The cost of having such facilities located within a municipality, and in some cases owned and maintained by a municipality, results in cost to the property taxpayers within those municipal boundaries. But though this small subset of citizens (property taxpayers within the municipality) pay for this infrastructure, or the opportunity cost of having such infrastructure be tax-exempt, all members of the general public have access to these services / infrastructure. Those citizens who live closest to this infrastructure will likely make the most frequent use of the infrastructure. Therefore, residents within unorganized territories (seasonal or year-round) regularly use such passive infrastructure and services in adjoining municipalities and service centers, but pay nothing toward their upkeep. As growth within the UTs accelerates, there will be a reciprocal cost to adjoining municipalities for the upkeep and replacement of such infrastructure. Unless new cost-sharing mechanisms can be implements, these costs will continue to be borne only by the municipal property tax payer.

There are three possible solutions to this problem. The first involves creating an adequate means to cost-share with the UTs which have residential populations which adjoin the municipality / service center for the cost of providing such regional infrastructure. The second solution is to create a common, regional impact fee for major development (i.e., development which impacts the entire region, not just a given municipality or unorganized territory) which would fund an account for capital outlay for regional infrastructure. The third solution also would fund a regional infrastructure account but would do so through capturing a portion of new property tax revenue which comes from new construction, renovation of existing structures, or land “splits” through subdivision. Much in the manner a tax increment finance district works, this third approach would use a portion of new tax revenue generated from new investments to fund regional infrastructure. Below are details to these proposed solutions to an on-going problem.

Cost-Sharing for Regional Infrastructure
Currently, the Unorganized Territories pay directly for services and infrastructure which directly benefit them. Examples would be plow contracts, fire protection contracts, and solid waste contracts. But UTs do not pay for indirect services, such as for the improvement of regional airports or recreational facilities in nearby municipalities or service centers. It has previously been deemed unconstitutional to have the UTs in a given county pay for such an indirect service unless ALL municipalities are paying for it, such as by including the cost for such infrastructure into the county budget. An example would be in seeking a contribution directly from the UT budget for a given county to fund the local share of improvements at a municipal airport which serves an entire region. Since the airport is open to everyone, the argument can be made that leveraging funds from the county's entire UT budget would be improper because residents throughout the county could benefit from the airport. But if there were a means test of some sort which could show that certain municipalities, certain Unorganized Territories, due to adjacency and seasonal and year-round residential population have a greater likelihood to utilize the services of the airport (in this case) than there should be a means for these UTs to contribute to the cost of this regional infrastructure. Adjoining municipalities can already share in such costs through inter-local cost-sharing agreements. It would be useful to write into statute enabling language to allow certain UTs to contribute as well.

Another example of such regional infrastructure is the Greenville Junction Wharf, which provides the only public boat launch and parking area on the Southern half of Moosehead Lake. If this wharf were to be reconstructed, it would not be fair to have the entire county help pay for it. Those residents who live near Greenville Junction would have a far greater likelihood of using the Wharf than would taxpayers who live more than an hour's drive from such a facility. But if a means test showed that certain unorganized territories – even certain adjoining municipalities – reasonably benefited from this infrastructure moreso than others in the county – than a cost-share could be paid from the nearby UTs and municipalities for the project. This would greatly benefit rural, isolated service centers who service unorganized territories with such indirect benefits through regional infrastructure.

How the unorganized territories have paid for such cost-sharing agreements in the past results in ALL of the UTs in a given county to share in the cost. For example, the cost-sharing agreement between the Town of Greenville and Piscataquis County to allow property owners and residents within the unorganized territories of Moosehead Junction Twp., Harford's Point Twp.; and Big Moose Twp. to contribute waste products to our landfill results in a cost which ultimately impact the mil rate for ALL of the UTs in Piscataquis County. Would it not be appropriate for a separate mil rate to be created for UTs which benefit from such an agreement, or are adjacent to a service center which provides for them public infrastructure (currently at no cost to them)? I would recommend enabling language for such cost-sharing agreements for capital projects for regional infrastructure result in a property tax impact ONLY to those UT property owners who are adjacent to or nearby the given infrastructure. Such a cost-sharing agreement would result in an invoice from the municipality which owns the infrastructure to agreeable adjoining municipalities and UTs for an agreed-to annual share of the capital cost of such infrastructure (e.g., debt service on a loan for the replacement of the Junction Wharf, or contribution to a reserve fund for construction of a solid waste transfer station prior to construction).

Impact Fee for New Development to Fund Regional Infrastructure
Another option to pay for regional infrastructure is to create a fund for such infrastructure and to have it held and managed collectively by the County, municipalities and service center in the given region. This approach is different from the previous as the funds to be collected would be generated by developers directly, and would be placed into a regional fund controlled by all governments in the region, not solely the municipality where the infrastructure is located.

Once the fund and its parameters are established, funding streams need to be created and implemented. One such funding stream would be the implementation of a region-wide impact fee for new development. If the entire region had a common impact fee, there would be no competitive advantage / disadvantage to build in any particular portion of the region. The region should probably be defined by those entities which all benefit from common regional infrastructure for such services as solid waste, recreation, airport, fire protection, etc. If the entire region offered a common impact fee – collected at the time building permits were issued – the funds collected (less a minor administrative fee for the cost of administering the system) would go the regional infrastructure fund. Literally the more development which occurred in the region, the more funds would be available for regional infrastructure for that population.

In the Moosehead Lake Region, such a system could look like this: the municipalities of Shirley and beaver Cove, the service center of Greenville, and the Unorganized Territories of Frenchtown, Lily Bay, Moosehead Junction Twp., Harford's Point, and Big Moose Twp. all agree to form a Moosehead Council of Governments or “MooseCOG”. The Council would have equal representation from each governmental entity. The Council would establish and implement a common impact fee for construction and development (both residential and commercial) within the region, and collect these funds from the developer via the municipality / territory where the development occurs. The funds would be held in this common regional infrastructure fund, which the council would control. When regional infrastructure needs came to the Council, they would approve the disbursement of such funds.

Tax-Increment Finance District (TIF) – Style Funding Stream for Regional Infrastructure Fund
An alternative (or additional) means of funding the Regional Infrastructure Fund would be to develop a means-test for UTs and municipalities to a service center and allow within the law optional development of a tax-revenue sharing program. The concept would be to allow member UTs, municipalities and service centers to pick a point in time (e.g., April 1, 2006) after which a portion of all new value in these communities (using the same measurement of growth as included in recently-adopted LD #1: new construction, renovation, and subdivision lot “splits”) would be used to fund regional infrastructure.

These UTs would have to have met a means test of adjacency and residential population which uses infrastructure within the region. If the means test revealed a subset of UTs and municipalities which derive benefit from regional infrastructure held in a service center, these UTs and municipalities would join the service center in diverting a portion of their new property tax value to the regional infrastructure fund.

For example, the selected UTs might be required to divert 50% of the new property tax revenue they generate from growth and development. This would mean that ½ of the new funding would go to the UT government account, and ½ would go to the new regional infrastructure fund. Whatever the value of these diverted funds (50% of new construction, renovation, and subdivision “splits”), it would be measured as a percentage of the total growth in all UTs statewide. If the growth in the given UTs represented, say, 8% of the total growth in ALL UTs statewide, than the member municipalities and service center would each be required to divert the same percentage – 8% - of their property tax revenue from new development. This would be done because otherwise, if the municipalities contributed ½ of the value of their new revenue to the infrastructure fund, the UTs as a collective entity would be paying a far lower percentage of their total new revenue from growth.

Respectfully Drafted;

John Simko, Town Manager - Town of Greenville*
Executive Committee Member, Maine Service Centers Coalition*
Member, Maine Municipal Association Legislative Policy Committee **

*These entities have expressed support for these general concepts, along with the Piscataquis County Commissioners, Selectmen from Beaver Cove and Shirley, and Governor Baldacci.

**MMA's Legislative Policy Committee has not commented on these proposals.