HomeMy WebLinkAbout2009-07-27 09-255 RESOLVECOUNCIL ACTION
Item No. A 255
Date: 7-27-09
Item/Subject: Resolve, Indicating the Opposition of the City of Bangor to the November Ballot
Question Seeking to Decrease the Automobile Excise Tax.
Responsible Department:
Commentary: An initiative will be on the ballot in November ballot that, if approved, will
significantly cut motor vehicle excise tax rates. Under this proposal, vehicles that are 4 years old
or newer would see a rate reduction of between 50% and 70%. For vehicles in their fifth year,
the rate is cut by just under 40%. Vehicles older than 5 years would see no change. The excise
tax is one of the City's major non -property tax revenues. In both FY08 and FY 09, it accounted
for about $4.6 million. We have budgeted $4,400,000 this fiscal year. If approved, the City will
lose approximately $1.8 million per year in revenue. The changes could go into effect in
December or January at a loss for this year of approximately $900,000. A decrease of this size
would require an annualized reduction of 4.2% in the City's budget, excluding debt service.
Given the cuts necessary to maintain a stable tax rate for Fiscal Year 2010, the majority of this
reduction will require eliminating positions throughout the City.
I would recommend that the City Council adopt a resolve opposing this proposal for the following
reasons: expense reductions would require eliminating a significant number of positions and
eliminating or reducing programs to which the community has become accustomed and that it
expects; it would increase the City's reliance on property taxes since recovering the lost revenue
would increase the property tax rate by 75 cents; the amount the City receives in auto excise
taxes, in conjunction with State local road assistance, is roughly equal to the amount that the
City spends for summer and winter road maintenance, paralleling a user charge for street
maintenance; to some extent, the auto excise tax is more closely tied to ability to pay than is the
property tax since it is based on the age and value of a vehicle; a majority of vehicles in Maine,
estimated at 68%, are over five years old and their owners will not see a tax reduction; it would
become effective mid -year after the FY10 property tax levy has been committed, taking off the
table the option of increasing property taxes to offset at least a portion of the lost revenue;
Department Head
Manager's Comments: Government Operations voted 3-2 to forward to Council withou
recommendation
,_,V4rJ J6,
City Manager
Associated Information:
Budget Approval:
Finance Director
Legal Approval: 4Z2n
City Solicitor
Introduced for
X Passage
First Reading Page _ of _
Referral
Assigned to Councilor - Wheeler July 27, 2009
CITY OF BANGOR
(TITLE.) Resolve, Indicating the Opposition of the City of Bangor to the November Ballot Question
Seeking to Decrease the Automobile Excise Tax.
WHEREAS, a question will appear on the November election ballot that, if, approved, would result in a
dramatic reduction in the automobile excise tax; and
WHEREAS, vehicles less than six years old would see a reduction in the excise tax ranging between forty
and seventy percent, while vehicles six years old and older would see no change; and
WHEREAS, 67% of the vehicles in Bangor and 68% of vehicles statewide are six years old and older and
would see no change in their excise tax; and
WHEREAS, corporate and business fleets, which are the source of approximately one-third of the City's
excise tax receipts, would be a major beneficiary of this change; and
WHEREAS, this will result in an approximate 40% reduction in auto excise tax revenues received by the
City of Bangor; and
WHEREAS, the auto excise tax is the third largest revenue source supporting City General Fund
operations, providing the City with approximately $4.6 million dollars annually, an amount
which would be reduced by $1.8 million under this proposal; and
WHEREAS, auto excise receipts, when coupled with road assistance funding received from the State of
Maine, closely approximate the amount spent annually by the City for summer and winter
road maintenance; and
WHEREAS, to replace this lost revenue through property taxation would require the City to increase its
property tax rate by 75 cents per thousand of assessed value; and
WHEREAS, if approved, this reduction could go into effect as early as January 2010, six months into the
City's fiscal year and at a point where the primary option available to the City to adjust to
this loss would be to reduce the approved General Fund expenditure budget; and
WHEREAS, given the $1.3 million that was cut from the originally proposed Fiscal Year 2010 budget in
order to maintain a stable tax rate for that year, a mid -year expenditure reduction of this
magnitude would require the elimination of city services and staff, including positions in
such core services as Police, Fire, and Public Works;
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF BANGOR THAT
A 255
The City Council opposes the November ballot question that would significantly decrease the automobile
excise tax for the following reasons:
• Reducing the excise tax will increase the City's reliance on the property tax and likely require
property tax increases to maintain essential services otherwise funded through excise taxes;
• The excise tax is often more closely related to ability to pay than the property tax in that it
reflects the value of the vehicle purchased and drops over time as vehicles age;
• The excise tax, in conjunction with State provided local road assistance, closely approximates the
amount the City spends annually on summer and winter road maintenance, in effect functioning
as a form of user fee for street maintenance;
• 67% of the vehicles currently registered in Bangor would see no change in their excise tax since
they are six years old or older;
• If approved, these reductions would go into effect in the middle of the City's budget year,
requiring significant expenditure reductions, much of which could only be accomplished through
eliminating services and positions, including positions in such core municipal services and Police,
Fire, and Public Works.
IN CITY COUNCIL
July 29, 2009
Passed
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# Oo-255_
RESOLVE
(TITLE,) Indicating the Opposition of the
City of Bangor to the November Ballot
Question Seeking to Decrease the Automobile
Excise Tag
Assigned to Councilor__