Tax Savings

Capital Equipment

 

Capital Equipment

As part of the financial review, CGR reviewed the combined asset inventory of major equipment and vehicles for both cities. We also examined the multi-year capital plans in both Lewiston and Auburn with regard to the intention to purchase major equipment and vehicles. Because of the size of both cities and school departments, and the common resource requirements of services both provide independent of one another, there are already multiple pieces of many equipment types in order to meet public service demands. As a result of merging into a single city and school department, there is no expectation that these equipment needs would change materially at “Day One” or that existing equipment would be redundant. However, a single capital planning process will likely allow some replenishment cycles to be lengthened, increasing cost avoidance over time.

Transition Costs

The process of combining two cities into one is likely to create certain transition costs, both in real expenditures and in staff time necessary to blend the municipal and education systems into a single entity. This section considers likely sources of transition costs in two categories: General implementation items (i.e. supplies, equipment, facilities, etc.) and direct personnel costs (i.e. harmonization of compensation). In neither case should all identified transition cost items be considered equally urgent or immediate – indeed, certain potential transition cost elements (e.g. implementing standard uniforms or vehicle logos) can likely be delayed until items are naturally ready to be replaced based on necessity and existing capital plans. By contrast, other items (e.g. legal consultation) will almost certainly be deemed necessary during the transition year to ensure the legal fidelity and accuracy of the implementation process itself. Readers should therefore view this listing as a guide of potential costs, rather than a definitive list of immediate imperatives.

In considering any transition costs related to education, it should be noted that on January 2, 2017 the State of Maine’s Governor issued an Executive Order entitled “An Order Regarding Support for Regional Efforts to Achieve Efficiencies in Delivering Educational Services.” The order provides, in part, for funding to support “regionalization, consolidation and efficiency adjustment purposes” and the “develop(ment of) a competitive process to award these funds to School Administrative Units prior to the end of the 2016-17 Fiscal Year to assist with the upfront costs associated with efforts that promote economic efficiencies within and across schools and districts…”[1]

 

 

Blending of compensation and benefits

Over time, the consolidation of Lewiston and Auburn would result in a blending of the salaries and benefits that currently cover most municipal and school employees. As is the case in most instances of merger, compensation levels differ for certain common positions between Lewiston and Auburn. In some cases, Lewiston municipal / school employees have higher rates of compensation; in others, Auburn employees do. Post-merger, as a combined city operates singularly, it is reasonable to expect some blending of those differences.

In considering this process of harmonization, two key factors should be noted.

First, a “blending” does not necessarily mean that every term and condition of every employee contract or collective bargaining agreement would naturally be raised to the higher level of the current two cities or school departments. Salaries, benefits, work rules and conditions of employment are collectively bargained together, with the end goal of every such bargaining process being an agreement that satisfies all sides – management, labor and taxpayers. One bargaining unit may have higher salaries but a lower health insurance or paid time off benefit, while another bargaining unit may have a different permutation. For this reason, it should not be assumed (nor is it reasonable) that a consolidated Lewiston-Auburn would result in employees and bargaining units being raised to the “highest common denominator” for every element.

Second, it is reasonable to assume that any blending that occurs will do so over time, and as a function of formal collective bargaining processes between unions, employees and management of the consolidated city. This is because existing contracts and obligations of the two cities (including collective bargaining agreements) would be assigned to the newly consolidated city and become an obligation thereof. Put another way, existing labor contracts of either city are not obviated by merger, but rather are transferred to the merged city.

This is consistent with the process established in State of Maine law regarding the creation of regional school units which can serve as a guide to consolidation. Title 20-A (Education), Part 2 (School Organization), Chapter 103-A (Regional School Units) reads as follows:

1. Assumption of obligations, duties, liabilities and rights. On the operational date established pursuant to section 1463, subsection 1, the regional school unit board of directors shall assume all of the obligations, duties, liabilities and rights of the participating school administrative units for all purposes under Title 26, chapter 9-A. The regional school unit is considered a single employer. Notwithstanding any other provision of law, the responsibilities of the regional school unit include:

A. Continued recognition of all bargaining agents that represented any bargaining units of employees who were employed by a participating school administrative unit, pending completion of merger proceedings described in this section.

B. Assumption and continued observance of all collective agreements between such bargaining agents and a participating school administrative unit, which agreements continue in effect for the remainder of their unexpired terms unless the bargaining agent and regional school unit mutually agree otherwise; and

C. Collective bargaining for an initial or successor collective bargaining agreement in any bargaining unit in which a collective bargaining agreement is not in effect on the operational date and for any interim agreement that may be required to align expiration dates in a regional school unit-wide bargaining unit, as described in this section.

The same section of law provides a framework for the structure of bargaining units post-consolidation, and delineates a process for integrating contracts going forward.

2. Structure of bargaining units. As early as possible after reorganization, all bargaining units must be structured on a regional school unit-wide basis. Bargaining units that existed in the participating school administrative units shall merge in accordance with the procedures and criteria in this section. Merger into regional school unit-wide bargaining units is not subject to approval or disapproval of employees.

A. Merger into regional school unit-wide bargaining units must be completed according to the schedule contained in this section and, except as required by paragraph H, no later than the latest expiration date of any collective bargaining agreement that was in effect on the operational date established pursuant to section 1463, subsection 1 that covered any employees in the merged unit.

C. Any additional bargaining units in a regional school unit must be structured as follows:

(1) In the initial establishment of such units, units must be structured primarily on the basis of the existing pattern of organization, maintaining the grouping of employee classifications into bargaining units that existed prior to the creation of the regional school unit and avoiding conflicts among different bargaining agents to the extent possible; and

(2) In the event of a dispute regarding the classifications to be included within a regional school unit-wide bargaining unit, the current bargaining agent or agents or the regional school unit may petition the Maine Labor Relations Board to determine the appropriate unit in accordance with this section and Title 26, section 966, subsections 1 and 2.

D. When there is the same bargaining agent in all bargaining units that will be merged into a regional school unit-wide bargaining unit, the units must be merged as of the operational date established pursuant to section 1463, subsection 1, and the regional school unit shall recognize the bargaining agent as the representative of the merged unit.

E. When all bargaining units that will be merged into a regional school unit-wide bargaining unit are represented by separate local affiliates of the same state labor organization, the units must be merged as of the operational date established pursuant to section 1463, subsection 1. The identity of the single affiliate that will be designated the bargaining agent for the merged unit must be selected by the existing bargaining agents and the state labor organization. Upon completion of the merger and designation of the bargaining agent and notification by the state labor organization to the regional school unit, the regional school unit shall recognize the designated bargaining agent as the representative of employees in the merged unit. If necessary, the parties will then execute a written amendment to any collective bargaining agreement then in effect to change the name of the bargaining agent to reflect the merger.

Prior to the operational date of the regional school unit, the single affiliate that is designated as the bargaining agent for the merged unit shall take measures necessary to prepare to meet its obligations as the bargaining agent on and after the operational date pursuant to Title 26, chapter 9-A, including, but not limited to, the authority and duty to negotiate a successor collective bargaining agreement that will take effect on or after the operational date. Until the operational date of the regional school unit, each existing bargaining agent retains all other authority, duties and obligations of the bargaining agent of the employees of the school administrative unit pursuant to Title 26, chapter 9-A.

G. When there are unexpired collective bargaining agreements with different expiration dates in the merged bargaining units described in paragraphs D, E and F, all contracts must be honored to their expiration dates unless mutually agreed to otherwise by the public employer and the bargaining agent. Collective bargaining agreements must be bargained on an interim basis in any merged bargaining unit so that all collective bargaining agreements expire on the same date.

As of the writing of this report, the current contract status for Lewiston and Auburn’s respective collective bargaining units is as follows:

Lewiston City

Expiration

Police Supervisors

Mid-2018

Police

Mid-2018

AFSCME – Professional Technical

Mid-2017

AFSCME – Public Works

Mid-2017

MSEA

Mid-2017

Firefighters

Open Contract

 

 

Lewiston Schools

Expiration

Administrators

Mid-2019

Food Service Managers

Mid-2019

Education Technicians

Mid-2019

Food Service Workers

Mid-2019

Teachers

Mid-2018

MSEA

Mid-2017

 

 

Auburn City

Expiration

Firefighters

Mid-2019

Police Command

Mid-2017

Police

Mid-2017

Public Services Department

Mid-2017

MSEA Administrators

Open Contract

911 Telecommunicators

Open Contract

 

 

Auburn Schools

Expiration

Teachers

Mid-2019

Education Technicians

Mid-2018

Administrators

Mid-2018

Support Personnel

Mid-2018

Food Service

Mid-2017

Leveling Up Analysis

In order to provide a frame of reference for the possible harmonization of employee compensation, a “leveling up” review was completed for the municipal and school workforces. As part of its options review for each workgroup, the CGR study team completed an informal positional compensation analysis in each department to ascertain the potential impact salary harmonization may have on a consolidated city.

Three points should be noted.

First, the compensation analysis considers salary differentials only. Salaries are, of course, the single largest component of the compensation package. While municipal and school employees in Lewiston and Auburn do participate in common retirement systems, in certain instances the pension tiers or benefit levels provided to employees differ. Similarly, while employees are generally offered common health benefit options through a common carrier, the employee / employer share of premium costs does differ between the two cities / schools (indeed, even between departments within the same city / school). As noted above, although salaries are the largest component of the compensation package, they are only one component, and formal collective bargaining involves broader negotiation and balancing of the full suite of wages, fringe benefits, work rules and terms / conditions of employment.

Second and related, it is not intended to be (and should not be viewed as) a precise or guaranteed adjustment. Rather, it is intended to offer an estimated range. The precise adjustments to salaries that would occur post-merger will be subject to formal collective bargaining (as noted in the sections of state law presented above), and thus are indeterminate at the current time.

Third, the estimates are based on existing staff levels (i.e. the impacts if current workforce complements were simply combined in full without restructuring, adjustment or reduction). Any restructuring or reductions that occur at- or post-merger would reduce these figures. The numbers are therefore conservative in nature. Further, they would be netted against any efficiency savings.

Estimated potential leveling up impact ranges are shown in the following table. It should be noted that these are conservative estimates in that they are based on existing staffing levels. Any staffing efficiencies that result in reductions in a merged city would reduce these costs commensurately.

City

Range

Administrator

$20,000 - $35,000

Clerk

$25,000 - $50,000

Tax Assessment

$20,000 - $35,000

Social Services / Gen Assistance

  $5,000 - $20,000

Human Resources

$15,000 - $35,000

Finance

$20,000 - $30,000

Economic / Community Dev

  $5,000 - $20,000

Planning / Permitting / Codes

$35,000 - $50,000

Information Technology

  $5,000 - $20,000

Public Works

$70,000 - $140,000

Police

$50,000 - $90,000

Fire and EMS

$200,000 - $320,000

 

 

Schools

Range

Teachers

$400,000 - $550,000

Education Technicians

$200,000 - $250,000

 

 

Total

$1,070,000 - $1,645,000

 

Summary of Tax and Non-Tax Impacts from Consolidation

If voters in Lewiston and Auburn voted affirmatively to consolidate, the resulting structure would impact property taxpayers. The impacts presented in this summary are based on the average valued property in each of the cities. The actual impact on individual properties would differ based on whether the property is above or below the average value in either jurisdiction.

Longer-Term and Non-Tax Considerations

Although the following analysis looks explicitly at the financial impact of consolidation, it is important for the Commission and community to consider other potential long-term considerations beyond the direct and immediate fiscal effects. A municipal consolidation could potentially offer additional budget flexibility; staffing / operational efficiencies; joint facility planning; capital cost avoidance; expansion of improvement districts beyond the current municipal boundaries; improved credit ratings that can reduce capital borrowing costs; and more. In sum, the financial impacts of consolidation are critical to evaluating its appropriateness, but these long-term factors also bear consideration, notwithstanding the inability to project their impact at the current time.

 

 

Calculating the Fiscal Impact

Calculating the fiscal impact of consolidation is an iterative process based on current spending levels and tax levels, and certain assumptions about future costs. Here are the steps we took:

1.      Laying Out Current State. Calculate the “current state” in both cities, based on the FYE 2016 budget, property tax levies and assessed valuations.

2.      Adjusting Property Valuations. Adjust current valuations to be equalized against state valuation levels. Presently Lewiston’s tax rate is considerably higher than Auburn’s, but this compensates for Lewiston’s properties being assessed at a level below market value (and below comparable Auburn values). Incorporating the equalized state valuation ensures that we are able to compare property tax levels and assessments in Lewiston and Auburn on an “apples to apples” basis.

3.      Separating Pre-Existing Debt Service. Separate the proportion of property taxes that get allocated to current debt, since in the event of merger Lewiston’s pre-existing debt service would remain in the former Lewiston, and Auburn’s would remain in the former Auburn.

4.      Summarizing Current State but Excluding Current Debt. Restate the current state excluding debt service.

5.      Applying Projected Cost Impacts. Apply projected cost impacts using two models:

·         Citizen Workgroup Recommended Model: This model incorporates the collective recommendations made by the four workgroups presented earlier in this report.

·         Max Savings Model: This model incorporates the most financially-beneficial alternative developed by CGR during the review process.

As noted earlier in this report, the workgroups did not always endorse the most financially-beneficial alternative because the participants focused on reviewing both financial and service impacts. In several instances the recommendation was one that did not generate the maximum savings. In some cases, the recommendation resulted in modest cost increases. Clearly, the workgroup process was not focused exclusively on saving money, but rather balancing savings with the perceived service needs of the merged community.

Step 1: The Current State

At present, the average residential property owner in Lewiston pays $4,036 in municipal and school taxes, and the average residential property in Auburn pays $3,292. These figures are derived from two basic numbers: First, the 2016 property tax levy (i.e. the amount of money the governing bodies decide to generate through property taxes to fund their respective budgets), and second, the 2016 taxable assessed valuation (i.e. the assessed value of all taxable properties within each municipality). Dividing the levy into the assessed valuation determines a tax rate. In Lewiston, the 2016 tax rate was $27.37 per $1,000 of assessed value; in Auburn, it was $21.44 per $1,000 of assessed value. That rate is then applied to individual properties to determine the property tax bill for each.

     

Table 1: Current State

Lewiston

Auburn

     

Property Tax Levy

   

Municipal (including overlay)

$30,388,232

$23,789,979

School

$19,107,966

$16,444,036

County

$2,372,745

$2,142,268

Total

$51,868,943

$42,376,283

     

Taxable Assessed Value (unadjusted)

$1,895,408,000

$1,976,187,978

Municipal Rate (including overlay)

$16.03

$12.04

School Rate

$10.08

$8.32

County Rate

$1.25

$1.08

Total

$27.37

$21.44

     

Median Home Value

$147,500

$153,500

Average Property Tax Bill

$4,036

$3,292

     


Step 2: Adjust to Equalized State Valuation

As noted, a truly direct comparison of budgeted tax rates requires additional adjustment. This is because Lewiston and Auburn actually assess at different levels of market value. For property taxes to be a truly equitable form of allocating costs, all properties within a particular jurisdiction must be valued at a common level. Within Lewiston, all properties are valued commonly; such is the case in Auburn. However, allocating property taxes across jurisdictions that have different levels of assessment requires an “equalization” process. In Maine, as in other states where assessments are determined by local jurisdictions, the state modified local assessments in a way that standardizes the different levels and enables fairer and more equitable allocations of property tax liability.[2]

When we adjust to the equalized state valuation, the true taxable assessed value of Lewiston increases (because it is currently assessed below market level), while the value of Auburn remains roughly the same (because it is currently assessed close to market value).

The equalized state valuation number for Lewiston is $2.203 billion, and for Auburn $1.960 billion. The combination of these two “apples to apples” numbers (or $4.163 billion) would serve as the assumed new taxable value for the merged city.

Step 3: Separate out Pre-Existing Debt Service

In the event Lewiston and Auburn were to merge, state law provides that the pre-existing debt obligation of the two cities not be combined. Rather, Lewiston’s pre-existing debt would remain in the former City of Lewiston, paid by taxpayers there; similarly, Auburn’s pre-existing debt would remain in the former City of Auburn, paid by taxpayers there. No pre-existing debt would be intermingled. Any debt assumed after the effective date of consolidation would be assumed by the new combined city, and would be shared by all taxable properties in the new city. But because pre-existing debt would be kept separate, the consolidated city would end up having a different tax rate based on whether a property is in the former Lewiston or former Auburn.

To account for this, our analysis identifies the portion of the 2016 tax rate in Lewiston and Auburn that is attributable to general debt service and separates it out. We then add that component back in at the end of the analysis, with the Lewiston share applying only to properties in the former Lewiston, and the Auburn share applying only to properties in the former Auburn.

In 2016, Lewiston paid $13.212 million in municipal and school debt service; Auburn paid $9.167 million. In the context of each city’s equalized state valuation, that results in a debt service tax rate of $6.00 in Lewiston (i.e. $3.76 municipal plus $2.24 school), and a debt service tax rate of $4.68 in Auburn (i.e. $3.23 municipal and $1.45 school). So on an equalized valuation basis, Lewiston’s debt service burden is approximately 28 percent higher. That difference would be reflected in a higher post-consolidation tax rate in the former Lewiston, but only until pre-consolidation debt is fully retired.

Step 4: Combined Current State

With the debt service costs removed, we can now show what tax rates in a merged Lewiston and Auburn would look like before any changes attributable to consolidation are applied. The following table combines the 2016 property tax levies of the two municipalities (minus debt service); combines their state equalized assessed value; and derives a combined tax rate.

   

Table 2: Current Combined State

Combined

   

Property Tax Levy (excluding debt service)

 

Municipal (including overlay)

$39,577,116

School

$27,773,805

County

$4,515,013

Total

$71,865,934

   

Taxable Assessed Value (state valuation)

$4,163,100,000

Municipal Rate (including overlay)

$9.51

School Rate

$6.67

County Rate

$1.08

Total

$17.26


As shown in the table, combining Lewiston and Auburn before applying any impacts of consolidation would result in a base tax rate of $17.26. To this figure we add back in the debt-related portion referenced above in Step 3.

In the former Lewiston, a debt rate of $6.00 is applied, resulting in a total tax rate of $23.26.

In the former Auburn, a debt rate of $4.68 is applied, resulting in a total tax rate of $21.94.

Step 5: Direct Tax Impacts of Consolidation

In this step we apply the projected impacts that could be provided by consolidation. Two models are used:

·       Citizen Workgroup Recommended Model: This model incorporates the collective recommendations made by the four workgroups presented earlier in this report.

·       Max Savings Model: This model incorporates the most financially-beneficial alternative developed by CGR during the review process.

The following summarizes the differences, by service area, between the Citizen Workgroup Model and the Max Savings Model. Where there is no difference between the Citizen Workgroup Model and the Max Savings Model, “no difference” is noted. Where there are differences and specific models are referenced under the Max Savings column, they refer to an option detailed in the section of this report addressing that particular service.

 

 

 

Citizen Workgroup Model

Max Savings Model

 

Administrator

 

Savings of $319,400

No difference

 

Planning, Permitting, Code

 

Savings of $18,600

Savings of $245,000
(see Model 3)

 

Social and Gen Assistance

 

Savings of $78,000

Savings of $103,200
(see Model 3)

 

Econ / Cmty Development

 

Cost of $23,300

Savings of $197,200
(see Model 2)

 

Library

 

Savings of $120,000

No difference

 

Finance and Operations

 

Cost of $21,600

No difference

 

Accounting

 

No change

No change

 

Tax Collection

 

Savings of $24,100

No difference

 

City Clerk

 

Savings of $54,000

Savings of $98.800
(see Model 3)

 

Assessing

 

Savings of $66,100

Savings of $122,000
(see Model 3)

 

Human Resources

 

Savings of $80,200

Savings of $111,300
(see Model 3)

 

Information Technology

 

No change

No change

Fire and EMS

Savings of $349,000

 

Savings of $750,000
(see Model 2 with assumed net reduction on personnel, insurance, EMS supplies, fuel, capital outlay and billing administration, netted against lost EMS revenue)

 

Police

Savings of $770,000

 

Savings of $1,000,000
(with assumed net reduction of up to 4 road patrol elements to align with service demand)

 

 

Public Works Admin

 

No change

Savings of $120,000
(see Model 1)

 

Arborist

 

No change

Savings of $49,240
(see Model 1)

 

Building Maintenance

 

No change

No change

 

Electrical

 

No change

No change

 

Engineering

 

No change

Savings of $49,300
(see Model 1)

 

Recreation

 

Savings of $62,400

No difference

 

Solid Waste and Recycling

 

No change

No change

 

Stormwater Operations

 

No change

No change

 

Streets and Highways

 

No change

Savings of $73,200
(see Model 1)

 

Vehicle Maintenance

 

No change

No change

 

Utilities

 

No change

No change

Education

Savings of $455,000

 

Savings of $750,000
(with assumed net savings from bringing at least one out-of-district SPED classroom in-district)

 

 

Direct Tax Impacts: Citizen Workgroup Recommended Model

 

 

Table 3a: Direct Tax Impacts of Consolidation

Combined

As recommended by workgroups

 
   

Starting Combined Property Tax Levy

 

Municipal (including overlay)

$39,577,116

School

$27,773,805

County

$4,515,013

Total

$71,865,934

   

Apply Net Recurring Restructuring Impacts

 

Administrator

($319,400)

Planning, Permitting and Codes

($18,600)

Social and General Assistance

($78,000)

Economic and Community Development

$23,300

Library

($120,000)

Finance and Operations

$21,600

Accounting

$0

Tax Collection

($24,100)

City Clerk

($54,000)

Assessing

($66,100)

Human Resources

($80,200)

Information Technology

$0

Fire and EMS

($349,000)

Police

($770,000)

Public Works

-

Administration

$0

Arborist

$0

Building Maintenance

$0

Electrical

$0

Engineering

$0

Recreation

($62,400)

Solid Waste and Recycling

$0

Stormwater Operations

$0

Streets and Highways

$0

Vehicle Maintenance

$0

Utilities

$0

Education

($455,000)

   

Apply Recurring Efficiency Impact

($2,351,900)

   

Revised Combined Property Tax Levy

$69,514,034

Revised Combined Property Tax Rate

$16.70

   

Full Differential Tax Rate (including debt svc)

 

Former Lewiston

$22.70

Former Auburn

$21.37

   

Projected Savings on Median Value Home

 

Former Lewiston

($125)

Former Auburn

($37)


 

Direct Tax Impacts: Max Savings Model

 

Table 3b: Direct Tax Impacts of Consolidation

Combined

With max-level potential savings

 
   

Starting Combined Property Tax Levy

 

Municipal (including overlay)

$39,577,116

School

$27,773,805

County

$4,515,013

Total

$71,865,934

   

Apply Net Recurring Restructuring Impacts

 

Administrator

($319,400)

Planning, Permitting and Codes

($245,000)

Social and General Assistance

($103,200)

Economic and Community Development

($197,200)

Library

($120,000)

Finance and Operations

$21,600

Accounting

$0

Tax Collection

($24,100)

City Clerk

($98,800)

Assessing

($122,000)

Human Resources

($111,300)

Information Technology

$0

Fire and EMS

($750,000)

Police

($1,000,000)

Public Works

-

Administration

($120,000)

Arborist

($49,240)

Building Maintenance

$0

Electrical

$0

Engineering

($49,300)

Recreation

($62,400)

Solid Waste and Recycling

$0

Stormwater Operations

$0

Streets and Highways

($73,200)

Vehicle Maintenance

$0

Utilities

$0

Education

($750,000)

   

Apply Recurring Efficiency Impact

($4,173,540)

   

Revised Combined Property Tax Levy

$67,692,394

Revised Combined Property Tax Rate

$16.26

   

Full Differential Tax Rate (including debt svc)

 

Former Lewiston

$22.26

Former Auburn

$20.94

   

Projected Savings on Median Value Home

 

Former Lewiston

($190)

Former Auburn

($105)


Summary of Fiscal Impacts

Recommendations made by the workgroups could generate $2.3 million in direct net savings (i.e. a 2.5 percent reduction off current tax levies) and would translate into annual recurring property tax savings for the median property in both Lewiston ($125/yr) and Auburn ($37/yr). At the max-level savings values, CGR estimates that total savings could rise to nearly $4.2 million (i.e. a 4.4 percent reduction off current tax levies), generating tax savings amounts for the median Lewiston property of $190 and the median Auburn property of $105.

Reflexively, residents and officials often look at the potential impacts of consolidation on a “snapshot” point-in-time basis. But it is important to note that the impacts shown above are, in each case, recurring and would be expected to continue forward. Thus, we can translate the above savings into multi-year terms.

Table 4: Ten-Year Tax Impacts

 
   

Aggregate Savings, Scenario 1

(based on workgroup recommendations)

$23,469,000

Savings on median property in Lewiston

$1,250

Savings on median property in Auburn

$370

 

 

Aggregate Savings, Scenario 2

(higher-level potential savings)

$41,735,430

Savings on median property in Lewiston

$1,900

Savings on median property in Auburn

$1,050

   

 

 

Review of Revenue Impacts

Based on a review of current revenue streams in both cities, CGR finds that there is no reason to expect material changes in the event of consolidation. Major revenue elements such as property tax and state revenue sharing will continue to be available, as will the state subsidy for a combined school department. Where certain revenues are subject to eligibility criteria, both cities currently receive them. For example, both are enterprise communities and therefore receive federal Community Development Block Grants. A combined city would therefore remain eligible. Such is the case with federal Title I education funds. Though not all school buildings are Title I buildings within the two departments, both are Title I districts and would therefore remain eligible if combined.

Additional Fiscal Impacts

As noted earlier, there are likely to be fiscal impacts in addition to those direct effects identified above. While real and potentially material, they are indeterminate at the present time. For example:

·       Capital Equipment: While we would not expect significant adjustments in the current capital equipment portfolio of a combined Lewiston-Auburn, acting as a single merged community may offer the opportunity to “stagger” capital equipment purchases across fiscal years. For example, where separate Departments of Public Works may each have to purchase a truck in the same year under the current structure, a single community may be able to space those purchases over multiple fiscal years, operating as a larger overall fleet.

Based on a review of city budgets, CGR estimates that Lewiston and Auburn (cities only) currently spend between ½ and 1 percent of their annual appropriations on operating capital outlay items (i.e. not bonded items). In total, this amounts to $0.4 to $0.8 million. If consolidation were to enable even a 5 percent reduction (or staggering) of those costs, it would result in an impact of as much as $50,000. A similar opportunity would exist in a combined school department. Applying the same percentages as in the cities, a 5 percent reduction would result in savings or deferral of $75,000.

·       Purchasing: The cities and school departments of Lewiston and Auburn utilize many common supplies and pieces of equipment. However, under the current structure the two communities largely procure those items independently of one another. Blending the two into a single procurement framework may offer economy of scale benefits that drive down unit costs.

Based on a review of city budgets, CGR estimates that Lewiston and Auburn (cities only) currently spend between 3 and 6 percent of their annual appropriations on supplies and materials (i.e. items that are not personnel, capital outlay, contractual or fixed charge-related). In total, this amounts to $3.2 to $4.9 million. Bulking larger purchases for a combined city may offer an opportunity to drive down unit costs. At even a 5 percent reduction, this would result in savings of nearly $250,000.
A similar opportunity would exist within a combined school department. Applying the same percentages as in the cities, a 5 percent reduction would result in savings of approximately $500,000.



[2] For a complete discussion of the issue of state equalization, readers are encouraged to review the baseline document, available on the Charter Commission’s website at http://newlacharter.ning.com/reference.

 

 

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