Bar Harbor may have found some help in its quest for a local option tax, which can come in many forms, but which would could allow towns and cities to opt in to specific types of additional taxes (maybe on retail or lodging or something else) and a portion of that additional tax would go back to the local community where it was generated.
Bar Harbor, hoping to ease some of its infrastructure woes and ease the burden of residential property owners, has been discussing the possibility for years, often cyclically advocating for the possibility.
Last week Ellsworth City Manager Charlie Pearce went before the League of Towns and advocated for the local option sales tax as well. This time, though, it was for his city—and others who might need it.
The Bar Harbor Town Council recently reiterated its support for the town to lobby for this. It also has come up during its Sustainable Tourism Task Force discussions as a recommendation. One was also proposed by state Rep. Gary Friedmann in the Legislature. It did not go forward.
No local option tax initiatives have passed the Maine State Legislature, though different legislators have tried for decades. They’ve come in many forms with many formulas, sharing different percentages with the state, with different proposed requirements.
“Every time it comes up, the majority in the room is in favor of it,” Tremont Town Manager Jesse Dunbar told Pearce. “It does seem like it’s always when it gets to Augusta, that’s when it gets, you know, killed.”
Realtors, Dunbar said, have often been against it because of the potential impacts to short-term rental owners (if the tax was a local lodging tax on short-term rentals).
Pearce’s framing of growth quickly turned to how pressure impacts Mount Desert Island communities and its housing and traffic and tourism changes.
For Pearce, the problem is that service centers like Ellsworth and Bar Harbor bear a disproportionate infrastructure cost from people outside their communities. Ellsworth, which has a population of roughly 9,000 serves the regional population of roughly 80,000. Bar Harbor has a year-round population of approximately 5,200 and hosts many thousands of visitors each year, thanks to the popularity of Acadia National Park.
The financial impact to those towns, Pearce argued, could be decreased if they could find a way to keep some of the millions sent to the state that industries like lodging and retail generate. The state taxes those industries.
If towns have to raise taxes to fund services, Pearce said, then that creates frustration in some residents. However, all for-profit businesses do pay property taxes just as residential property owners do.
“How do we deal with those growth pressures?” he asked rhetorically at the beginning of his discussion.
He advocated for his city and service centers like it, saying that Ellsworth has thousands of people coming to work — or traveling through to work every day and there is no off season.
Last year, he said, Ellsworth had a net negative for full-time government employees. However, the budget still increased 6-7% on the municipal side.
“It’s a $600,000 increase to public safety, that’s off the top, no additional police or firefighters, it’s just 600 grand, another $400,000 employee benefits across the board, a good bulk of which goes to public safety pieces,” he explained.
Pearce continued, “Our finance director just noted, when you look at public safety, schools, and public works, and the infrastructure piece, you’re at like 90% of the government side of the thing, so there’s this kind of like dual dynamic with increased taxes too, where those are the biggest drivers and growing, but it’s like, hey, cut the economic development initiative, cut the $14,000 branding piece that’s, you know, so we can put up a welcome to Ellsworth sign, which we don’t have in Ellsworth right now.”
Those types of cuts, he said, don’t help citizens, but their taxes still increase.
“So, for me looking long term with our finance director, it’s like ‘OK, these are some pretty substantial costs. What’s going on here? And how do you dig into kind of like we’re seeing a lot of growth?’”
In the early 2000s, there were studies on service center economies—like Ellsworth’s—that he received from Twila Fisher.
“It has all the recommendations we’re still talking about now, local option tax, the inequitable service center aspect, the infrastructure demand,” he said.
Being a service center increases property taxes “and that manifests itself in really angry and aggressive town meetings, especially in service centers,” he told the others.
Retail tax revenue generated by stores in Ellsworth — much like Bar Harbor and all other towns — goes to the state. However, Ellsworth and Bar Harbor don’t receive much of that state money coming back to their communities to help lower the property tax burdens on its citizens.
“They ain’t sending that money back,” Pearce said. “Yes, we’re getting revenue sharing…. Yes, we’re getting school reimbursements, but a lot of that’s passed through money, especially with some of the infrastructure pieces.”
The Hilton Home2 Suites, he said, adds tens of thousands of dollars to Ellsworth’s tax base every year.
That, he asked “is a net positive from the infrastructure investment, right?”
The state receives 9% in lodging off every single stay at the Hilton Home2 Suites.
“We ain’t getting that,” he said. “We just passed three retail cannabis stores in Ellsworth. The state’s going to get 14% of the gross on that, essentially.”
The legal fees for licensing that Ellsworth has to pay for those stores, he said, is roughly $10,000.
He hoped Maine’s incoming new governor, Hannah Pingree, could be invited to meet with the League of Towns.
Pearce also focused on Bar Harbor’s moratorium on hotels. Ellsworth has one on RV parks, which means that those properties can’t be built to those uses currently.
“But you can kind of see this, like, shoot, if you’re getting 9% on the gross in Bar Harbor, and there’s a line item in your budget, when you add that hotel, and you can say, hey, I reduced your property — This tourism reduced your property taxes by X. You know, it makes it a lot more palatable to your residents,” Pearce said. “Like, what the value of having a tourism economy is locally to your property taxes, to your school systems, to your infrastructure. But when it’s ‘you know, hey, we’re going to add 300 more people here and we get, like, $25,000, $30,000 a year on the base of the property valuation.’“
This story was originally published by The Bar Harbor Story. To receive regular coverage from the Bar Harbor Story, sign up for a free subscription here.