DRAFT FISCAL CAPACITY POLICIES/STRATEGIES

December 11, 2011

State Goal: Plan for, finance and develop an efficient system of public facilities and services to accommodate growth and economic development.

Local Goal: Maintain and improve our fiscal capacity in a manner that allows us to make cost effective and efficient investments in the facilities and services required to support job creation and population growth.

Summary: Fiscally, Fort Kent has managed well considering rising operation and maintenance costs, a slowly declining population and the trend in residential development being spread out along rural roads. It is well documented that the cost of delivering services like road maintenance, police, fire and emergency protection, water and sewer and school busing all increase substantially as development spreads further away from the community center. The 2011 Comprehensive Plan update encourages development where services can be provided in a cost effective manner. This approach helps protect and maintain the community’s fiscal capacity and is explained further in the future land use section of the plan.

The Town’s fiscal capacity is measured using four parameters; assessed value, operating expenditures and revenues, borrowing capacity and alternative revenue sources. Analysis of these factors indicates that Fort Kent has both fiscal strength and opportunity. The town’s net valuation is 83.8% of the State’s full valuation. This is fair and acceptable figure on which to base local tax assessment. Local net valuation is calculated every year and is trending upward. In 2010, department operating cost increases represented only about 5% of the municipal budget; very modest given that the real operating cost increases since 2005 are more in the order of 20-30%. Basic department revenues indicate a declining trend from 2007 to 2010; likely the result of transient grants funding having closed. The town presently has borrowing capacity that would allow it to carry additional debt. Current long-term debt is .92% of the State’s full valuation; well below the 5% that is considered fiscally prudent. Per capita debt is 2.5% of the per capita income of $19,250. Well within the recommended limit of 4%-5% and a positive sign of fiscal capacity. Fort Kent would benefit from a thoughtful approach to alternative revenues as there is considerable potential for growth. The trend indicates little progress in reducing dependence on property taxes by shifting some of the burden. The town could adopt impact fees to lower the significant impacts certain development has on facilities and services. The building (land use) permit fee is a low flat fee that obsolete and does little to defray the cost of permit reviews and code enforcement.

The policies and strategies outlined below are based on the parameters that measure fiscal capacity. They are designed to maintain the town’s positive fiscal characteristics. The capital investment plan, is the overriding strategy that directs where investment in facilities and services should be made, what the priorities are and identifies potential funding sources. This forms the basis for the annual capital improvements plan that includes details on funding sources and timeline for specific projects.

Policy 1: Maintain a reasonable property tax obligation by continuing to stay

below the limits established in LD#1.

Strategies:

a. Advocate for required fiscal impact analysis of all State incentive programs that result in revenue losses to municipalities.

b. Continue to manage for a local net assessed valuation of 80% or above the State’s full valuation.

c. Complete an eligibility review of property uses for properties owned by tax exempt organizations and study options for payments in lieu of taxes (PILOT).

d. Establish and make annual contributions to a reserve fund for a 2017-2018 town wide revaluation.

e. Continue to assess new construction according to the revaluation base year.

Policy 2: Control the operating expenditures/revenues for all departments by a

cost/benefit approach to the availability and level of services.

Strategies:

a. Initiate public communication on efforts and methods used to control operating expenditures.

b. Complete a comprehensive review of existing fee structures for all departments, review annually and adjust fees as necessary.

c. Research opportunities to discontinue ownership or maintenance of existing rural roads that are vacant or with few residences and propose modest property tax reductions for owners.

d. Review fee formulas for service agreements with neighboring communities and adjust as necessary to cover administrative and capital costs.

e. Continue to maintain the annual fund balance level to minimize tax anticipation note/interest expense to meet tax obligation.

f. Participate in regional initiatives in solid waste, transportation, and joint purchasing and tax assessment/revaluation services that improve efficiency and control operating costs.

g. See specific strategies under public facilities/services.

Policy 3: Continue to manage the town’s long-term debt below 5% of the State’s full valuation for the community.

Strategies:

a. Continue to raise funds for certain capital improvements through annual contributions to reserve accounts. (vehicle and some equipment replacement, building systems, grants leverage, etc.)

b. Use tax rate and user fee increases to fund quality of life and job creation capital improvements based on strong public communication and justification.

c. Continue to borrow as necessary to protect infrastructure/facilities that meet the present needs of the community.

d. Implement an integrated funding approach to capital improvements that create jobs or expand services, utilizing grants, loans and tax revenues.

e. Maintain reserve fund balances for all Departments by developing a reasonable minimum base level for each.

Policy 4: Study local options for alternative revenues and annually review and

adjust all department fee schedules.

Strategies:

a. Complete a comprehensive review of existing fee schedules for all municipal departments, review annually and adjust fees as necessary.

b. Evaluate opportunities to establish new fees for services presently provided and new services requested.

c. Amend the (Zoning Ordinance) Building/Land Use permit fee structure to reflect the cost of permit review and code enforcement under the new state minimum building code.

d. Amend other ordinance fees including, but not limited to, fees for roads, subdivisions and windmills as necessary to defray review costs and/or increase revenues.

e. Study the use of impact fees in accordance with the SPO guide “Financing Infrastructure Improvements through Impact Fees” and implement as necessary.

Policy 5: Direct substantial capital investment to areas designated in the future

land use plan and capital improvements plan.

Strategies:

a. Develop a private investment incentives program based on tax rate, fees, services and grant/loan access for development in designated “growth” areas.

b. Amend development standards and permit fee structures in all ordinances to categorize development based on the future land use plans; desirability of location and cost efficiency in the delivery of public facilities/services criteria