February 15, 2015; Seacoast Online

Less than a month ago, we published a newswire about a proposal by the governor of Maine to levy property tax on some nonprofit organizations. That story was updated with a focus on the impact on some camps run by nonprofit organizations. The implications of the budget proposal continue to be explored, this time in an article focusing on a specific area of the state, and the impact the bill would have there.

As a quick recap, Gov. LePage of Maine has put forth a budget that would significantly reduce the top income tax rate (from 7.95 percent to 5.75 percent) and proposes to replace this lost revenue by increasing sales tax by one percent. Aside from the fact that this benefits the very wealthy and asks all consumers to make up the difference, another proposal in the budget is to eliminate all municipal revenue sharing, using that savings as a tax credit for homeowners. This revenue sharing program involves the state giving five percent of its revenue to local cities and towns. A third proposal is to require nonprofits with property valued in excess of $500,000 to pay property tax. Although it may seem coincidental, a spokesperson for the Governor has said that this initiative is not intended as a way to replace the revenue-sharing funds.

An example of the impact of these proposals can be found in York, in southern York County, just slightly north and east of Portsmouth along the coast. It is home to a significant number of nonprofit organizations, including a large hospital, museums, and the York Housing Authority, which operates some workforce development and affordable housing programs. In total, at current assessments, York stands to earn $239,000 in revenue by taxing nonprofits, which is about $30,000 less that it would lose in the revenue sharing cuts.

York Hospital alone would pay $118,394. The director of the hospital has pledged not to reduce staff, ensuring continued high quality care to all patients regardless of their ability to pay. The money to pay the tax bill would have to come from somewhere, which would in all likelihood be increased fee-for-service for those who have the ability to pay.

In South Berwick, a little further north than York, the largest nonprofit is Berwick Academy, the oldest private school in the state. The property the school sits on has a current assessed value of $14 million, meaning the school would have to pay taxes in six figures annually. The Head of School has said that since they have only a very small endowment, the money would have to come from staff cuts, increased tuition, or reduction in financial aid availability.

One of the unintended consequences these nonprofits point to is that the burden this tax would put on the budget will mean either a reduction of service or service at greater cost, making it harder to meet the needs of the state’s neediest. Another is that an adversarial relationship would arise between nonprofits and the municipalities where they work. The projections listed are on current assessed value and the income the municipality would receive is almost always lower than the amount lost in revenue sharing. These properties are considered exempt from tax right now, so they have not been given the same assessing scrutiny as taxable properties. In all likelihood, then, the numbers projected are low. Although the governor’s office has said this initiative is not tied to the proposal to eliminate revenue sharing, the municipalities themselves will probably see valuing nonprofit property as high as possible as a way of closing the budget gap.—Rob Meiksins