HomeMy WebLinkAbout2009-07-27 09-254 RESOLVECOUNCIL ACTION
item Nn_
Date: 7-27-09
A 254
Item/Subject: Resolve, Indicating the Opposition of the City of Bangor to the November Ballot
Question Seeking to Modify Current State Law on Tax and Expenditure
Limitations on State and Local Government.
Responsible Department: Executive
Commentary: A referendum referred to as Tabor II will appear on the November ballot. It amends
the current law limiting the property tax levy and state spending. Currently, the municipal tax levy can
grow by Maine's ten year average real income growth plus the percentage of new value added due to
construction. TABOR II would cap our allowable growth to no more than income growth and "forecasted
inflation." Unlike the current system where the Council can separately vote to exceed the LD 1 limit, a
referendum vote would be required. Finally, it would require our budget to be prepared and presented
at least two weeks before any budget meeting and in accordance with a cost center budget format
prepared by the State Planning Office.
TABOR II also impacts the State by changing the State's general fund spending growth limitation from
the current average annual real personal income growth plus the 10 year average population growth rate
to the most recent inflation rate plus the 3 year average population growth rate; extending spending
limits to the Highway Fund and all Special revenue funds; requiring a statewide referendum to ratify
increases in state spending; requiring a statewide referendum to ratify any new taxes, increases in tax
rates, or the repeal of any tax exemption; and requiring that certain notices and financial information be
mailed to every registered voter in the state prior to any statewide referendum, a process that carries a
significant cost.
This measure would have the effect of further limiting our ability to increase our property tax levy and
would potentially require periodic referendums should the Council find it necessary to exceed the LD 1
limit as was the case during the past year due to the then rapidly escalating cost of energy. It would
severely restrict the flexibility of State budgets, which would undoubtedly result in further reductions in
state aid to schools and municipalities and increase the pressure on the property tax.
Department Head
Manager's Comments: Government Ops voted 3-2 to forward to Council' hout recd ed Yon.
IJA%
4 City Manager
Associated Information: Maine Municipal Association summary of proposal.
Budget Approval:
Legal Approval:
Introduced for
X Passage
First Reading
Referral
Page , of _
1
Fh4nce Director
ity Solicitor
A 254
Assigned to Councilor - Gratwick July 27, 2009
CITY OF BANGOR
(TITLE.) Resolve, Indicating the Opposition of the City of Bangor to the November Ballot Question
Seeking to Modify Current State Law on Tax and Expenditure Limitations on State
and Local Government.
WHEREAS, since 2005, local governments in Maine have operated under a state law that limits the
extent to which the property tax may increase in any given year and that requires the local
governing body to vote on a separate article to exceed that limit; and
WHEREAS, this law also imposes expenditure limitations on State Government; and
WHEREAS, the purpose of this legislation was to limit state spending and the municipal property tax levy
in an effort to reduce the tax burden on our citizens and reduce Maine's national ranking on
tax burden; and
WHEREAS, since it was adopted, it has achieved its stated purpose, with current State spending and
municipal property taxes both below targeted levels; and
WHEREAS, the City of Bangor's municipal tax commitment for Fiscal Year 2010 is over $1.5 million below
the state established limit; and
WHEREAS, this citizen initiative, also known as TABOR II, will make changes to the current spending
and property taxation limits that apply to all levels of government in Maine; and
WHEREAS, it will impose growth limits on all state spending, including the State's Highway Fund, where
the current law places limits only on the State's General Fund; and
WHEREAS, TABOR II will establish Fiscal Year 2010 as the baseline year for all future growth in State
spending, a year where both the State General Fund and Highway Fund will experience
significant revenue declines; thus, this proposal will lock in State spending at current
depressed levels reflecting the impact of the current recession on State revenues; and
WHEREAS, current State spending limits are calculated on a cumulative basis allowing the amount
spending is below the limit to be carried forward to future years thus allowing some
flexibility in State spending and providing an incentive to spend below statutory levels;
TABOR II will base the following year's spending level on that of the current year, thus
creating a "use it or lose it incentive;" and
WHEREAS, TABOR II will require statewide voter approval for virtually all tax increases and expenditure
increases above the growth limit, a requirement that entails significant additional state and
local election expenditures and additional costs associated with its requirement that certain
notices and financial information be mailed to every registered voter in the State at an
estimated cost of $800,000 for each mandated referendum; and
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WHEREAS, at the municipal and county level, TABOR II also mandates referendum voting to approve
any budget that exceeds the municipal or county property tax limit; and
WHEREAS, it also requires municipalities and counties to adopt a uniform budget format as developed
by the State Planning Office; and
WHEREAS, both of these requirements will add costs that must be borne by local government and its
citizens; and
WHEREAS, TABOR II, if approved, will dramatically move state and local government in Maine in the
direction of budgeting by referendum, the results of which have become apparent in those
States where this has already happened; and
WHEREAS, it will limit the flexibility of both the State and its local governments to react to changing
conditions, community needs, and economic conditions and undermine the authority of
elected officials to make budgetary and service decisions based on information and a depth
of analysis unlikely to be undertaken by the average voter; and
WHEREAS, this measure will effectively override the following provision of the Bangor City Charter: "The
right of initiative or referendum provided herein shall not apply to ordinances, orders or
resolves providing for the appropriation of money, the municipal budget, the levy of taxes,
or the wages or hours of City Employees," a provision which explicitly recognizes the special
responsibility of elected representatives to make such decisions.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF BANGOR THAT
For the following reasons, the City Council opposes the so-called TABOR II question that will appear on
the November ballot and which would significantly modify current limits on State spending and on the
municipal property tax levy:
• The spending and levy limits established in current state law have been achieving their stated
goal of reducing the tax burden on Maine citizens;
• The requirement that state spending above the spending limit and most tax increases be subject
to approval at a statewide referendum will increase both state and local expenses and move
toward a system of budgeting by referendum which, as shown by experience elsewhere, is an
ineffective way to make budgetary and service level decisions;
• By establishing the current year as the basis from which future state spending increases are to
be calculated, state spending, particularly for the highway fund, will be starting from a depressed
level reflecting the impact of the current recession;
• Tax policy, budgets, and service levels are best decided through the core processes of
representative government where the people elect individuals and charge them with the
responsibility of making decisions based on data, analysis, debate, and public opinion while
balancing the need for services and expenditures that address the common good with the ability
of citizens to pay for such services.
IN CITY COUNCIL
July 27, 2009
Motion Made and Seconded
Motion Made and Seconded to
Amend by Substitution
Vote 7-1
Councilors Voting Yes: Blanchette,
Bronson, D'Errico, Gratwick, Palmer,
Stone and Wheeler
Councilors Voting No: Nealley
Concilors Absent; Hawes
Pass
CITY CLERK
(TITLE,)_ Indy eating the Opposition of the
City of Bangor to the November Ballot
Question Seeking to Modify Current State
Law on Tax and Expenditure Limitations on
State and Local Government
Assigned to Councilor.
Q9-254
(As Amended)
Assigned to
CITY OF BANGOR
(TITLE.) Resolve, Indicating the Opposition of the City of Bangor to the November Ballot Question
Seeking to Modify Current State Law on Tax and Expenditure Limitations on State
and Local Government.
WHEREAS, since 2005, local governments in Maine have operated under a state law that limits the
extent to which the property tax may increase in any given year and that requires the local
governing body to vote on a separate article to exceed that limit; and
WHEREAS, this law also imposes expenditure limitations on State Government; and
WHEREAS, the purpose of this legislation was to limit state spending and the municipal property tax levy
in an effort to reduce the tax burden on our citizens and reduce Maine's national ranking on
tax burden; and
WHEREAS, since it was adopted, it has achieved its stated purpose, with current State spending and
municipal property taxes both below targeted levels; and -
WHEREAS, the City of Bangor's municipal tax commitment for Fiscal Year 2010 is over $1.5 million below
the state established limit; and
WHEREAS, this citizen initiative, also known as TABOR II, will make changes to the current spending
and property taxation limits that apply to all levels of government in Maine; and
WHEREAS, it will impose growth limits on all state spending, including the State's Highway Fund, where
the current law places limits only on the State's General Fund; and
WHEREAS, TABOR II will establish Fiscal Year 2010 as the baseline year for all future growth in State
spending, a year where both the State General Fund and Highway Fund will experience
significant revenue declines; thus, this proposal will lock in State spending at current
depressed levels reflecting the impact of the current recession on State revenues; and
WHEREAS, current State spending limits are calculated on a cumulative basis allowing the amount
spending is below the limit to be carried forward to future years thus allowing some
flexibility in State spending and providing an incentive to spend below statutory levels;
TABOR II will base the following year's spending level on that of the current year, thus
creating a "use it or lose it incentive;" and
WHEREAS, TABOR II will require statewide voter approval for virtually all tax increases and expenditure
increases above the growth limit, a requirement that entails significant additional state and
local election expenditures and additional costs associated with its requirement that certain
notices and financial information be mailed to every registered voter in the State at an
estimated cost of $800,000 for each mandated referendum; and
WHEREAS, at the municipal and county level, TABOR II also mandates referendum voting to approve
any budget that exceeds the municipal or county property tax limit; and
WHEREAS, it also requires municipalities and counties to adopt a uniform budget format as developed
by the State Planning Office; and
WHEREAS, both of these requirements will add costs that must be borne by local government and its
citizens; and
WHEREAS, TABOR II, if approved, will dramatically move state and local government in Maine in the
direction of budgeting by referendum, the results of which have become apparent in those
States where this has already happened; and
WHEREAS, it will limit the flexibility of both the State and its local governments to react to changing
conditions, community needs, and economic conditions and undermine the authority of
elected officials to make budgetary and service decisions based on information and a depth
of analysis unlikely to be undertaken by the average voter; and
WHEREAS, this measure will effectively override the following provision of the Bangor City Charter: "The
right of initiative or referendum provided herein shall not apply to ordinances, orders or
resolves providing for the appropriation of money, the municipal budget, the levy of taxes,
or the wages or hours of City Employees," a provision which explicitly recognizes the special
responsibility of elected representatives to make such decisions.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF BANGOR THAT
For the following reasons, the City Council opposes the so-called TABOR II question that will appear on
the November ballot and which would significantly modify current limits on State spending and on the
municipal property tax levy:
• The spending and levy limits established in current state law have been achieving their stated
goal of reducing the tax burden on Maine citizens;
• The requirement that state spending above the spending limit and most tax increases be subject
to approval at a statewide referendum will increase both state and local expenses and move
toward a system of budgeting by referendum which, as shown by experience elsewhere, is an
ineffective way to make budgetary and service level decisions;
• By establishing the current year as the basis from which future state spending increases are to
be calculated, state spending, particularly for the highway fund, will be starting from a depressed
level reflecting the impact of the current recession;
• Tax policy, budgets, and service levels are best decided through the core processes of
representative government where the people elect individuals and charge them with the
responsibility of making decisions based on data, analysis, debate, and public opinion while
balancing the need for services and expenditures that address the common good with the ability
of citizens to pay for such services.
BE IT FURTHER RESOLVED THAT
We urge all citizens to become fully informed on this proposal prior to the November election by
becoming familiar with the language of the proposal and reviewing materials provided by those
supporting and opposing this measure.
9 54
An Overview of TABOR II
(prepared by the Maine Municipal Association)
Maine Leads, a non-profit advocacy group, has collected signatures for a citizen's initiative
entitled "An Act to Provide Tax Relief', often referred to as "TABOR II". The initiative was written by
the Maine Heritage Policy Center, an organization dedicated to promoting conservative public policies.
TABOR II makes changes to the current law that since 2005 has imposed spending limits on
Maine's State, county, and municipal governments and all school systems. That law, many elements of
which were developed by the Maine State Chamber of Commerce, is referred to as "LD 1". TABOR II
repeals the LD 1 spending limit system as it applies to State government and replaces it with a
structurally different system. TABOR Il modifies the LD 1 spending limit system as it applies to
municipalities and counties without totally replacing it.
Generally, the TABOR II changes would place additional statewide limits on the authority
of. (1) the voters at town meeting; (2) the representative town or city councils; (3) the boards of county
commissioners and the county budget advisory committees, and (4) the Maine Legislature to adopt
budgets or enact tax changes that exceed certain limits established by formula in the TABOR II
initiative.
TABOR II is different in a number of respects from its predecessor, "An Act to Create a
Taxpayer Bill of Rights" (now referred to as "TABOR I"), which Maine voters rejected in 2006. The
following is an outline of key differences between TABOR II and Maine's current spending limit law
(LD 1).
With respect to state government:
■ TABOR II imposes growth limits on all state spending, including the State's Highway
Fund, not just General Fund allocations like current law. Current law restricts state spending
from the General Fund account. TABOR II would also apply its spending restrictions on each
dedicated account in the state budget, including the Highway Fund and dozens of "Other Special
Revenue Fund" accounts.
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■ TABOR II recalibrates the entire spending limit system for state government, and in so
doing TABOR II establishes Fiscal Year 2010 as the baseline year for all future growth in
the State's General Fund, Highway Fund and Special Funds revenue. Because of the current
nationwide economic recession, the FY 2010 General Fund and Highway Fund revenues are
currently projected to come in at unusually low levels (see General Fund and Highway Fund
baseline chart, below). For example, the General Fund appropriations for FY 2010 are fully
$202 million less than the total General Fund appropriations two years ago, in FY 2008. The FY
2010 General Fund appropriations are $51 million less than the appropriations of FY 07, which
represents the period of time the first version of TABOR was rejected by the voters. Similarly,
Highway Fund appropriations for FY 2010 are $40 million less than the Highway Fund
appropriations of FY 2007. Going forward, therefore, TABOR II will have the effect of locking -
in state -level spending at historically low levels.
■ TABOR II's growth limits are more volatile than current law. TABOR II limits the growth
of state spending to three-year average population growth plus previous year's inflation.
Current law (LD 1) limits growth to ten-year average real growth in total personal income plus
ten-year average population growth. The LD 1 limit is more stable over time.
■ In certain circumstances, TABOR II may result in higher growth limits than current law.
Under current law the state's spending growth allowance is the average annual real increase in
total personal income (2.28%) plus the 10 -year average state population growth rate. The total
growth allowance would be calculated today as 2.87%. Under TABOR II, the state's spending
growth allowance would be the most recently calculated rate of inflation plus the 3 -year average
state population growth rate. The TABOR II total growth allowance would be calculated today
as 4.15%. As evidence of the volatility of the TABOR II growth allowance, the Legislature's
Office of Fiscal and Program Review projected the going -forward growth allowances under
TABOR II to be 1.84% in FY 2011 and then jump to 3.22% in FY 2012.
■ TABOR II creates a financial disadvantage for State government if the Legislature enacts a
budget that is more frugal than the TABOR II spending allowance. An element of the LD 1
spending limit system designed by the Maine State Chamber of Commerce allows a
government to be more frugal than the spending limit might allow without losing forever that
authorized spending capacity. The policy behind this element of LD I is to avoid creating a "use-
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it -or -lose -it" phenomenon where the government maximizes its spending allowance in order to
save those resources for a rainy day. TABOR II rejects that policy for State government. If the
Legislature enacts a budget that spends less than the TABOR II allowance, it would lose forever
that authorized spending capacity.
■ TABOR II changes the rules to erase a reserve built-up by the State over the last four
years. As described above, LD 1 allows a government that spends less in a fiscal year than its
spending allowance to effectively carry-over the unspent allowance into the subsequent fiscal
year. Over the four fiscal years since LD 1 was enacted, the State has consistently spent less in
General Fund revenue than the State's spending limit would allow. According to the "LD 1
Progress Report 2008" authored by the State Planning Office, the spending allowance reserve
built up by the State over the first four-year period was valued at $221 million. Because TABOR
II re -writes the rules the State has been working under and recalibrates the State's spending
allowance system, all of that reserved spending authority disappears.
■ TABOR II imposes significant additional costs on state and local governments by requiring
referendum voter approval for all revenue increases and for expenditure increases above
the growth limit. On the State level, this includes: (1) any increases in General Fund spending
and Highway Fund spending over the newly -designed TABOR II limits; (2) any state -level tax
rate increase, tax base expansion or repeal of any tax exemption that net generates more than
one-hundredth of one percent of the state's General Fund (approximately $300,000 a year), and
(3) the annual increases to the motor fuel taxes, which are currently indexed to inflation.
■ Prior to any statewide referendum vote, TABOR II requires that certain notices and
financial information be mailed to every registered voter in the State. Without considering
the administrative costs of assembling the data required by this mandatory requirement to mail a
special notice to the State's 994,000 active registered voters, the direct costs are estimated to be
approximately $800,000 for each mandated referendum.
■ Municipal costs of conducting statewide referenda. In addition to the costs of providing the
special mailed notice that the State would pay, the municipal costs to the property taxpayers
associated with conducting a statewide referendum election are approximately $1 million.
With respect to municipal and county government:
AI-
■ TABOR II mandates referendum voting on the county and municipal level. On the county
and municipal level, TABOR II requires a referendum vote to approve any budget that exceeds
the municipal or county spending limit, and those limits would be specially capped by TABOR II
in high-growth communities.
■ Although TABOR II preserves the current method for calculating growth limits for
municipal property taxes and county assessments, it further specifies that they may not
exceed the statewide ten-year average real income growth plus forecasted inflation. This
could restrict the ability of communities that experience new residential and commercial
development to meet increased service and infrastructure needs.
■ TABOR II would require municipalities and counties to adopt a uniform budget format as
developed by the State Planning Office.
General Fund and Highway Fund Appropriations 1999-2011
Source: Maine State Legislature, Office of Fiscal and Program Review
• The General Fund appropriations for FY 2009-2011 include approximately $194 million in federal
"stimulus" funding and $116 million from the state's "Rainy Day" (Budget Stabilization) Fund, both of
which represent one-time funding sources.
(June 24, 2009)
1999
2,201,734,442
16.6%
215,167,045
-0.4%
2000
2,316,629,198
5.2%
268,704,902
24.9%
2001
2,645,121,992
14.2%
293,315,365
9.2%
2002
2,565,345,849
-3.0%
290,385,517
-1.0%
2003
2,540,382,576
-1.0%
288,309,449
-0.7%
2004
2,642,999,485
4.0%
293,574,323
1.8%
2005
2,784,473,472
5.4%
310,931,897
5.9%
2006
2,871,878,613
3.1%
349,584,284
12.4%
2007
2,978,358,710
3.7%
346,221,340
-1.0%
2008
3,129,325,355
5.1%
336,160,213
-2.9%
2009*
3,019,596,034
-3.5%
335,410,803
-0.2%
2010*
2,926,891,598
-3.1% 1
306,623,946
-8.6%
2011*
2,885,022,849
-1.4% 1
303,913,274
-0.9%
Source: Maine State Legislature, Office of Fiscal and Program Review
• The General Fund appropriations for FY 2009-2011 include approximately $194 million in federal
"stimulus" funding and $116 million from the state's "Rainy Day" (Budget Stabilization) Fund, both of
which represent one-time funding sources.
(June 24, 2009)