A proposal sponsored by the Maine Municipal Association to allow communities to assess a moderate fee on currently tax-exempt property is an important step in resolving a historic inequity in the way municipalities pay for basic services.
Maine’s towns and cities take care of police and fire protection, public works, snow removal and other functions for an array of properties that pay nothing in taxes. In good times it was easy for local government to look the other way, but as the budget noose tightens in the recession of 1991, there is a lean and hungry look being cast in the direction of the tax-exempts.
Bangor recently broached the subject with its fraternal organizations, hospitals and public institutions when it suggested that it would treat its fire department like a utility and assess a fee of all property owners based on their buildings’ square footage.
From the perspective of a business or residential homeowner, the concept is appealing. By spreading the $4 million annual expense of the fire department among the tax exempts ($400 million worth in Bangor), as well as the taxables ($1.2 billion), current taxpayers would save a significant amount of money. Everyone benefits from the fire department. Why shouldn’t everyone pay for it?
The utility fee approach is creative, but unfortunately it also may prove to be unconstitutional. The fee is a poorly disguised tax, and Maine law is explicit on the issue of taxing otherwise tax-exempt property to recover costs. The one exception at this time is tax-exempt property that generates rental income.
MMA is suggesting a change in the law that would expose all tax-exempts to a reasonable level of fees. The proposed ceiling on the level of fees to cover service costs would be equal to 50 percent of the mil rate charged taxable property the previous year. In this way, these institutions and organizations would not have to pay for either education or local welfare, which comprise at least 50 percent of most town and city budgets.
This bill will be contested bitterly by opponents. It will emerge amended and altered after a thorough scouring by hospitals and fraternal organizations and religious groups, all of which will contend that they render charitable service to their communities and therefore ought to continue to be exempted from paying for fire calls and snowplowing.
But homeowners and businesses also dig deep to pay for charitable causes and community projects (including hospital expansions and church renovations). There is no good reason why the burden for basic public services should not be fairly apportioned among all those who are served.