Inter-local agreement bill to encourage municipal cooperation moves toward passage

Senator Hill praises the Legislature’s vote on the bill – awaits Governor’s signature

AUGUSTA – Legislation that would allow for greater collaboration between municipalities in Maine and New Hampshire received favorable support from the Maine Legislature and now awaits the Governor’s approval.

The bill (LD 433), An Act to Exempt from Income Tax the Income of Nonresidents Working in Maine Pursuant to an Inter-local Agreement, will exempt Maine’s income tax for out of state workers who perform work in Maine under an inter-local agreement. Senator Dawn Hill (D-York) sponsored the legislation at the request of town officials in Kittery who were experiencing problems engaging in shared resources of municipal interstate agencies or local governments.

Current tax provisions in Maine Law limit out of state residents from working for more than 10 days in Maine before they are subject to the state income tax. As a result, municipalities along the Maine and New Hampshire border struggled to cross the state line and collaborate on public projects and services.

“Many local governments are making proactive efforts to reach out to neighboring municipalities in hopes of working together and saving taxpayer money,” said Senator Hill. “Unfortunately, for some towns in the southern part of Maine and along the New Hampshire border, this became a challenge when their willing neighbor happens to be located in another state.”

The legislation applies to inter-local agreements between states, not internationally. Maine workers currently employed by a municipality can not be “displaced” as a result of proposed inter-local agreements.

Senator Hill added, “This bill removes the barrier of utilizing shared resources and creates greater opportunity for taxpayer savings through inter-local agreements and collaboration.”

In recent years, and in large part because of the economic situation, there has been a strong emphasis on regional collaboration in most cities and towns around the state in an effort to stretch local budgets and try to do more with less.

“By working together, many of Maine’s cities and towns have been able to take innovative approaches to reduce local costs without jeopardizing services or raising taxes,” said Senator Hill.