IN THE CITY
by Jim Bennett
The last four months have been a very difficult time for many in Presque Isle. The City Council has been wrestling with their desire to maintain the current level of services for residents and visitors while also trying desperately not to increase the costs associated with those services.
While the process resulted in what many have described as the most comprehensive review of all of the expenditures and revenues of the city, it also has unfortunately generated a lot of misunderstandings surrounding what the final budget actually included or did not include. In an effort to clarify that information, I will be offering a series of articles over the next few weeks that will summarize the budget.
If you had the opportunity to watch any of the budget meetings that were broadcast live locally, you may have noticed that members of the Council had a very large budget notebook that they often referenced. That budget notebook contains every line item and detail of every expenditure anticipated to be made in 2012. It also has historical information for the last three years (including 2011) in the same line items. In addition, every revenue line for the city is also included in the budget notebook. The same information is available to the public as well.
In addition to having copies of the budget available for the public at the Library and City Clerk’s Office, it is also available at the city website (http://www.presqueisle.govoffice2.com). This same budgeting process was also used in 2011, as part of a continuous effort to make your government more transparent and available to you.
For the first article, I have elected to share with you the major challenges that the Council faced this year. Before digging deep into those challenges, I think it is helpful to provide some basic information. The property tax rate is made up of a couple of major components. Obviously, a significant part of the tax rate is based on spending. Besides the net expenditures needed to operate the city, the total tax bill also includes money that the city collects on behalf of Aroostook County and SAD 1. The total amount due is paid to those entities, even if the property taxes are not paid by individuals on a timely basis.
For 2011, the total expenditures needed were: SAD 1, $5,375,811; Aroostook County, $574,758; and city expenses (net), $6,295,826. Other: overlay, $56,407; Tax Increment Finance, $168,300. Total is $12,471,035.
The total amount needed to be raised by taxes is then divided by the total taxable value of the community (each property added together) which was $530,639,780. The result is a tax rate of $23.50 or .0235. In addition, for every $530,639 the City either saves or spends the tax rate is impacted by $1; every $53,063 impacts the tax rate by $0.10; every $5,306 impacts the tax rate by $0.01.
Coming into initial budget deliberations (in October, 2011), there were nearly $500,000 of impacts that were over and above the 2012 budget. Left unmitigated, the impact would have been almost a $1 increase in the local tax rate. The Council did not see raising local property taxes as a viable option.
Like your personal budgets, the city is not immune to the increased cost of goods and services. To illustrate, the price of gas, oil, diesel fuel and heating oil would require an additional $136,913 in 2012. Also, the increased cost of health insurance would require another $104,402 in 2012. These are just two examples of big ticket items within the 2012 budget that the Council needed to fund without increasing property taxes.
Another big influence on the budget was the reduction in other revenues that the city receives to offset property taxes. For example, the excise tax paid when you register your vehicle is used by the city to reduce property taxes. Normally, there is some growth in this revenue stream from year to year. Unfortunately, there has been no growth in this revenue stream over the last couple of years. In 2010, residents paid $1,410,968 in this fee to offset property taxes.
Another of the large non-property tax revenue items is called State Municipal Revenue Sharing. These funds are generated by taking a set amount of a portion of state revenues, such as income and sales taxes, and sharing them with municipalities across the state. Over the last couple of years, the state budget has been balanced by taking large amounts of money away from the State Municipal Revenue Sharing Fund to pay other state bills. In 2009, the city received $1,686,472 from the state of Maine. In 2011, the city budgeted to receive $1,375,000. In 2012, the expected revenue is $1,200,000; a full $175,000 less than the current budget. The total reduction in 2012 is $468,472 less than revenue sharing received in 2009. That reduction in funding is almost, dollar for dollar, related to the state government’s arbitrary raid of this fund over the last few years.
Considering the increased cost of goods and services, health insurance and other items coupled with stagnant revenue streams and decreased state revenue sharing, the Council had to roll up their collective sleeves in order to balance the 2012 budget.
Hopefully this information has given you an understanding of the beginning numbers that the City Council was facing before they began their budgeting process. I trust all of you agree with the Council that simply raising the property taxes was not an alternative. Next week, I will provide you the details on how the budget changed in order to deal with the impacts discussed this week.
Finally, in closing, on behalf of the City Council and city staff, may each and every one of you find peace and joy over the next few weeks of holiday celebrations.
Jim Bennett is Presque Isle’ city manager. He can be reached at 760-2785 or via e-mail at jbennett@presqueisleme.us.
