Town Manager Delves Into Potential New Revenue Sources For Bar Harbor
And Their Roadblocks
BAR HARBOR—Eleven Bar Harbor residents, parents, grandparents, workers, and retirees sat down on a snowy Wednesday afternoon at the Jesup Memorial Library to talk to Town Manager Kevin Sutherland during his open conversation session called “Manager’s Minutes,” the last of 2022.
Sutherland began his time in Bar Harbor, on January 3, 2022, and has almost spent a full and eventful year at the town’s helm. On Wednesday he shared a rough draft of a memo detailing the Town Council’s actions of 2022.
The memo included a list of 18 policies reviewed. The town has 39 policies and he hopes that the Town Council and staff will review all of them by June 2023. The town also amended six ordinances and created two new ones.
Policies reviewed last year include:
However, for much of the 90 minutes, Sutherland and Communications Coordinator Maya Caines focused on the town’s complicated situation as a community of approximately 5,000 year-round residents that supports a massive tourism industry that requires a full fire department and police department and additional infrastructure for hotels and roads and waterfront through property taxes.
Compounding that situation, a great deal of land in the town is the national park and not buildable or owned by nonprofits, and therefore can’t create more property taxes. The town’s Land Use Ordinance controls what can be built, where, and the requirements for building properties.
ALTERNATIVE REVENUES AND LOCAL OPTION SALES TAX
Sutherland spoke of steps to find alternative revenues for the town, which isn’t one of the town council’s current top three priorities, he wrote, but “it was in the running.”
Toward that goal, the town rejoined the Maine Service Center Coalition, which often advocates for state-wide legislative efforts that help towns like Bar Harbor, towns that generate a great deal of sales tax for the state.
Sutherland said again Wednesday that Bar Harbor in 2021 generated $236 million in restaurant and lodging sales tax revenue for Maine, but less than 1% of that comes back to the town.
“In this current fiscal year, we budgeted $616,600 for state aid for our schools and $350,000 of revenue sharing for municipal services. That’s $966,600,” Sutherland told The Bar Harbor Story, Thursday. “Less than one percent. Less than half of one percent is coming back to the community in which it was generated.”
The revenues that are generated by the town are passed onto the state, but not the town itself for the infrastructure needs to support the tourism that creates the revenue.
The council recently spoke of a local option sales tax, which is defined by the SalesTaxHandbook as
“A municipal sales tax administered by a local government body, often a county or city. Local option sales taxes can also be administered by local transportation districts, school districts, recreation districts, and other special local government divisions.
“Traditionally, municipal governments rely on personal property taxes for the majority of their tax revenue. However, local option sales taxes account for a bit over 11% of all municipal tax revenue nationwide. In certain states, especially in the south, municipal governments are more reliant on sales taxes for revenue and thus levy higher local-option tax rates.”
These taxes occur in 27 states. In some states there are also regional special districts, which collect a local tax for one specific purpose. Helping to fund a town program or build a marina would be examples of a specific purpose.
“Every legislative session has had bills that have advocated for local sales tax,” Sutherland said. “They never make it out because everyone wants a slice of that money.” That money he refers to is the sales tax generated in Bar Harbor.
Local businessman Peter Hastings asked Sutherland who to contact in support of creating a local option sales tax. Sutherland suggested State Rep Lynne Williams, State Senator Nicole Grohoski, or Governor Janet Mills’ office.
A question for the council and town residents would be how much staff time and money does the town want to expend trying to get the state to pass a local option sales tax, Sutherland said.
“From everyone else’s perspective, Bar Harbor is fine,” he said, because they see it as a town with a comparatively low mill rate and fine economic vitality.
“We are the second largest generator of sales tax behind Portland. I think it would be beneficial for the state” to realize the impact that Portland and Bar Harbor have on the state’s overall economy, Sutherland said.
There have been local sales tax option bills presented to the Maine Legislature session after session. Those are generally opposed by several special interest groups as well as towns and municipalities throughout Maine that are not tourism centers. Opponents of the measures say that local sales tax options would impact lower-income Maine residents disproportionately and do little or nothing for communities that do not create sales revenue.
Typically, opponents use logic similar to the Maine Center for Economic Policy’s Sarah Austin’s here:
“The ten municipalities with the highest meals and lodging sales in the state generate 45 percent of the state’s meals and lodging tax revenues. But those same ten municipalities are home to just 16 percent of the population. Similarly, the ten municipalities with the highest total taxable sales in our state generate 42 percent of all sales tax revenue but represent only 19 percent of the state’s population.”
What isn’t in that equation is how 5,000 residents in Bar Harbor, a town where a disproportionate amount of land is not taxable because it’s either owned by Acadia National Park or parceled off into conservation easements and nonprofits is expected to support the infrastructure needs of those tourists and consumers who generate the sales tax that benefits the state.
The Maine Center for Economic Policy writes,
“By creating a new system of haves and have-nots, the local option sales tax would create even greater division between communities with means and those without. It would also be inadequate to meet our municipalities’ needs.”
It is also against a specific general local option sales tax, saying that it impacts poor Mainers more than property tax. The article does not speak to a local option lodging tax or fee.
There are five states with no sales tax. Maine’s general sales tax is 5.5 percent. It first began the sales tax in 1951. Groceries and prescription drugs are exempt.
NONPROFITS
Hastings also asked about Bar Harbor’s nonprofits and how their growth often takes away from the town’s tax base. He said that he couldn’t find any other town of 5,000 in the country that had as many nonprofits and percentage of land that wasn’t taxable as Bar Harbor’s.
Some nonprofits in Bar Harbor offer payments in lieu of taxes (PILOTS) to help defray the costs to the town and its residents’ tax bills.
“Are we asking for enough?” Hastings asked Sutherland.
In most cases, the PILOT is not anywhere near what the actual assessed value of the property would be, Sutherland said. The largest nonprofits are Acadia National Park and the Jackson Laboratory. The lab just wrote a $115,000 check for its annual contributions, Sutherland said.
“Those are continued conversations that we have,” Sutherland said. One of the bigger questions in these sorts of conversations become: How do you convince the board or president of a nonprofit to give back to the community and start contributing PILOTs or increasing the amount?
If the property’s use is not mission-critical to the organization, then that nonprofit’s property is taxable entity, like a housing component for the Jackson Laboratory.
Sutherland mentioned his time working in Ithaca, New York, where the there was an abundance of nonprofits. His tax bill there, he said, became higher than his mortgage. The town decided to move towards either infill or greater height of buildings to create more density. The town chose to increase the height of buildings, creating more taxable property that way. By changing the town’s codes, the tax burden shifted from 30% of the property owners supporting the town, to 45-50%.
OTHER ALTERNATIVE REVENUES—GRANTS
The town hired two contract grant writers this year to help Bar Harbor receive “big ticket grants.” It also joined the Community Resilience Partnership.
The town applied for and received seven grants this year.
The $50,000 CRP Municipal Building Electrification Grant is for an audit of the Bar Harbor Municipal Building and looks at turning the heating all to electric.
The Town Council and Warrant Committee will begin meetings focusing on the budget process this January. The budget is approved or amended by town voters each year at the town’s annual meeting in June.