Town of Millinocket, Maine, starts process to decide what it will do when Great Northern Paper's last paper machine is gone, taking with it US$2.3M in annual property taxes; town's population expected to drop by 50% in next 10 years

MILLINOCKET, Maine , May 27, 2014 () – The new budget process set to begin Tuesday is about more than figuring out what to do about a projected loss of $2.3 million in property taxes, town leaders say.

The meeting with town and school employees at Stearns High School at 4 p.m. is the beginning of something Millinocket hasn't experienced since its incorporation more than a century ago, when the town was built around a paper mill.

It is the start of a process, Town Manager Peggy Daigle says, wherein town leaders can decide what their town will be once the last of the paper machines is gone. That machinery, the source of about $2.3 million in tax revenue annually, will be auctioned next month. The revenue decline will impact the 2015-16 fiscal year, she has said.

"They have to figure out what kind of a town they want," Daigle said. "They need to realize that the population is projected to go from 4,500 down to about 2,300 in the next 10 years. East Millinocket and Medway are going to experience similar declines.

"And with the decreased population," she added, "you have to figure out, who are they [residents]? What kind of services will they need? They [councilors] have to consider a policy about infrastructure -- how they keep the sewer and water and road system intact and then they have to determine what the public safety needs will be going forward."

Services are seldom reinstated once cut, Daigle said.

It is an especially difficult situation for residents who have for so long prided themselves on their identity as citizens of a papermaking town, but the auction is part of a general decline in papermaking and the local economy that has forced Millinocket's population to plunge from 7,742 to 4,466 residents over the last 40 years.

The $2.3 million is part of about $6.5 million in local revenues that pay for town services and schools, Daigle has said. Millinocket's total school budget for the 2013-14 fiscal year, which ends June 30, is $6.5 million. The municipal budget town leaders approved for that year is $6.2 million.

Daigle said she sees four basic options taxpayers can consider:

? They can offset the loss of $2.3 million in property tax revenues caused by the loss of the paper machine by increasing taxes. That would push the town's $28.95 mill rate to $38, which would almost certainly be the state's highest, Daigle said.

The other options all involve layoffs, Daigle said.

? They can seek salary cuts from all town and school workers to offset at least part of the loss of revenue.

? They can eliminate several town services.

? They can privatize many town services -- the town airport, library or trash plant -- to create savings.

Daigle said she doesn't favor across-the-board salary cuts for all town workers. This, she said, would weaken the town's ability to retain workers, causing too many of them to leave and making their replacement with workers equally skilled very difficult.

Nor does Daigle favor a dramatic mill rate increase. Businesses, she said, would be about as unwilling to relocate to Millinocket and pay so much more in taxes as workers would be unlikely to move to the region and keep so much less of their pay than their counterparts elsewhere.

The present mill rate is already high enough to make significant economic development just about impossible, she said.

Daigle said she will recommend about $300,491 in cuts to the council that would fulfill the town government's portion of her goal of cutting $600,000 from the 2014-15 school and town budgets. She recognized that her cuts would address only a fraction of the $3 million that needs to be cut over the next two years, calling her recommendations a first step.

Town leaders and residents need to approve those cuts and decide the rest, she said.

Daigle's cuts would eliminate town crossing guards, retiree health insurance and Drug Abuse Resistance Education supplies. The cuts would include a third of the town library's $155,000 budget, and $80,000 from the town's $130,000 capital projects budget.

Town department heads will determine how those cuts will be applied, she said.

One issue not addressed so far in the new budget: The $2.3 million in delinquent property taxes that paper machinery owner Cate Street Capital owes the town for the 2013-14 fiscal year. Town leaders have said they will place a lien against Cate Street or the companies it manages sometime soon.

Town leaders have similarly not addressed any revenues they might receive from the $140 million pellet mill that Cate Street hopes to build in place of the machinery being auctioned.

Cate Street is due to announce any day now whether or when it will close on its $16 million loan from the Finance Authority of Maine and restart the paper mill in East Millinocket.

Watch bangordailynews.com for updates.

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