A dozen municipalities in Washington County have agreed to prepay their portions of the county’s 2025 tax anticipation note, bringing total pledges to $2.27 million as of Wednesday. Fewer towns have said they will not prepay.
County Manager Renée Gray said she is pleased with the response so far and expects more towns will agree to prepay before the end of the year.
After years of financial mismanagement, including underbilling towns for county taxes, the county has run out of money and will owe $8 million on a tax anticipation note, or TAN, to Machias Savings Bank in early 2026.
A bond referendum to borrow up to $11 million to pay the debt went before voters in November and was overwhelmingly rejected.
The Washington County commissioners anticipated that outcome and sent letters Oct. 9 to municipalities asking them to consider prepaying their portions of the TAN. The amounts were calculated based on a percentage of each town’s 2025 valuation.
Municipalities that agreed to prepay their portions were told they would be excused from paying interest on any bond the county might borrow in early 2026 to retire the 2025 TAN. As a result, many towns have already held public hearings and special town meetings for voters to consider that option.
Gray said she hopes Machias Savings will extend the deadline for the county to pay the 2025 debt until February, which she said would help. She added that the county needs to know this year which towns are willing to prepay to determine how much it must borrow to cover the debt.
As of Wednesday, Addison, Cherryfield, Columbia, Columbia Falls, Crawford, Harrington, Jonesboro, Jonesport, Machias, Roque Bluffs, Talmadge and Topsfield had agreed to prepay.
Several towns have declined to prepay, some emphatically.
The county sent letters requesting prepayment to 43 municipalities, to the unorganized territories and to the Passasmaquoddy Nation, and most towns have not yet responded to the county’s request, though many have scheduled special town meetings in the coming weeks to discuss their options.
Voters in Alexander, Cooper and Northfield are scheduled to meet this week, but some towns, including East Machias and Wesley, have postponed their special town meetings until early January.
County officials said they expect some of the towns that are still weighing their options and without meetings scheduled may agree to prepay. They noted that every dollar put toward the $8 million debt reduces the amount the county must borrow in the new year, reducing the interest owed.
With stronger-than-expected responses from towns willing to prepay, county borrowing will be less than first projected.
But officials said the county will still operate without new revenue for months in 2026 because tax bills cannot be sent until the state provides valuations, typically in February, “so already we’ll be operating two months without revenue” in the new year, Gray said.
She said the county cannot borrow more money until it pays off the 2025 TAN, so the more towns that agree to prepay, the sooner the county can retire that debt and borrow for 2026.
One suggestion that has surfaced repeatedly since the county’s debt came to light is shifting the budget cycle from a calendar to a fiscal tax year. That would align more closely with municipal budget cycles and could eliminate or greatly reduce the need to borrow a TAN each year.
Commissioners agreed and voted to make the change.
But, Gray said, “We can’t even begin to do that until the year 2028 because it’s going to take towns time to plan for that action. They’re going to have to raise 18 months worth of county taxes,” which means the county will likely ease into the new budget cycle by adopting a six month budget and then a 12-month budget.
Gray said the county recognizes towns need extra time to prepare because many are dipping into reserves to pay the 2025 TAN and will have to begin saving to meet obligations as the budget cycle changes.
Gray said one way towns could help reduce interest costs on annual TANs is by making incremental payments to the county rather than lump-sum payments.
In 2023, the county paid $94,000 in interest on that year’s TAN. In 2024, the interest climbed to more than $124,000, Gray said. She added that if the county had revenue throughout the year, it could pay down its TAN over time and cut interest costs.
The county has asked towns to do this in the past, she said, but Columbia and Columbia Falls are the only two towns that ever did.
“We wouldn’t need to borrow a TAN if we had cash flow coming in” more regularly through the year, Gray said, adding she hopes towns might consider that an option going forward to help save money.
