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Home My WebLink About1997-04-14 97-182 RESOLVECOUNCIL ACTION Item No. 97-182 Date April 14, 1997 Item/Subject: Supporting Comprehensive Tax Reform to Reduce Reliance on Property Tax Responsible Department: Legal The Maine Municipal Association is sponsoring a major new legislative proposal to comprehensively restructure the State's current tax system. MMA's proposal would correct the present over -reliance on property taxes as a source of governmental revenues. This Resolve would express theCity of Bangor's support for MMA's proposal. VV v"` D¢parimeRi H¢ad Manager's Cityty Manage g anage.: Associated Information: Maine Townsman article)6A&p Q, Finance Director City solicitN Intro dR< For Passage First Reading Referral Page 1 of _6_ 97-182 Assigned to Councilor Soucy April 14, 1997 CITY OF BANGOR (TITLE) ,''RQgp(jS, Supporting Comprehensive Tax Reform to Reduce --Reliance on Property Tax Ru Gu CIM County oft GYM efB mw: RE30LVE01 WHEREAS. it is vital to the common interests of Maine communities and residents that there be a proportionate, fair and stable balance among the three major sources (property, sales and income) of tax revenue necessary to support state and local government;and WHEREAS, among the three major sources of tax revenue, the State of Maine relies disproportionately (approximately 45%) on the property tax as a source of governmental revenues and only 28% each on the sales and income taxes; and WHEREAS, the State sales tax base historically has been so narrow that a balance among the state and municipal tax revenue sources either be achieved n maintained due to the instability and unpredictability of sales tax revenues; and WHEREAS, historically the standards for exempting charitable and benevolent institutions from property taxes have been too liberal, placing an unfair burden on Maine's service center Communities, NOW, THEREFORE, by the City Council of the City of Bangor be it RESOLVED, THAT the City of Bangor hereby supports and encourages the 118th Legislature to enact "An Act to Comprehen- sively Realign the Tax Structure of the State", by expanding the State sales tax base, Imposing service charges on tax exempt institutions, and reducing the property tax by exempting the first $20,000 of "Just value" of homesteads of Maine residents. IN CITY COUNCIL April 16, 1997 Passed : 6 yes, 3 n 1 absent Councilors voting yes: Aube, Blanchette, Leen, Soucy, Tyler d Woodcock Councilors voting n Parnham S Sullivan Councilor absent: Baldacci 7SIR 9]-183 B E S 0 L V E Supporting Comprehensive Tex Reform to Reduce Reliance on Property Tex tea. &-V -glw &Gi, _ Advocating for Tax Reform "Getting the word our' to legislators and citizens Iafnfrnation Its what drives the en- gine of democeary. Or a founding fa Werjamm Meeieon once said, 'A popular government without popular information, or the mem, of aegW r. ing it, is but a prologue to a farce or a tragedy, or both" This article is offered as resource for 'getting the ward out', reforms n if you will, on the proposed Tax Reform Act of 1997. aA a., An Act m compmFtanuefy Rolign tM Tax Sous; Lure - fi"caa The materials below can be owed mw r of wuri. Some like the Que, and An an be repm, ducetl mtyoor municipal newsletter, or in you,town myons, or be reprry ducwl in -stand atones" t0 be disuib- used at meetings or to Some of the Laws its, like lha a)cu- lations, can terve as a template for producing your own informational mammals. SOME BASIC Q 9A Question: What by the purpose of this legulmium Answer. To realign the balance ung she three major sources of tax revenue collected by suite and local governments in Maine. They are cuo mtly way out of balance, with the property ax bearing a disproportion- ate share of the burden, contributing about 45 Fusion of the mix, and with the sales and income Law each con- tributing about 28 percent of the mix. An ideal mix would have each La contributing about 33 percent or Ne Quesdom How will this rea4gn- hear be achieved? Awu By reducing the coninlaw made byrevidential property na- payers through a tool known as a 'homestead exemption". By mcma - ing she services met are subject in she sales tax. By acquiring institutions that currently pay no property rex to pay their fair share of essential mm mcipal servi[essuch as fire protection and snow plowing. Federal pmpmm, exempt church property, municipal property, and exempt open land (Fingers, with no buildings) will not be required to pay for municipal set - Aces under she proposal. Q,,,H,,: Who will benefit from the homestead exemption? Answer. Every Maine owner of residential property — an estimated 300,000 owner, — no matter what Meir income, as long as their home B their primary place of residence. Question; just bow will Maine homeowners normally Answer: As currently proposed fla"ll have $20,000 exempted from the 'just' (market) value of their home and she land it it on, up to ten acres, Wert their property axes are calculated. So if their home Is valued at $85,000 and she full value tax ate of their municipaliryis 16.09, Mev will v< $321.80 in property taxes. With- out the exemption they would have Bud $1,045.85 in property mxe; with the exemption, they will only pay $724.80 in made. QmAdWw Doesn't the homestead exemption give a property is, break 97-182 By Jo Josephson, Staff Writer to people who don't need io Answer: Proportionately the homestead exemption provides a tech higher percentage ax reduc- tion tindividuals in law to mid- range valued homes. A $20,000 home- stead exemption would be a 50 per- m property tax reduction for some, one in a $40,000 valued home; the me IS0 000 homestead exemption oolds, a 10 percent property as m duction in a $200,000 owned home. A homestead exemption for property wexes is malar to the standard aeduc- vailable to everyone who pays es (bath state and fed - mi �regardless oftheirme me. Qambm How will the muni cipah es be cautioned for the lost wes? Aumr: It is estimated that mu- icipalities Will9oss' more than $100 million as a result of Ne homestead exemption. Under the propmed leg- Musion. municipalities Am to be reim- bnned 45 days after filing their Mn- iciWl VJmuon known for 100 per- t of she lose t0 their community. If the Sale fails to reimburse the Am icipalities at that level, the home - award nomogram provision of the law is automatically repealed. Most of the mo pay for Me exemption will be generated by an expanded sales x base that case, certain services that are not urrently subject to the ales rex. Qwumn: What kinds of services are going m Be newly waxed? Atrium Service, Nat are bought with our uncap doUwo including amn,ement and recreation ,,rice. .WANG t1JWN64 MIN NmA 1997 11 like m and movie driven. Also being Proposed are Inch personal, business Intl professional services mpmeonal, lawn care, dry cleaning, accounting, lobbying and legal. Exempt health eand conrtmrdon services will not be eased. Quantum Isn't fussiest another six iftereami drainer. No, but'ox m fir. Under sue proposed legislation there will be a shirt from the overburdened property tax m the narrowly based sales new. There will also be a shift no entities thatare ntly exempt from property cassis The proposed law requires that any revenues ro4 wetted from the sales is, expansion rhes exceed the cost of the homestead empdan must be placed in a special Tax Relief Fero Quurvnn: What's in this for rent. nnsAnsmen. There is already a Pro- gram on the books far renters. In 1989, rue Legielamre adopted what is popularly known as the circuit breaker program. Under it, low a tome and elderly residents of Maine are entitled m partial rebases oa their Property axes and rents if me man" they spend exceeds a certain permits. age of their income: five percent of re for property want and 93 per- � mof income for rent. The average rebate for mxpayers and matew in 1995 was $351. If the homestead ex- emption is adopted, it will free up ahem 20 peaent of funds in the circuit breaker program that could be better targeted ro semen. A home- stead exemption and circuit breaker program are matrimony esthetic: n sac[, they complement one an- other. Qumliov What in this for bri- wa o Ammer: Business and industrial properties and seasonal maidences will ant directly benefit from the homestead exemption, at that part of me sax reform propose] will not have the effect of lowering the mil rare. However, she teme< charge piece of the restructuring proposal will ben - ant the nom midential property mx- payers by immediately dropping the me rate, especially in the sera cen- mr It hould be noted that businesses and industries are are ready prim to substantial sax breaks. over the put 10 years, 70 to 80 Maine 12 Mv<A 1997 AGLAE fOWMWAN businesses have upped into a tool known as Tax Increment Financing (TIF), which enables them to plow all or a Sweden of due property tax dol- lar generated by new projects back into those projects. Mare recently, a m level TIF, Employment Tax In- crement Financing, was made avail- able to businesses that create good paying jobs with benefits. ETIF re- bates businesses up to half of the in- come tax for the new jobs. Maine also has one of the lowest corporaten the < ry, anc income re inh uladone do veloped by We Margaret Chase Smith Center for Public Polity, only 14 other wares place leu ofa tax burden on corporations than Maine does. SOME SAMPLE CALCULATIONS Calcutdli ig Tax Savings To calculate the savings in prop- erty taxes for a homeowner who makes their primary residence in your 1 The Series V Diesel -.t. Municipal Tractor Snow Blower The 4 -Season Tractor with a new advanced design for maximum productivity, safety - _ and comfort from the leader in - the Municipal Tractor held. F•. sw«Par Trackless MT5 Sense offers a variety of snow removal, --� sweeping and mowing attach- ments year round versatility. Other attachments include a Boom Flail, Sickle Bar, V -Plow, Reality Mower Angle Plow and Sander. HOWARD P. FAHUMLD, INC. "The Sno-Plow People" Skowhegan, Maine 474-9836 Resolution Supporting Comprehensive Tax Reform To Reduce Reliance On Property Tax Whewishma, among me draw mg,rum m a, here Ma prOPmamm¢.fair a msime W: among Ne overw=dw (PmPm=°'leans income) ofluxmrnuee rely so suPAat.btednalaaa0eemmmc {Vhema.weece arms commercial rally as fammamul,ely 46 esaot) on Wes Paap em lux m a mmxe arms commercial nary ser portent tern nn he saes and i,. mule � Wg me to he ales so hue hu Water be achieved d et mairew hu a hdo, in m,wnghand npreenwntm, ®n neither be achieved nm maintained anew uabiaw identically theft Whew.hrwriperyeaunamGfm am museum, buNem 'udawtione from property maluce rem ton liberd. Platltgan titans burden an sutMh ThuhelegirUrvre etua'MAuw GmtWehmsicelYPealiBn the 'fan Sonowte of the State' hr expanding the intitax buin imposing versus, chmgn an now exempt imtaide and economic the pmputy au, by rrarfaing e arm SWAM ofImC your ahomaxaN ofMore assume. municipality. Fort shorneoe he rex obligation without he homestead exemption u you would normally do, multiplying he assessed mine of the home by the calmunicipal mil tate. To determine the , aearned value with he home- steaa exemption, apply your town's assess ment ratio the $20.000 ex - restrict, ndsor rhat amount from the turned value. Then, calcu- late your tax bill using the new as Word ed value. e EXAMPLE: A home is valued at IM,006, the town: woo mens mtia is 80% (of full value), and the mould. 9Y-182 pal tax rate is 15 mils. Without the homestead exemption, Ne property tax bin would be $750 (550.000 x .015). With the homestead exemp- tion, property taxes are $510: the homestead exemption is $20,000 which is multiplied by to do 80% which equals $16.000: then$16,000 is subtracted from he 5so.000 assessed value: he uawe as tied value of the property is now $34,000, multiplied by the municipal tax rate of 15 mils, which equals $510. The amount saved by the homestead exemption is Win (said multi. $510). calculating Progressivity, While everyone in town rill have he same deduction from heh prop eery tax and therefore he same dollar amount savings, the fact that not everyone a homestead has the same value means that he homestead ex- emption will base greater ealue for some than others. Which is m say, those with lower valued homes will benefit more than those with higher cavum homes. EXAMPLE: A municipality with a W mil tax nue is messing lex property PROVIDING ECONOMICAL, ENVIRONMENTALLY Got De-IcerTM (winter ice control) SAFE ALTERNATI VES FOR: omrnercial SOIL STABILIZAIION: UTILIZING STABILIZER PLUS® ecycling Sweepings and Canada. ystems For MEDEP Supervised or Nov -Supervised Remediation of Sods From UMergrouvd Took Removal Protects And Surface Spills. CONSTRUCTION MATERIALS REPROCESSED: RECYCLED PRODUCTS AVAILABLE. Old Pavelcem, Asphalt Roofing Shingle; Got De-IcerTM (winter ice control) Sandblast Grit, Catch Basin Grit, Bottom Jack's patch (recycled cold patch) Ash, Rubber, Glass, Porcelain, Street Recycled Topsoil Sweepings and Canada. Recycled Paving Mixes Ma omis Recycled At Om Facility or At The Site Of Oberman A ITv. of Commercial Paving Co., hic, 2 (bla® WL, Swtlarmupp, W 06%J, TO (207) 883-3325 Fax later) %93-1121. Our MEDEP License and As provisions maybe viewed m one Scarborough Office. THINK TWICE -RECYCLE AMMEWiticaYAN Month. 1997 13 at full value (assessment ratio Is 100%). There are two homes: one as. ester at $100,000; rn e oral aearen et W.000. The $100.000 homeowner would get 1$20%reduction in axes (the $20,000 exemption is one.FRh of the assessed value); whereas the $40A00 homeowner would get a 50% reduction in taxes (the $20,000 ex- emption is one-half of the assessed value). The dollar savings for both homeowners is $400 ($20.000 times the mil rte). A PROPOSED RESOLDTION Resolutions are formal expres- s of sentiment, opinion or will. While they do not have the force of law. adoption Of resolution during the course of a town meeting or a meeting of the Ward of selectmen or the council is an effective over in draw o the legislation provided background materials are also made available. Accompanying th erratic is ample resolution expressing sup - Fort of the sex reform legislation. MY POINTS TO MAKE WITH YOUR LEGISLATORS • This is about sex reform, about changing a structural problem. • This is about realigning the bal- ance ng the Sea major sources of revenue that drive state and local government, so that the scum does not rel{ daproportionmely upon the proper, x • Thepropertytax ro ndy mabissfa 5per mfre'"Nigne while the sales and income taxes to - fetor only make up 55 percent. • The current burden on the proper, ax is unacceptable. • The homestead exemption is the orale significant sex break that it available to the mmygacitium low m - come have the circuit breaker: businesses have their own how exemptions. - Thisisaboutrealigningthebal- aoilaxith more discretionary sales x se n. • This is about expanding the nautically narrow rales ax base, to bring it into the 21• Century, where services make up a large part of our econorrI • This u about tightening up the standards applied to tax exempt charitable and benevoleminsum- sothat the taxpayers supporting them can be mored they are actually 14 mmgy Joel Bettor MWASAI performing a charitable service. IN THE WEEKS AHEAD Municipal officials will want to get re word out in Use next few weeks As An An mCompefmntrcty Rmlign the Tax SM1ustnm of the Slob makes in way through the legislative process. As with all proposals, it will be amended and modified; municipal officials are urged to keep abrcaat of the changes by reading MMAy Legulaiw Buten, But keeping abreast of the bill is jun the up of the Iceberg. Whit fol- lows is a short list of what alae can/ should be done in the coming month. • Contact your lord legislators by phone at Sore House. For sure senaors the number is 1-800-425- 6900.tFor State lepra sthe umber Is 1-800.4254900. Make use of the above 'Key Poinu'. • Concert members of your edu- 97-182 uoml community (leaches, school Ward members) and get them to un- dersand bow adacaArm will benefit from this proposal. Then get rem to contact their legiamors. • Conlin members of your eld- erly community and encoumge rem to make calls and write letere to their legislators in support of re bill. • Pass a resolution at your board council meeting in support of the fix reform bill. See above 'Sample Resolution'. Be sarc to give a copy to the local Freta. • Develop your awn set of cost waving calculation, under the $20,000 proposed humeatead exemptionm- iillUse above samples as a template. Publish the calculation in your mo- icipalnewsletter. Share them with the local press. While you are at i4 do the same with the above -Questions As Answers. B Water Pollution Cancel 0 WAr Wsournes 0 Operations A NYMemnce B Trampmfatlon& Clvil EnBi mein as Building Smlwg 0 At Quaky PermMln9 &Engineering 0 G wompMc lnmrmadon Systems BUSINESS FORMS & COMPUTER SUPPLIES Vp CALL Merit Integrated Products, Inc. ORIGINATORS AND DESIGNERS OF THE ONE STEP OPERATION SYSTEMS FOR . ASSESSING . VIILITV DISTRICTS . ACCOUNTING . 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