Economic Development

Here’s the permanent place for ideas and discussion about economic development in South Berwick.

One Response to “Economic Development”

  1. Gretchen Straub Says:
    April 12th, 2008 at 6:52 pm

    Laying blame for the projected 26% budget increase on a lack of “economic development” is a poorly thought out argument.

    Let’s look at the reality of how “economic development” would have “saved” us from a 26% tax rate hike.

    In South Berwick the property tax rate is determined by one simple math equation.

    Here is the equation South Berwick used to come up with the rate we are all paying today:

    Amount to be raised ÷ Taxable Valuation Base = Tax Rate

    $8,450,297 ÷ $632,981,051 = $.01335 per thousand

    You can see this .01335 rate used on a typical tax bill as follows:
    tax bill

    We can see that if the Taxable Valuation Base goes up then the tax rate goes down, but

    the magnitude of this relationship is exceedingly relevant.

    Let’s determine the magnitude of the increase in valuation base required for the tax rate to stay the same for the manager’s proposed budget?

    26% Increase ÷ Constant Tax Rate = 26% of Valuation Base

    $2,197,077 ÷ .01335 = $ 164,575,056 increase

    “Economic development” would have had to bring in businesses property valued at: $164 MILLION.

    If “economic development” brought just 1 million dollars of added value a year that would be very successful.

    It would take 164 “successful years” to come up with increased property value of the needed $164 million.

    (The above calculation doesn’t even begin to describe the loss of state aid for education that South Berwick receives when Taxable Valuation Base increases. For every dollar that South Berwick increases its Taxable Valuation Base, the State of Maine decreases its funding to South Berwick. This is because South Berwick is near the optimum point of the funding formula curve that is based on Taxable Valuation Base and school age population. With SAD 35 representing 64.8% of our tax bill the tax benefit of “economic development” is reduced by the same 64.8%. )

    The argument of “economic development” as the answer to significant tax relief in South Berwick is simply unsupportable.

Leave a Reply