalities are willing to assist the preservation of working farms, but these setback provisions, chock-full of municipal mandates, are not the answer! (LL)

Fuel Delivery Trucks on Posted Roads

Last week the Transportation Committee held a public hearing on LD 2381, An Act to Ensure Fuel Deliveries by Allowing Fuel Delivery Vehicles to Travel on Posted Roads.

As printed the bill would have provided and exemption for home heating oil, kerosene and propane delivery vehicles from the requirements of having to obtain state and local permits in order to travel on posted roads when making deliveries. Proponents of the bill testified that the changes proposed were necessary in order to address two issues.

First, the change would eliminate the burden on the fuel companies for getting and carrying in each truck permits from the state and each individual municipality for traveling over posted roads to make deliveries. LD 2381 also addresses the fact that not all municipalities have adopted procedures for granting permits and that the delivery companies were being fined for failing to obtain "nonexistent" permits from those municipalities.

MMA’s Legislative Policy Committee opposed the bill on the basis that the language threatened home rule authority by nullifying the permitting processes the municipalities have enacted. MMA offered an amendment to the bill, however, in an attempt to accommodate the concerns of the fuel delivery representatives with regard to making deliveries in municipalities that do not have permitting procedures for traveling over posted roads. The amendment would have established minimum standards that would apply in circumstances where no applicable municipal ordinance existed with regard to travel over posted roads.

With the assistance of the Department of Transportation and the Office of Policy and Legal Analysis, another proposed solution was provided to the Committee. The proposed amendment would require fuel delivery companies to obtain a statewide permit issued by the Department of Transportation and eliminate the requirement for obtaining municipal permits. The amendment also clarified that municipalities could impose additional restrictions on the fuel delivery trucks traveling over posted roads and that the fuel companies would be required to adhere to each municipality’s requirements.

The Committee will be making a final decision on the proposed amendment next week. If you have any concerns about this amendment please contact SFR’s Kate Dufour at 1-800-452-8786 or kdufour@memun.org as soon as possible. (KD)

Retainage Update

In the January 14th edition of the Legislative Bulletin, MMA reported the outcome of the State and Local Government Committee’s 7-6 decision to oppose LD 529 regarding retainage on school construction projects. The issue over whether or not municipalities and school districts should be authorized to retain 5% of a school construction contract has been a matter of debate for the Legislature for the past four years. A year ago, in the first session of the 119th Legislature, the proponents of the bill once again submitted a piece of legislation that would have, from the municipal perspective, weakened the capaticy of retainage to ensure the adequacy of school construction projects. Under the terms of LD 529, as originally printed, a construction project would have to be broken down into a number of "lines", and when each line was completed and accepted by the owner, that line of the contract would have to be paid off at 100%. The municipal concern was that these requirements would leave municipalities and school districts with limited leverage at the end of a project as problems may become apparent to ensure that the entire project would be satisfactorily completed.

The minority "ought to pass" report includes two changes to the printed retainage bill. First, in order to avoid a large fiscal note, the state was exempted from the proposed construction contract management standards. The second change limited the number of line items to the total number of "first tier" subcontractors.

Since that public hearing, the proponents of the bill have offered a new amendment. As we understand the new language, municipalities would be authorized to continue to retain 5% of the cost of each line of a school construction project until the project had been satisfactorily completed. Upon "substantial completion", after the owner (the school) has developed the punch list, identified all incomplete items, but otherwise accepted the entire project, the total amount of retainage minus 150% of the cost of the punch list and 100% of the value of the incomplete items would be paid to the contractor. This change would seem to clarify the way the existing process is supposed to work and address the concerns of the contractors that municipalities and school districts are unnecessarily retaining funds "just in case" something goes wrong with the project in the future.

If you are interested in receiving a copy of the proposed compromise language, please contact Kate Dufour at 1-800-452-8786. (KD)

Due to construction at the State House and State Office Building, several state agencies have been temporarily relocated around the City of Augusta. To assist you in finding these agencies, we have compiled the following is a list. All locations are in Augusta unless otherwise noted.

LD 2510 – An Act to Make Supplemental Appropriations and Allocations for the Expenditures of State Government and to Change Certain Provisions of the Law Necessary for the Proper Operations of State Government for the Fiscal Years Ending June 30, 2000 and June 30, 2001 (Emergency) (Sponsor: TOWNSEND) (Governor’s bill)

9:00 a.m.  With the Joint Standing Committee on Human Resources (287-1317)

1:00 p.m.  With the Joint Standing Committee on State and Local Government (287-1330)

LD 2377 – An Act to Prevent Contamination from Home Heating Oil Tanks (Sponsor: NUTTING, J.) (Submitted by the Department of Environmental Protection)

LD 2480 – An Act to Allow Police Assistance in Emergency Situations (Sponsor: MURPHY, E.)

LD 2510 – An Act to Make Supplemental Appropriations and Allocations for the Expenditures of State Government and to Change Certain Provisions of the Law Necessary for the Proper Operations of State Government for the Fiscal Years Ending June 30, 2000 and June 30, 2001 (Emergency) (Sponsor: TOWNSEND) (Governor’s bill)

1:00 p.m.  With the Joint Standing Committee on Transportation (287-4148)

WORK SESSION:  LD 2433 – An Act to Penalize a Company that Does Not Submit the Report Required by Law Regarding State Assistance (Sponsor: TWOMEY)

LD 2458 – An Act to Reduce the State Rate for Tax on Telecommunications Personal Property (Emergency) (Sponsor: GAGNON) (Submitted by the Department of Administrative and Financial Services)

WORK SESSION:  LD 2427 – An Act Relating to Underground Facility Plants (Sponsor: DAVIDSON)

LD 2510 – An Act to Make Supplemental Appropriations and Allocations for the Expenditures of State Government and to Change Certain Provisions of the Law Necessary for the Proper Operations of State Government for the Fiscal Years Ending June 30, 2000 and June 30, 2001 (Emergency) (Sponsor: TOWNSEND) (Governor’s bill)

9:00 a.m.  With the Joint Standing Committee on Criminal Justice (287-1122)

WORK SESSION:  LD 2325 – An Act to Address Financial Inequities in Special Waste Fees (Sponsor: DUNCAN)

WORK SESSION:  LD 2350 – An Act to Clarify the Laws Governing Solid Waste Disposal Districts (Sponsor: MICHAUD)

WORK SESSION:   LD 2442 – An Act Regarding the Requirement of Notice in the Acquisition of Solid Waste Hauling, Incineration Residue Disposal and Related Assets (Sponsor: POVICH) (Submitted by the Department of the Attorney General)

Public Hearing on the Taxation Committee’s Property Tax Exemption Review (including recommendations regarding "Revenue Sharing II" and standards to govern charitable exemption)

LD 2510 – An Act to Make Supplemental Appropriations and Allocations for the Expenditures of State Government and to Change Certain Provisions of the Law Necessary for the Proper Operations of State Government for the Fiscal Years Ending June 30, 2000 and June 30, 2001 (Emergency) (Sponsor: TOWNSEND) (Governor’s bill)

9:00 a.m.  With the Joint Standing Committee on Education and Cultural Affairs (287-3125)

(Baxter School for the Deaf)

10:00 a.m.  With the Joint Standing Committee on Labor (287-1333)

LD 2281 – An Act to Grant Municipalities Greater Flexibility in their Arrangements for Tax Base Sharing Agreements (Sponsor: MILLS)

LD 2331 – An Act to Expand Eligibility for the Veterans’ Property Tax Exemption (Submitted by the Committee to Study Standardized Periods of Military Service and Other Matters Related to the Award of State of Maine Veteran’s Benefits)

LD 2353 – Resolve, Relating to the State Valuation for the Town of Milo (Emergency) (Sponsor: DAVIS, P.)

LD 2422 – RESOLUTION, Proposing an Amendment to the Constitution of Maine to Allow the Legislature to Provide for Assessment of Property Used for Commercial Fishing at Current Use (Sponsor: ETNIER)

LD 2426 – An Act to Institute Current Use Taxation on All Agricultural Land (Sponsor: GREEN)

LD 2445 – An Act to Amend the Laws Governing Municipal Tax Increment Financing to Encourage Downtown Investment (Sponsor: GAGNON) (Submitted by the Department of Economic and Community Development)

LD 2413 – An Act to Maintain Maine’s Traditional Town Line Signs (Sponsor: RINES)

LD 2355 – An Act to Repeal Certain Archaic and Unenforced Laws Related to the Duties of the Secretary of State (Sponsor: KONTOS) (Submitted by the Secretary of State)

LD 2482 – An Act to Enhance Maine’s Historic Districts by Efficiently Installing Underground Delivery Systems During Road Construction (Sponsor: LEMOINE)

WORK SESSION:  LD 2084 – An Act to Reduce the Release of Mercury into the Environment from Consumer Products (Sponsor: TREAT)

LD 2484 – An Act to Limit the Issuance of Concealed Firearms Permits (Sponsor: SAXL, M.)

LD 2339 – An Act to Provide Assistance in the Cleanup of the Plymouth Waste Oil Site (Sponsor: CAMPBELL)