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Only Steps Forward: Concerns over funding the Lewiston Auburn Railroad Company

By Jonathan P. LaBonté

Mayor of Auburn

With absolute confidence, I can state that those of you reading this know Auburn and Lewiston have an issue with high property taxes. Not just the rate we charge, but the total burden, in particular for residential property owners.

Both cities need to focus on growing existing real estate values and attracting investors and on reducing costs wherever possible.

The decades of stagnant growth has made it difficult to cut budgets to achieve prosperity, but there’s definitely inefficient use of local financial resources. In addition to continuing to highlight ways we can support existing businesses and lure new investment, it’s important to highlight in real time the places where we can and should save money.

Just this week, the board of directors of the Lewiston Auburn Railroad Company (LARC) met to vote on a contract for administrative support for a few board meetings a year and to handle bookkeeping. Sadly, the Auburn directors were outvoted on two occasions by the Lewiston directors as we sought to reduce the cost of administration for the LARC.

For brief background, in the 1870’s the two cities came together to create a railroad company. The purpose was to advance further industrial development along the Androscoggin River, specifically the canal and riverfront mill area of Lewiston, by increasing freight-shipping competition between the long-standing Maine Central and the Grand Trunk Railroad.

Because the industrialists of Lewiston saw the need for the asset and that it would add the most value on their side of the river, they facilitated a deal that led to Lewiston making 75% of the initial investment and Auburn pitching in the other 25%. That has translated into Lewiston having six of the nine seats on the board, with Auburn holding the other three. The board members are chosen by each city council to serve three-year terms.

The company has evolved since those early days, where a long-term lease to the Grand Trunk/Canadian National Railroad meant the directors of the company only really needed to meet to vote a dividend to both cities. The Lewiston Auburn Railroad Company no longer cuts a dividend to each city as a non-property tax revenue source; it has instead invested revenues into buying real estate, at times taking out loans to do so, and owning and leasing parking lots and commercial property in downtown Lewiston.

Since being elected to a three-year term this spring, I have asked some standard, simple questions to fully understand the operation of LARC and what role it can play in reducing the tax burden locally. First, I asked to obtain a copy of the annual budget. I knew the answer, but wanted it documented: LARC doesn’t create a budget or financial plan; it simply spends money as it comes in. How many of you can afford to do that in your households?

Second, I asked for details on the administrative contract with the Lewiston Auburn Economic Growth Council (LAEGC). The previous contract was for $20,000 and, given the hours worked for LARC, it came out to about $125 an hour.

To pay so much above-market rates for administrative support is a cause for concern, as is the fact that this joint agency operates unlike others that utilize the capacity of existing city staff to handle routine financial activities.

And if the $125-an-hour hour rate wasn’t already excessive, the now-outgoing president of LAEGC had proposed a 25% increase in fees. He justified the increase on the basis of additional work being requested, namely the involvement of LAEGC in a passenger rail study. With confirmation that LAEGC will not be directly involved in any passenger rail study, the Lewiston directors shifted their argument for the

25% rate increase to some obligation LARC has to help make up for Auburn’s reduction in funding to LAEGC.

If those elected by Lewiston have such a strong commitment to subsidizing government agencies and feel it is unwise to pay a reasonable rate only for the work they need, we have much larger problems on the horizon. With many of these same voices also championing a merger of the two cities, Auburn taxpayers better hold on tightly to their wallets.

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