Most all towns to prepay TAN to help bail out county

While it appears the Washington County government may have raised enough funds from municipalities to be able to pay its tax-anticipation note (TAN) to Machias Savings Bank by February 20, the meeting of that obligation is coming at a significant cost to the towns in the county. As of February 9, more than three-quarters of the municipalities in the county had agreed to prepay on the TAN, leaving the county trying to come up with the difference owed with cash on hand.

However, this year a number of municipalities may be paying double what they paid the county last year, in order to help the county out of its financial crisis. For instance, Eastport's share of the TAN amount, which it agreed to pay, is $323,130. The amount Eastport is being billed for the county tax is increasing by 27.6%, from $400,919 to $511,592. Thus the amount the city will pay to the county for this year only, $834,722, will be more than double last year's payment. City Manager Brian Schuth, who was also chair of the county budget committee this past year, does note that the city may get a small amount back from the county on its TAN prepayment, but that has not yet been determined.

Of the amount the city is paying to the county, Schuth says, "It's very unpleasant news but absolutely no surprise. It's a bad story that we've known for a while."

David Burns, the chair of the county commissioners, says, "I'm extremely appreciative of the towns that have stepped forward to help us with this. The towns didn't get themselves into this situation; the county government got itself into this situation." Whether they voted to prepay on their share of the county TAN or not, he notes, "All of the towns are working out what's best for them and their constituents, and I fully understand that." He says that, during the county budget discussions this past fall, the county government was trying find a balance "to continue to provide the necessary service and not overburden the county taxpayers."

While the county's 2026 budget is increasing the amount to be raised by taxation by 17.2%, for some municipalities the percentage increase is higher because of changes in their state valuation. The percentage increases for some of the larger municipalities are 24% for Baileyville, to a total of $817,955; 26% for Calais, to $597,160; and 19.9% for Lubec, to $629,821. Other towns have high shorefront valuations and pay a significant county tax, including Addison, with a 32.8% increase to $535,944; Milbridge, a 20% increase to $645,101; Steuben, a 28.9% increase to $639,562; and Machiasport, a 4.8% increase to $420,103. The unorganized territory's tax will increase 10.4% to $1,023,661.

In a letter to the municipalities, the county commissioners thank them for the assistance and ask them to consider dividing their payments for the 2026 county tax into multiple payments through the year, which will reduce the amount of interest that the county will owe on the 2026 TAN. They also note that those municipalities that have already paid their portion of the 2025 TAN may have a negative balance that can be deducted from their 2026 tax payment. Any negative balance would be because the TAN prepayments were based on $8 million being owed to the bank, where the actual amount will be approximately $7 million.

While the amounts municipalities are paying may be doubling for this year only, Schuth says the county's only other option was defaulting on the TAN. "It's my belief that would have been disastrous" for the towns, the county and the bank. While the county's voters turned down in November a bond issue to pay the TAN, the municipalities are paying most of the amount. "People were angry," notes Schuth. "You can't fault the people."

TAN payments made

With 34 of the 43 municipalities, including the Passamaquoddy Tribe, agreeing to prepay their share of the TAN, approximately $5.7 million has been committed, as of February 9. Any payment by the unorganized territories has to be approved by the legislature, so those funds will not be available in time.

The principal amount on the TAN is $6.75 million; interest is still being added, but as of January 21 the total amount owed is nearly $7 million. Therefore, the county will need to pay about $1.4 million with cash on hand from the 2025 county taxes. As of February 9, County Manager Renee Gray was not sure if there would be enough money available, with the county payroll being paid weekly. "I feel we're about there," she says, adding that the county cannot take out a short-term loan to make up the difference. Noting that the county will have to pay the full amount, she says, "We're in negotiations with the bank."

All of the county's District 3 municipalities and all but one of the District 2 municipalities, including the Passamaquoddy Tribe, agreed to prepay the TAN amounts. Six of the municipalities in District 1, which covers the northern part of the county, declined to prepay. Municipalities that declined are Baileyville, Beddington, Danforth, Deblois, Pembroke, Princeton and Robbinston. Vanceboro and Waite could not be reached by county officials.

Of the amount raised by the municipalities to pay the TAN, Gray says, "That's a pretty good success rate considering where we were a few months ago."