AUGUSTA, Maine — A bill that would adjust the formula for how the state distributes money to municipalities passed through the Legislature’s Taxation Committee this week.
LD 1835, sponsored by Assistant Senate Minority Leader Justin Alfond, D-Portland, affects the Disproportionate Tax Burden Fund, commonly known as “revenue sharing 2.”
Currently, all municipalities receive a set percentage of revenue sharing from the state from sales taxes and other fees that helps pay for local services. Revenue sharing 2 kicks in for cities and towns that have a property tax rate that exceeds 10 mills.
A mill is equal to $1 of tax per $1,000 of property value. In other words, a homeowner in a town with a mill rate of 10 would pay $2,000 in taxes on a $200,000 home.
Alfond said his bill would restore the revenue sharing 2 portion of the tax code to its original intent by increasing the threshold from 10 mills to the statewide average mill rate, currently 11.76.
This would decrease the number of communities that receive revenue sharing 2 funds, Alfond said, but would help those communities with a higher property tax burden receive more assistance from the state.
Currently, more than 300 of the nearly 500 cities and towns in Maine receive revenue sharing 2 funds, which has in many ways diluted the purpose of those funds.
The one caveat of LD 1835 is that it would be applied only when municipal revenue sharing is fully funded by the state, which means 5 percent of all state revenue. Alfond said that could take a few years.
The bill also was amended in the Taxation Committee to stagger the eligibility threshold over a period of four years to provide a smoother transition for towns.
Currently, $94 million is budgeted for revenue sharing in 2013, but if the program were fully funded, that would jump to $138 million.
Although some communities would lose money and some would gain money from the state under LD 1835, all communities would end up getting more money if revenue sharing is fully funded. The Maine Municipal Association has endorsed the plan.
The measure now goes to the House and Senate.