A proposal by Gov. Paul LePage to suspend revenue-sharing for two years could leave Belfast with a significant financial hole to fill, according to Belfast city officials.

If the revenue-sharing payments were suspended, City Manager Joseph Slocum said, Belfast would be looking at a loss of $650,000 in funding. That gap would result in a one-mil property tax increase to residents if the city covered the funding loss through a tax increase, he said.

The city has seen its portion of the revenue-sharing funding decrease steadily dating back to 2008. When the city approved its 2012-2013 budget, Slocum estimated the city had seen a reduction of more than $400,000 in revenue-sharing since the beginning of the recession.

The state sets aside 5 percent of its monthly sales, corporate and personal income tax revenues to fund the revenue-sharing pool. Cities and towns receive a percentage of that funding, based on a calculation using state valuations, tax assessments and estimated or actual populations, according to the State Treasurer’s Office website.

The revenue-sharing system was established as a means to help ease the property tax burden for residents while providing funding for programs run by the towns that were previously handled by the state.

Although Slocum was skeptical that LePage’s budget would be approved as presented, he said he anticipates that Belfast will continue to see a reduction in the amount of revenue-sharing it receives.

A preliminary analysis distributed by the Maine Municipal Association stated that towns and cities would lose $283 million in property tax relief funds over the two-year period. The proposed budget would eliminate $139 million in fiscal year 2014 and $144 million in fiscal year 2015.

Because of those reductions, the Maine Municipal Association said, the resulting cuts from city and town governments “can only be described as extremely serious.”

LePage refuted the Maine Municipal Association’s assessment of his proposed budget, saying in his Jan. 25 weekly address that the amount of funding provided through revenue-sharing accounted for between 2 and 4 percent of the budget for cities such as Bangor, Portland and Waterville.

“It is not impossible for local government to save money, consolidate services and identify priorities. If revenue-sharing makes up as little as 2 to 4 percent of community budgets, it is reasonable to request local officials to find alternatives,” LePage said in his address.

LePage noted in his address that revenue-sharing has not been fully funded dating back to Gov. John Baldacci's tenure. The Maine Municipal Association estimated that the state has regularly taken about $40 million a year from the revenue-sharing fund under the LePage and Baldacci administrations.

Slocum acknowledged that a reduction in state revenue-sharing could mean the city has to make “hard cuts” in the budget.

“We may have to propose cuts people don’t like,” Slocum said.

Where potential cuts may come from is still unclear, but Slocum said he is asking each department head to provide a proposed budget by March 1, as well as a more detailed explanation of what challenges the departments face in trying to provide services.

“We want people to know we tried to put forth the best budget,” Slocum said. “Wherever the numbers end, they end.”

The City Council will receive the budget by April 1, with a final budget proposal completed by May 30. Residents will then vote on the budget on June 18, according to a memo from Slocum.

Republican Journal reporter Ben Holbrook can be reached at 338-3333 or at bholbrook@courierpublicationsllc.com.