Paul Sylvain

When it came to last week’s county bond referendum, Machias town officials were clearly prepared for the worst. 

Meeting just hours following the bond’s defeat at the polls, the Shiretown’s selectboard quickly put into motion a plan to deal with a massive jump in the county's 2026 budget, needed to fully repay a 2025 tax anticipation note (TAN) by Dec. 31.

Unlike Machias, which operates on a July to June fiscal year, the county currently operates on a January to December fiscal year. Out of necessity, the county operates on credit for the first nine months of its fiscal year. It does so by obtaining a TAN each year from a bank. State statutes mandate that TANs must be repaid in full no later than Dec. 31 in the same year they are issued.

The county’s 2025 TAN amounted to $7.6 million, with interest charges increasing the amount due payable on Dec. 31 to about $8 million.

According to the county’s most current town-by-town breakdown, Machias needs $314,152.41 to pay off its commitment fully. The town is fortunate in that it appears to have sufficient reserve funds available to pay it off in a lump sum, officials said. 

However, the option currently favored by the selectboard, Town Manager Sarah Craighead Dedmon, and the town’s finance director, Nicholas MacDonald, involves taking a short-term, five-year loan at 4.2%, but with the intent of repaying it in full within a year at most.

In a Nov. 5 memo to the selectboard, MacDonald wrote, “Given current market conditions, and our pending [fiscal year] 2024 and FY2025 audit completions, it is prudent that we temporarily finance the amounts through a structured loan, rather than deplete existing fund balances.”

MacDonald laid out two loan options. A five-year loan for $314,152.41 at 4.2% interest would result in an annual payment of $70,964.10, with a total interest cost of $40,668.09. The total amount, with interest, would be $354,820.50 if it goes to the full five-year term.

A second option presented by the finance director was for a 10-year loan at 5.6% interest. The annual payment owed by the town would be $41,878.04, but at an interest cost of $104,628.02, over the 10-year life of the loan. The final repayment cost would total $418,780.43.

MacDonald concluded, “Given the current uncertainty surrounding Washington County’s financial position and the ongoing budget and audit issues, it is recommended that the town proceed with securing a short- to mid-term loan for this obligation — preferably the five-year option at 4.2%, if available.”

Selectboard Vice Chairman Ben Edwards also serves as vice chairman of the Washington County Budget Advisory Committee (BAC), which last week resumed weekly meetings to hammer out a 2026 county budget. He described the BAC’s Nov. 5 day-long meeting as “very painful.” 

“One interesting wrinkle is that there has been some concern that we can’t pre-pay [the county’s tax commitment] because that would be illegal,” Edwards said. “Technically, the county cannot send us a second tax bill within the same fiscal year. I don’t believe that’s going to be an issue, because technically this isn’t a second tax bill. Nevertheless, the county’s auditor threw up a flag, so we’ll see, but I think we’ll be okay.”

Edwards was referring to an Oct. 9 letter, signed by County Commissioners Courtney Hammond, Billy Howard, and Chairman David Burns, and titled, “Washington County Request for Assistance with TAN Payment.” The letter was sent to officials in every town and city in Washington County.

“Of course, there is an alternative,” said Edwards. “The alternative is that [the county] add in the $8 million TAN to next year’s county budget. I don’t believe that’s prudent. I still think [the town obtaining a low-interest loan to pay off its total commitment] is the right thing to have ready for the end of December, and then we can choose whether we want to use this or not.”

Edwards further noted, “If the budget committee decides it wants to keep county services at the levels they are currently at, it would [result in a] roughly $14 million or $15 million budget. … If you add in the additional $8 million, we could potentially be looking at a county budget as high as $23 million,” Edwards said. “I don’t think that’s entirely likely, but it’s on the table right now. At the very outside, we could be looking at double the county budget next year.”

Asked by a fellow board member if the county would default on the TAN if it failed to repay the bank by Dec. 31, Edwards replied, “This was part of the confusion that came up the last couple of weeks.”

He explained, “Technically, the note with the bank is not due till mid February [exactly one year after the town obtained the TAN from Machias Savings Bank]. It is the state statute that requires that we retire the TAN [by the end of the calendar year it is obtained].” Failure to repay the TAN in full on Dec. 31 would violate state statute, Edwards said; however, “we … would not be in default of the loan.”

So what does the BAC’s vice chairman think the county’s 2026 budget will look like after the committee completes its work in the coming weeks?

“To put this thing in perspective, we’re looking at a 20% to 25% increase just to hold the line with current county services,” Edwards said. “Keep in mind that in order for us to cut anything, it’s going to be cutting the headcount, and that will be primarily out of the patrol deputies for the sheriffs.”

Edwards reported that he BAC, “talked about this for quite a while today. And I would say the consensus of the budget committee is that we want to move forward with services roughly where they are now. There’s not a lot of appetite for a large cut.”

Machias residents will have an opportunity to question the selectboard about the town’s plans for paying its 2026 county tax commitment during a public hearing slated for 5 p.m. Wednesday, Nov. 19, in the second-floor conference room at the 17 Stackpole Drive town office building. 

Besides the county TAN payment plan, the selectboard will also be seeking input on proposed new ordinances addressing solar and wind farms, as well as long-term lease agreements. 

The town will then convene a special town meeting to vote on the TAN payment plan and proposed ordinances two weeks later, at 5 p.m. Wednesday, Dec. 3, in the second-floor conference room at the 17 Stackpole Drive town office building.