Maine Trails, August - September '09
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Troubling questions

Two voter referendums on the November ballot could have long-lasting implications for Maine’s transportation network

By Douglas Rooks

Transportation funding on the ballot
Two upcoming voter referendums, if passed, would have a devastating effect on the safety of Maine’s transportation network. Questions 2 and 4 are two of seven that will appear on the November 3 statewide ballot – including four initiatives and a citizens’ veto, a constitutional resolution and the transportation bond question.
 
The MBTA opposes these two referendums and has joined a coalition of individuals and organizations across the state in fighting to defeat them.
 
The questions read as follows:
 
Question 2
“Do you want to cut the rate of the municipal excise tax by an average of 55% on motor vehicles less than six years old and exempt hybrid and other alternative-energy and highly fuel-efficient motor vehicles from sales tax and three years of excise tax?”
 
Question 4
“Do you want to change the existing formulas that limit state and local government spending and require voter approval by referendum for spending over those limits and for increases in state taxes?”
 
FMI about the campaign to defeat these two questions, visit VoteNoOnTabor.org and NoBadRoads.org
 
Two seemingly unrelated referendums that will appear on the Nov. 3 ballot could have serious effects on transportation funding.
 
What the voters will make of the two tax-payer initiatives is anyone’s guess. With at least seven referendum questions on the ballot –including the four initiatives and a peoples’ veto – it may be more difficult to focus voter attention on the likely consequences of the tax-payer initiatives. Still, there is little doubt that the financial effects of the two questions on transportation, combined, could be very substantial.
 
Question 2 is generally known as the excise tax referendum. It would cut, by at least 40 percent, the municipal revenues usually spent on roads and bridges. According to an analysis by the Maine Municipal Association (MMA), that would reduce revenues by approximately $84 million. In some communities, vehicle excise taxes amount to more than 10 percent of revenue from local sources, exclusive of state aid. While not dedicated to roadwork, as a matter of state law, excise tax is closely correlated with municipal highway budgets, and most towns and cities spend more annually for summer paving and winter plowing than they receive from this source.
 
A feature of the proposed excise tax question that target cuts entirely to owners of newer vehicles is also attracting attention. By the third year, rates will have been reduced to the current sixth-year level of $4 per thousand. At least two-thirds of vehicles now on the road are six years or older.
 
In an editorial when the proposal was submitted to the legislature, the Bangor Daily News observed, “A perverse consequence of this bill, based on Mainers’ propensity to keep their cars longer, is that it makes the excise tax more regressive.”
 
Question 4, dubbed “TABOR II” (Taxpayer Bill Of Rights), is a redrafted version of a referendum the voters rejected in 2006. Unlike the defeated referendum, the question that goes before voters this fall has broader ramifications. TABOR II would change the formulas limiting state, county and municipal increases that have been Maine law for four years. It also would mandate a referendum vote for any budget increases above these new limits. On the state level, a referendum vote would be required for tax increases above a certain limit as well.
 
If passed, this referendum would apply to the annual increases in the fuel taxes that support the Highway Fund, that this year amounted to just 1 cent a gallon from the indexing provision. It would also affect future legislative actions like the 2008 increase in vehicle registration, license and title fees by $10 each, funds that were designated for the state’s bridge reconstruction program through the TransCap program championed by the MBTA.
 
At a time when the state is struggling to maintain its reconstruction and maintenance programs – Maine this spring canceled three-quarters of its planned maintenance surface treatment program for the current biennium – any diminished funding is viewed as serious.
 
Effects on towns and cities
Municipal officials are leading the campaign in opposition to the excise tax question. Geoff Herman, government relations director for MMA, recently told the Bangor Daily News that the effect of the referendum, if passed, would be to shift the burden to property taxpayers: “That money is going to come from somewhere, and if it doesn’t come from this particular source, it’s probably going to come right from the property tax itself, so that’s a concern.”
 
Other municipal officials see it somewhat differently. Greg Dore, long-time road commissioner in Skowhegan and a former MBTA president, said resistance to property tax increases is high and the more likely result would be serious cuts in local road programs. Municipalities are already seeing reductions in revenue sharing and education funding from the state and in dedicated revenue from the Highway Fund as well.
 
Bruce Manzer of Bruce A. Manzer, Inc., an excavating and paving contractor with plants in Anson and Bethel, was even more blunt. “If these questions go through, we’ll be done.”
 
Manzer does business with towns in Maine’s northern counties and New Hampshire, as well as work for both states’ departments of transportation. He views the possible reductions as a serious threat to an already beleaguered system and said, “the state doesn’t have the money to bring the roads up to standard, and it’s just going to get worse.”
 
Municipalities may also find themselves jumping through additional hoops just to maintain their road programs, even if they choose to tap property tax revenues to replace lost excise tax revenues. Towns exceeding the newly restrictive TABOR limits will have to conduct referendums to do so, even if they have approved the budget through an open town meeting.
 
The business view
Dana Connors, president of the Maine State Chamber of Commerce, said the chamber’s board is still assessing possible positions on the two questions. While the chamber has members who have been generally supportive of the current TABOR plan, it is less likely to take an active role in the excise tax campaign.
 
And in testimony earlier at the legislature, when the Taxation Committee was conducting a hearing on TABOR, Connors called attention to the effect on transportation funding, and the adverse impact on roads and bridges the measure would have. Prior to his Chamber service, Connors was commissioner of transportation in the Brennan and McKernan administration, from 1986-94.
 
In a recent interview, Connors said that transportation funding should not be viewed as discretionary from the business perspective.
 
“It’s very fundamental to our entire economy, in moving people and goods safely. The truth is that, while we should explore alternatives, in a rural state like Maine, upwards of 80 percent of all goods move over the highway system.”
 
He said such a view “should not be confused with a lack of sympathy for taxpayers,” noting that Maine’s excise tax rate is often cited as the seventh highest in the country. “But every single one of us has a road in front of his home or business. This is just a high priority investment we can’t afford not to make.”
 
Even if indexing provisions were approved by voters under a TABOR system, Connors said that existing fuel tax rates are proving inadequate to fund even present levels of investment. “People are driving less, so revenues are down, and the popularity of fuel efficient vehicles will drive them down further,” he said.
 
Many voters may be unaware of just how many programs could be covered by the referendum provisions, according to an analysis prepared by the Senate President’s Office. Including the General Fund and Highway Fund, there are at least 300 special revenue accounts and 35 internal service accounts that could be affected.
 
And in contrast to the existing indexing system, that aims to maintain the value of Highway Fund revenues, TABOR would require any “excess” revenues that exceeded the state’s projections to be automatically used to lower the gasoline and diesel taxes.
 
Finally, TABOR could threaten bond ratings for state, county and local governments. In both California and Colorado, similar tax and spending limitations have led to credit downgrades for numerous jurisdictions. Colorado, the only state that currently uses TABOR, has suspended major components of it for five years.
 
Local programs lagging
Greg Dore said that many communities, including Skowhegan, have struggled to maintain their local road programs even with current revenues.
 
If the referendum passed, he said, “public works would take the biggest hit.” While, in theory, selectmen and councils could propose reducing other programs to make up the difference, “you can’t do it,” Dore said, since the link to the excise tax is so clear.
 
Skowhegan maintains about 100 miles of roads, and in a good year the town manages to repave seven miles, and reconstruct about one mile; Dore said about 30 percent of the town’s roads are in need of reconstruction. In recent years, though, the repaving mileage has fallen to about three a year. “At that rate it would take 30-40 years to repave everything,” he said – clearly not a sustainable level.
 
While the voters in Skowhegan have consistently recognized the need to fund the town’s program responsibly, Dore believes that may not continue should the referendum pass.
 
Dore meets occasionally with fellow public works directors from central Maine and hears similar stories to what Skowhegan’s facing.
 
 “We’re all facing the same things. We’re all in the same boat,” said Dore.
 
Part of the problem, in his view, is tight budgets prompt towns to cut back in areas less immediately visible – like purchasing equipment for road maintenance. “Over 10 years, we can expect to buy about $1 million in machinery,” he said. “You may not spend it in that particular year, but it’s still a $100,000 cost.”
 
Unanswered questions
There are other questions about the referendums, if the voters approve them. One would be establishing an effective date of the excise tax reduction. If passed, the measure would take effect between mid-January and mid-February. The problem for towns and cities will be adjusting to a significant revenue decrease in the middle of the fiscal year.
 
Bangor City Manager Ed Barrett said implementing a reduction in the current budget year would leave no budget flexibility at all. With no other way to keep the budget balanced, municipalities would be faced with canceling work and laying off employees.
 
On TABOR, a much more complicated piece of legislation, there are many questions. One of great importance for future budgets concerns the base year – the current one – on which all future growth in permitted spending could occur.
 
Because state and federal revenues have been sapped by the current recession, TABOR could effectively lock tax rates at unusually low levels. TABOR would permit year-to-year increases no higher than general inflation plus population growth at each level of government. The LD 1 system of spending limits already in effect, by contrast, relies on a 10-year rolling average of economic growth as its basic yardstick.
 
Boom and bust
In Auburn, Bob Belz, the public works director, has seen the cycles of boom and bust before. According to Belz, his city was one of a number of municipalities where there was sustained pressure to reduce property taxes from the late 1980s into the 1990s.

The city did reduce taxes, but a disproportionate share of the cuts came from the highway budget.
 
By the mid-1990s, new city councils in Auburn responded to numerous complaints about road conditions by putting more money into the budget, enabling public works crews to gradually reduce the backlog of needed repairs.
 
The problem, Belz said, is that “it’s a lot more expensive to fix the roads once they’ve deteriorated than it would have been to maintain them in the first place.” He worries that measures like the excise tax referendum, however well-intended, would put municipal road budgets back into the same fix.
 
Bruce Manzer says he sympathizes with those who feel that the excise tax is a burden, and believes gasoline and diesel taxes are a better way to raise money for roads. “If you just put a nickel on the gas tax, you’d produce a lot of money, and you’d spread the load more evenly,” he said.
 
Manzer said he believes the public is actually much more supportive of transportation funding than many believe. As for a potential tax increase, he said, “A year ago, the price of gas was $4.25 a gallon. You can’t believe that the price changes aren’t a lot more disruptive than whether the tax is a little lower or higher.”
 
That, in essence, was what the legislature considered doing in June when it debated going beyond the scheduled one-cent increase to a higher level, while repealing the indexing law as part of the package. But no bill ultimately passed muster, and it’s unlikely lawmakers will reconsider the issue before the November vote.
 
That’s why Greg Dore considers it so important for transportation officials and local governments to start making the case for preserving existing funding, at least until other changes can be considered.
 
“With people afraid of losing their jobs, it’s hard to maintain spending, because we do have high costs,” he said. “We’ve got a lot of work ahead of us to get the attention of the voters. They have to know what the consequences would be.”
 
Manzer said that when the public is asked directly whether it supports transportation spending, such as the biennial bond issues, it usually says yes. “When you ask them whether they’d like to ride on a good road or a bad road, they understand.” If the same connection to the referendum questions can be made, he believes voters will take the same position again.
 
“We’re already paying the price,” he said, in the form of damage from substandard roads, particularly in rural parts of the state.

“We need to invest in some parts of the state that need it the most. Slashing our budgets is not the way to go.”

 

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