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Maine Senate Passes New Municipal Revenue Sharing Formula
04/10/2012   Reported By: Susan Sharon

If the Maine House follows the direction of the Senate, the state may soon have a new formula for distributing money to cities and towns. The Senate gave initial support to a bill that would eventually restore municipal revenue sharing and, supporters said, help equalize the way in which it is distributed.

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Backed by a majority of members of the Taxation Committee and endorsed by the Maine Municipal Association the bill's intent is to fully restore revenue sharing and change the formula for what's known as "revenue sharing 2." Currently, cities and towns are supposed to receive five percent of sales taxes and other state revenues. Those with significantly higher mill rates receive a 17 percent allocation. The trigger for such state relief is a property tax rate of 10 mills or higher, and that's what's known as "revenue sharing 2." Originally this formula was supposed to help communities that were considered "service centers." But now so many municipalities qualify that some say the purpose of revenue sharing 2 has been eroded. In addition, the system has been underfunded by 40 million dollars for the past four years...and that, says Democratic Senator Justin Alfond of Portland, creates a pressure cooker for cities and towns.

"It puts more pressure on all your budgets. It puts more pressure on the property taxpayers of all of your communities," said Sen. Justin Alfond (D-Portland).

So, what Alfond, a few other lawmakers and the MMA proposed is LD 1835, an Act to Restore Equity in Revenue Sharing. During debate on the Senate floor, Alfond told his colleagues that the bill would change the "revenue sharing 2" formula from the current ten mills to the current statewide average of 11.6 ...but in order for the mill rate to change, revenue sharing would need to be fully funded at five percent...and the change would be implemented over four years.

"We will go from ten mills to 10.5, 10.5 to 11, 11 to 11.5, to eventually where we get to where is the statewide average," Alfond said.

He said it's a matter of fairness and equity. That's because service center communities provide infrastructure and services used by residents of surrounding smaller towns. But while the plan would help Portland and communities with high mill rates, others would lose money. And that's why Senator Doug Thomas (R-Ripley) opposed it.

"To fully fund revenue sharing and then take the bulk of that money and give it to communities that can't control their spending is a policy decision that's going to wreack havoc with the whole state. We don't need to create incentives for people in the state of Maine to spend more tax money. We spend plenty now!"> But given that the MMA is consumed with the issue of revenue sharing, looking for solutions to the underfunding and formula fairness issues and given its strong support for the bill, Sen. Alfond says it only seems clear that the bill is a sound policy for Maine communities. After a brief debate the Senate agreed in a vote of 19-15. The bill faces further votes in the House and Senate later this week.

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