Last year, the Boothbay Harbor Board of Selectmen and then Town Manager Carlo Pilgrim set a goal of meeting the LD1 property tax levy limit. In a series of meetings, municipal budgets were cut and the final budget presented to taxpayers did not exceed LD1, at least not on paper.

This year, Boothbay Harbor taxpayers will be asked to vote to greatly exceed the LD1 limit calculated for the town. Town Manager Tom Woodin wants to clarify the Harbor's record on LD1 and hopes that voters will agree that LD1 is not a reasonable goal this year.

The goal of LD1 is to lower Maine's state and local tax burden by limiting government growth to rates reflective of income and population growth. Determining LD1 is complex, but the calculation basically uses last year's budget as its base and then limits any increase over that level to the rate by which personal income and property values have grown. The specific growth factors used are the increase in the town's property value and a statewide average personal income growth estimate. Any municipality that wishes to exceed the LD1 limit can, but must explicitly vote to do so.

This May, voters in Boothbay Harbor will be asked to do precisely that. Woodin estimates that this year's budget may exceed LD1 by roughly $235,000, depending upon what voters approve at town meeting. How can this budget exceed LD1 by so much while last year's was right on target? According to Woodin, while voters approved a budget last year that was about $9,000 under LD1, the actual corrected budget was about $190,000 over LD1. The Harbor's unusual budgeting process, which relied on setting budgets based on previous budgets rather than actual expenditures, resulted in an inaccurate assessment of the budget relative to LD1. This calculation error was not limited to last year. Woodin estimates that the 2006-2007 budget, estimated to exceed LD1 by $70,700, actually exceeded LD1 by about $260,000.

Of greater significance than its effect on the LD1 calculation, poor financial management and budgeting practices have resulted in the decimation of the town's undesignated fund and increased the town's reliance upon tax anticipation loans. Meanwhile, town departments, such as the DPW, have struggled to provide services without growth in funding. These factors make it virtually impossible to hit LD1 this year says Woodin. "LD1 is a great goal. Its premise is to keep the tax burden rate consistent with personal income growth. But it's hard for this town to hit that goal. We would have to cut an additional $235,000 from the municipal budget to do it," notes Woodin.

Boothbay Harbor is in a bit of a financial jam, but it isn't unusual in not being able to meet LD1. The Maine State Planning Office reports that 43 percent of reporting municipalities did not meet their LD1 limit in 2007. They conclude that small communities had greater difficulty meeting LD1 because they have "less room to diversify revenues or cut services to keep property tax growth in check in response to rising costs, such as fuel and health care."