from Maine Townsman,
By Geoff Herman, Director of State & Federal Relations, MMA
Following the passage of Question 1, several communities have adopted resolutions pledging property tax relief with new school subsidy revenue expected from the state. MMA has been receiving a number of requests for sample resolutions.
In October 2003, Portland’s City Council initiated what is becoming a trend by adopting a resolution that pledged to match any increases in state contributions to the City’s schools that resulted from the passage of Question 1A with corresponding property tax reductions.
Question 1A, of course, was the School Finance and Tax Reform Act of 2003, a citizens initiative originally developed by municipal leaders within the Maine Municipal Association, fiercely opposed by the political, media and business establishment for nearly two years, and finally adopted by the voters of Maine on June 8, 2004.
A week before the vote this year, the City of Lewiston adopted its own resolution promising to provide a specific property tax rate reduction if the City receives a certain projected increase in state subsidy.
A week after the voters adopted Question 1, the City of Brewer injected momentum into the local resolution approach by adopting a similar resolve pledging to dedicate a minimum of 90% and, if possible, 100% of new Question 1 school funding to property tax rate reduction. Madison, Hampden, Bucksport, Houlton, South Portland, and perhaps dozens of other communities have followed suit with similar resolutions although there is local variation with respect to the wording.
Since these several municipalities have taken the lead, the managers, councilors and selectmen in other towns and cities across the state have expressed an interest in bringing forward similar resolutions to their councils, selectmen or school boards. Working from the models created by this first group of municipalities, the staff at MMA’s State and Federal Relations Department have been drafting sample resolutions in an attempt to meet the needs of municipalities that are organized differently than a community where the city council is the legislative body and the school system is a municipal department.
The central purpose of Question 1 was to reduce the property tax burden, and as Portland’s resolution observes, it is very important that the municipal leaders do all that they can do to achieve that purpose and keep faith with the voters. The adoption of a resolution is certainly a visible, on-the-record statement of that intention, and the consideration of an appropriate resolution is strongly encouraged. Because municipalities are organized differently, however, there are some issues that need to be thought through before any particular resolution is adopted.
Authority. Most of the resolutions that have been adopted thus far were approved by town or city councils that are the legislative bodies of their communities. Those councils have the capacity and possess the authority to pledge a guarantee of property tax relief. That is not the case for the municipal officers in the majority of Maine towns. In communities where the town meeting is the legislative body, the board of municipal officers, whether it’s a board of selectmen or a town council, does not make the final budget decisions and therefore cannot make the same pledge as the city councils can.
Accordingly, the sample resolutions that MMA has developed for the board of selectmen in the town meeting communities make a different pledge, going as far as the board’s authority allows to get to the same result.
In the sample resolution developed by MMA for the board of selectmen in a town that controls a municipal school system, the selectmen promise two actions that fall within their scope of authority. First, the board pledges to work with the local school committee to identify the increase in state school subsidy that is made available from one year to the next attributable to the adoption of Question 1. Second, following the Brewer model, the board promises to recommend to the voters at the town meeting a combined municipal and school budget that if adopted by the voters would return at least 90% of the identified revenue to the property taxpayers in the form of a reduced property tax commitment.
SAD and CSD towns. For the board of selectmen in a town within a School Administrative District (SAD) or a Community School District (CSD), the municipal authority to pledge certain outcomes with respect to the school budget is even more removed because the school budget is adopted by the legislative body of the entire district and the town’s share of that district budget is simply assessed against the town and lies outside of the direct control of either the board of selectmen or the town meeting.
Accordingly, MMA’s sample resolution for the board of selectmen of towns in school districts first establishes the board’s understanding that any new state subsidy provided by the implementation of Question 1 is to be dedicated to property tax relief. The sample resolution goes on to request that the school district’s board of directors: (1) clearly identify the increase in state school subsidy that is made available from one year to the next attributable to the adoption of Question 1; and (2) recommend a school budget to the district voters that if adopted by the voters dedicates at least 90% of that new revenue to reduced school assessments.
The identification of Question 1 revenue. There are other issues that board members may want to discuss before finalizing a resolution that is before them for adoption.
For example, all of the resolutions assume that the identification of the increased state subsidy attributable to Question 1 will be a simple calculation, but that may not be the case.
All rational school subsidy systems, including Maine’s emerging Essential Programs and Services model, provide greater subsidy to schools that are being required to educate more students or more students that present educational challenges. For those schools, some of the increased state subsidy that school systems should be expected to receive after the implementation of Question 1 will be attributable to rationally calculated increases in the demand for educational services rather than the implementation of Question 1’s call for a full 55% state support of K-12 public education. To identify those increased dollars in state support as “Question 1” revenue and promise its return as property tax relief would financially punish the school systems that are simultaneously being required to increase educational services.
In addition, Maine’s school subsidy distribution system establishes certain cost sharing obligations to cover the normal operational “allocation,” and when increased state school subsidy is made available to some school systems with the implementation of Question 1, the local share of that total allocation may also have to increase in order to fully leverage the increased state share. Any required increases of the local share should be recognized in any property tax relief calculation.
MMA is committed to working with the Department of Education and school administrators to develop a rational system of identifying the changes in any school’s state subsidy from year-to-year that is truly attributable to the implementation of Question 1.
The measures of return. There is also some variation among the resolutions that have been adopted to date regarding how to measure or account for the expected property tax reduction. Some resolutions define the matched property tax reduction in terms of reduced property tax rates, some call for that reduction in terms of reduced property tax commitment, others use the term property tax burden or, simply, lower property taxes.
When considering the adoption of a resolution of this nature, the selectmen or councilors should have a good understanding of the specific measure of property tax return to which they are committing themselves so when the time comes for reviewing the resolution after Question 1 is implemented there will be no confusion.
To measure property tax reduction in terms of mill rate brings another variable into the mix that is not under the control of a municipal legislative body, which is the amount of assessed value to be taxed in any future year. Because the taxable value of a municipality may grow or decline in unpredictable ways, and may dramatically change as a result of a revaluation, the use of the tax rate as a measure could generate misunderstandings down the road.
The term “property tax burden” generally refers to the relationship between property tax collections and household income, and the use of that measure could also generate confusion if it is not a measure of common use in that community.
The term “property tax commitment” refers to the total number of dollars raised by the property tax in any one year and would appear to represent the most simple measure, affected by the least number of extraneous variables.
Inflation. All but the most crudely developed tax burden management systems incorporate some system of indexing for inflationary growth. Incorporating allowable inflationary indexes, however, is perhaps too complicated for the vehicle of a resolution, which by its nature should read simply and speak directly to the board’s intention. It is perhaps this recognition of some need for flexibility that lies behind Brewer’s guarantee of a 90% return, with the potential of a 100%.
In recognition of the need to accommodate some inflationary growth and the inherent complication of articulating all of that in a resolution, some boards may prefer a simpler declaration of understanding that the purpose of Question 1 was to provide property tax relief and that to fulfill that intention the board will: (1) work collaboratively with the schools and the state to account for the responsible control of growth, (2) accurately identify the property tax relief revenue provided by Question 1, and (3) recommend to the local legislative body that 100% of that identified revenue be used, like municipal revenue sharing, to reduce the commitment.