HALLOWELL — The city’s efforts to lower the tax burden for residents this year was dealt a final blow Thursday as City Solicitor Amy Tchao delivered a memo to city officials detailing the illegality of undoing the city’s property tax increase.

In the month following the unanimous approval of the city’s budget — which raised property taxes by about 20% and caused outrage among property owners — City Council members made $231,000 in cuts under the impression that they would be able to lower tax bills this year.

But that reduction cannot legally happen, Tchao said in the memo, because the Hallowell City Council has already approved a budget and the Board of Assessors has already officially committed the city’s taxes.

The city would instead need to submit emergency legislation to the Legislature to undo the budget and change taxes, an uncertain process that likely couldn’t even begin until the Legislature reconvenes in the spring.

“As explained herein, based on our review of your City Charter, and Maine law governing taxation, we do not believe the Council has the authority, under the circumstances here, to rescind or change the tax commitment or reduce the taxes owed by taxpayers in this fiscal year,” the memo reads.

HOW DID HALLOWELL GET HERE?

In June, initial estimates on the budget showed the tax increase would be about 25%. City officials were caught off guard by the estimate.

The City Council then made $262,435 in cuts from what was initially a municipal budget of slightly more than $4 million. The biggest single line the council eliminated before approving the budget was $35,000 for a PFAS-free water delivery service.

When the City Council unanimously approved the budget July 29, council members thought the tax increase would be about 16%. The actual tax increase varied widely among property owners, but overall averaged about 20%.

Soon after the budget approval, the Hallowell Board of Assessors approved the city’s tax commitment and bills went out to residents, who quickly organized a petition effort to ask the council to reverse its budget approval and reduce the tax increase to less than 10%.

Instead of going through a referendum process on the petition, councilors unanimously reversed their budget approval Aug. 12 and began cutting the budget, under the assumption that any cuts they made would directly correspond to property tax decreases during this fiscal year.

In all, the council made almost $300,000 in additional cuts, and had planned to make more in future meetings before re-committing the city’s taxes.

The council operated under this framework until its Sept. 9 meeting, when City Manager Gary Lamb and Mayor George Lapointe reported that they had received unofficial word from the city’s legal team that the council would likely not be able to cut taxes under this year’s budget.

Tchao’s memo solidified that reality.

Hallowell Mayor George Lapointe Joe Phelan/Kennebec Journal file

“My sense is that nobody asked the question before,” Mayor George Lapointe said. “It seemed a very logical thing to do in August. And then our attorney looked at it, she said, ‘No, you can’t do that.’ So, I mean, the simple reason is we thought it was a legitimate thing to do.”

Ideally, Lapointe said, the council would have delayed the final vote for a week to allow the city’s legal team and councilors to mull over the budget.

He also said he wanted to get the public more involved in the budgeting process much earlier next year — preferably, he said, when the city’s finance committee begins meeting every other week in January to begin the budget process. This increased engagement, he said, would require much more effective communication from city leadership in the months leading up to the budget vote.

None of the three incumbent members of the City Council up for reelection — At-Large Councilor Maureen AuCoin, Ward 1 Councilor Kate Dufour and Ward 5 Councilor Patrick Wynne — are running to keep their seat in November.

The only way Hallowell’s tax commitment can be overturned, according to Tchao’s memo, is if it were illegally carried out. Hallowell officials held all proper meetings, made all proper notices and the tax commitment was properly signed, leaving no authority for the city to undo the tax commitment.

Under Maine law, the memo said, the state Legislature holds all authority over taxation; local officials work at the behest of the state when they commit and collect taxes, and there is no exception in state law for municipalities that simply want to lower tax burden.

“Notably, under this comprehensive statutory scheme governing taxation, there is no statutory provision authorizing any municipality’s legislative body (in Hallowell, the Council) to simply override or rescind a legal tax commitment,” the memo said. “The Legislature has not specifically carved out such authority where no illegality or invalidity has been found. Without such express authority, matters regarding taxation are strictly reserved for the Legislature.”

WHAT HAPPENS NOW?

The City Council has not yet determined a remedy for taxpayers, and Tchao said the council has very limited authority to do so.

Abatements, a taxpayer refund process council members discussed at length during their most recent meeting, were taken off the table in Tchao’s memo.

Abatement categories are specifically defined under state law, and Tchao wrote that none of them apply in Hallowell’s case, leaving “no authority under Maine law for the Council to issue an abatement in this situation.”

One of the only remaining options for the council this fiscal year, Tchao wrote, is to submit emergency legislation to the Legislature to allow Hallowell to adopt a revised budget and commitment that lowers taxes. But the city would need to wait until the spring, when the Legislature is back in session, to know if the emergency legislation would be approved.

Lapointe said the City Council would be in contact with Hallowell’s state elected officials, Rep. Dan Shagoury and Sen. Craig Hickman, about the potential emergency legislation.

The city could also enact an ordinance freezing spending on parts of the current budget to roll over to next year’s budget as a way to lower taxes. This approach, which Lapointe said he prefers, would mean there would be no relief for taxpayers this year, but could increase the city’s ability to lower taxes in the next budget cycle.

The city may also be able to issue rebates to households who qualified for a Homestead Tax Exemption last fiscal year, with a state law-defined preference for refunding lower-income taxpayers. But Lapointe said in an open letter to residents Tuesday that he preferred not to use this option because it would only provide relief for some taxpayers, not all.

Hallowell property owners’ unpaid tax bills began to accrue interest Sept. 18.

“It is most unfortunate that the city cannot pursue our initial idea for a new tax commitment and lower tax bills because doing so could create much larger legal problems for the city,” Lapointe said in the letter. “That means our present fall and spring tax bills must be paid as they are now, and the tax relief we had hoped would occur this fall will instead be part of next year’s budget.”

The City Council meets next at the city hall on Monday, Oct. 7, at 6 p.m.