City Councilors Jim Cloutier (left) and Cheryl Leeman are headed for another clash over a property tax rebate program. (photos/The Fuge)
City may revive tax rebate program
Critics call idea a “shell game,” consider legal challenge
By Chris Busby
This spring, the Portland City Council will consider enacting a property tax rebate program similar to the program it adopted three years ago – an initiative later ruled unconstitutional by a state law court. Critics of the 2003 Portland Property Tax Relief Program are rattling their swords again in anticipation of this latest measure, and another court challenge could be forthcoming.
The 2003 program provided property tax rebate checks (worth between $200 and $400) to about 8,700 qualified homeowners. But in order to do so, the city raised the tax rate for all property owners – owners of commercial and residential land and buildings.
Members of the business community cried foul, and in February 2004, the Maine Supreme Judicial Court agreed that the city’s program violated the State Constitution. It ordered the city to refund overcharged property owners, but $1.8 million in refund checks had already been sent out. The city ultimately had to use over $1 million in surplus funds to cover the court-ordered reimbursement.
Stung by the program’s defeat, Portland officials lobbied state legislators to devise a way to legally resurrect some form of the program.
Depending who you ask, they succeeded.
A state law passed last year allows municipalities to offer residents property tax rebate checks using the same qualifications by which homeowners and renters qualify for rebates under the state’s so-called “Circuit Breaker” program. An early draft of Portland’s new program was submitted to the City Council’s Finance Committee on March 1.
The new program would give qualified homeowners and renters a city-issued rebate check of up to $500 (the city checks will equal 25 percent of the state rebate checks, which are capped at $2,000). Recipients must have lived in Portland for the past year, and must meet the same income guidelines required for eligibility under the state Circuit Breaker program.
Single people who make over $74,500 a year and families clearing over $99,500 are ineligible. In order to qualify for the rebate, a homeowner’s property tax bill must amount to more than 4 percent of the household’s income. Renters qualify if they paid over 20 percent of their annual income in rent.
City Finance Director Duane Kline told committee members the program could need $1 million or more to provide rebates in its first year. And therein lies the rub: The city will have to get that money from somewhere.
“Who’s gonna pay for it?” Councilor Cheryl Leeman asked rhetorically in a recent interview.
Leeman opposed the 2003 city rebate program because it raised everyone’s property taxes in order to give back some of the money to a select group of property owners. “It’s the old shell game,” she said. “The general premise is so flawed: Raise somebody’s taxes and give them a rebate. How about ‘Keep the million and reduce my property taxes?'”
Councilor and Finance Committee member Jim Cloutier is a proponent of the new rebate program, and championed the 2003 initiative even after it lost in court. He said the money to fund it doesn’t have to come from a property tax increase this time. Instead, the city could use some of the millions of dollars it collects annually from parking operations and the rental of city-owned properties. Cloutier also suggested the city could draw from surplus funds in the general budget.
The source of the program’s funding has not yet been determined. The Finance Committee expects to discuss a final draft of the program in the coming weeks, and will then forward that to the full council for a vote.
Finance Committee Chairman Nick Mavodones said at the committee’s March 1 meeting that he expects the council will approve the program. Cloutier declined to predict how the full council will vote, but he said there is “substantial support” for the idea.
“I don’t know what one word describes what the city is doing more: hubris or arrogance,” said Orlando Delogu, the University of Maine law professor who led the effort to negate the city’s previous rebate program.
Delogu said that regardless of the new state law, the rebate program still violates the provision in Maine’s Constitution that requires “uniformity” in taxation. “It hasn’t been challenged yet, but it may well be,” he said.
“If it’s in conflict with the Constitution, someone will establish standing to [challenge] it,” said Bill Becker, Executive Director of the Maine Heritage Policy Center, a conservative think tank in Portland.
Delogu — a former city councilor and chairman of the Portland Planning Board who challenged Karen Geraghty in the 2003 race for her West End council seat — contends the program’s true purpose is politics, not property tax relief.
“What these people want is to remain in office, and the way you remain in office in a blue-collar state is to pander to what are perceived to be the low-income homeowner and renter needs,” he said.
Cloutier defended the program against charges it’s unfair. “It’s unfair only if you assume that people of limited means should have to pay a higher proportion of their income [in property taxes] than anyone else,” he said. “What’s unfair is the current system.”
Cloutier said families with median incomes ranging from $35,000 to $50,000 generally pay between 8 and 10 percent of their annual salary in property tax. “Most people with Mr. Delogu’s income pay substantially less than 8 percent,” said Cloutier, a lawyer and partner in the firm Cloutier Barrett Cloutier & Conley.
Becker has no problem with lower property taxes, but he said they should be lowered for all property owners, not just residents who meet certain guidelines. Business owners could use the savings to increase their employees’ salaries and benefits, he said, and an across-the-board tax reduction would help keep businesses and residents in the city.
Told of Cloutier’s comment that the program could be funded from sources other than the property tax, Becker said, “In the end, it’s not free money. Someone is going to have to pay a million more to be able to afford this.”
Cloutier said he is unconcerned about the prospect of another court challenge. But if there is one, he noted that this time, because the program is based on a state law, the Attorney General’s Office would be defending it, not the city.