| Joanne Cole, NGX |
In a week or so, New Gloucester residents will receive a letter with a new proposed assessed value on their home or property, the next step in a town-wide revaluation of all real estate—buildings and land, residential and commercial—that began last year.
Just the thought of revaluation can be unsettling. With demand for housing in greater Portland exploding, New Gloucester property values have gone up significantly in recent years. Higher property values mean higher taxes, right? No, not across the board, and not necessarily for you.
What revaluation does is redistribute the tax burden more equitably based on a more-accurate snapshot of the fair market value of property in town. In other words, after revaluation, property owners will more nearly be paying their fair share relative to each other.
Here’s why you should welcome, rather than dread, that letter, and some reasons why you might want New Gloucester to do revaluations more often.
1. It’s simply fairer. Imagine a co-worker getting nice raises every year but the IRS not looking at her actual paystubs or getting an updated return for fifteen years. You’d probably say that’s not right – she hasn’t been paying her fair share for more than a dozen years.
Now add to that, let’s say you haven’t been getting similar raises over that same time. As a result of your co-worker not carrying her proper share of the load, you’ve wound up paying more than your fair share. And the disproportionate burden on you only gets bigger the longer she accumulates raises and goes without anyone checking her W-2s.
It’s an imperfect analogy and an oversimplification, but it gets at a key concept at work behind revaluation. Properties’ values change at different rates. Some homes—indeed, some areas of town—have undoubtedly increased more in value than others over the fifteen+ years since New Gloucester last did a comprehensive review. And some properties may have declined in value.
Revaluation corrects for the changes in values over time, re-allocating who owes what based on what they now actually have – same principle as in the salary example. Before revaluation, you and I may have been paying according to the same published tax rate, but if my home shot up in value and yours didn’t, you were paying a higher effective tax rate than I was, because you carried some of my load.
That’s why your tax bill might go up, stay flat, or go down as everyone’s respective shares of the tax burden are readjusted through revaluation.
2. Revaluation helps maintain a foundation of fairness. The State of Maine turns out to have ideas of its own about valuation, fairness, equity, and what towns should do. The fundamental requirement, in the Maine Constitution, is that real property be taxed at its “just value,” which is understood to mean market value.
It sounds straightforward—literally a matter of fact—but tug lightly and a complex web of law, policy, regulations, and judgment comes into view. And the approach and decisions a town takes on assessment and valuation are consequential, affecting not only the taxable landscape but how much money the community receives as reimbursement from Augusta for the Homestead Exemption and the Business Equipment Tax Exemption, among other things. Key principles and standards provide a foundation of fairness; revaluation helps maintain it.
One state guardrail is that every municipality have an average assessment ratio of at least 70%. The lower the average is, the more likely that it’s made up of a wider range of individual assessment ratios, so the state sets a floor. Statewide, the 70% line helps ensure that all municipal assessing in Maine falls within shouting distance of something approximating fair market value.
In recent years, New Gloucester’s average assessment ratio has been about 80% – within the acceptable range as far as the State of Maine is concerned. But that 80% figure is an average that can mask individual inequities. It may be made up of some properties assessed at 50 percent of their actual value, others at 60 percent, some at 80, some at 90 and 105, and so on, in part because of the passage of time. Revaluation helps pull in the outliers, establish greater equity across the board, and keep a town on the right side of that 70% line.
Most of us, of course, focus not on state requirements or town-wide average ratios, but instead at the micro level: our home address. What matters here is that revaluation seeks to get to the same percentage of value for everyone, whatever that percentage may be – in other words, to equalize the rate as applied to property owners at every address. We should all cheer for that.
3. You’ll get the full benefit of your Homestead Exemption. The Homestead Exemption is available if you’ve owned a permanent residence for at least a year. It takes some value right off the top—currently $25,000—and subtracts that from your total taxable value. When the Town’s assessment ratio is less than 100%, the homestead exemption amount is adjusted accordingly. If the town certifies an 80% assessment ratio, the exemption would be $20,000 instead of $25,000.
4. Revaluation is revenue-neutral. Revaluation does not result in a windfall of ‘free’ tax revenue for the town. Even if the total value of property in town increased by, say, 25 percent, the town doesn’t ‘automatically’ get 25 percent more revenue. The town can still collect only the amount we voters approve as the budget for the town, schools, and county.
5. Revaluation is required. Maine requires municipalities to do a revaluation at least every ten years, so that’s a very good reason to do it. (It’s apparent that not all communities follow through on schedule.)
6. A revaluation is essential ‘periodic maintenance.’ Even if periodic revaluations weren’t legally required, they would make sense. The longer a growing community goes without a revaluation, the sharper the jump in values will be when it does finally happen – sticker shock, at least, or worse, inability to pay — and the greater the inequities among property owners. “Shifts are big when revaluation is infrequent,” John O’Donnell of O’Donnell & Associates said.
In addition, the longer a town avoids revaluation, the more expensive, disruptive, and time-consuming it will be. Imagine the National Weather Service in Gray attempting to do accurate forecasting without using up-to-date models and evaluating current conditions. Revaluation isn’t just about getting updated numbers; it’s also about having a system or model in place to produce accurate numbers going forward, so that what starts fair—at revaluation—stays fair.
Portland, currently undergoing a revaluation of its own, is committed to revaluating on a four-year cycle, rather than every ten years. Their rationale: “A ten-year cycle, for a fast-growing City like Portland, creates more opportunity for inequities to grow and usually leads to much larger and unpredictable changes to property values. A shorter cycle reduces the chances of this happening and helps make property taxes more equitable, predictable, and manageable.”
We’ll never catch Portland and don’t want to, but New Gloucester is also growing fast. We’ve now passed Gardiner, Bridgton, Jay, Poland, and Camden in population. So while the upfront investment in revaluation is substantial—the town’s contract with O’Donnell & Associates is $220,000—so is the cost of inaction. And the value of an ‘equitable, predictable, and manageable’ system? Priceless.
7. Protections are built into the process, and relief is available. The revaluation process is thorough, careful, and fair. It includes house-to-house-to-house field visits by assessors’ representatives, as well as detailed analyses of market trends, sales data, statistical models, and much more. The new valuation schedules that result “will be consistent and grounded in the market,” John O’Donnell says.
In addition, preliminary valuation information and an overview of the process are shared with the board of selectmen for their review and comment. This ‘show your work’ session ensures that town leaders can see for themselves that the analytical framework and resulting numbers are sound, O’Donnell said. That in turn creates confidence within the community that the new assessments are fair and appropriate. Once a board gives its blessing, proposed numbers are readied and out go the letters to taxpayers.
Letters in hand, taxpayers can request a hearing if they believe their proposed assessment is inaccurate or erroneous. The key is to bring specific information about how or why you believe your valuation is off-target. Erroneous dimensions? Unfinished second floor? Truly comparable properties valued lower?
These hearings, with owners sharing feedback, not only can affect the ultimate valuations for those who appeal but can also serve as a useful collective check on the assessment and system as a whole. In this way property owners, too, play a valuable role before the assessments are finalized and tax bills go out.
State exemptions and credits can help soften the impact of that tax bill – among them the Homestead Exemption, special exemptions for veterans and for homeowners with certain physical conditions, and the state’s Property Tax Fairness Credit, for owners or renters whose housing costs consume a high proportion of their income. Also, in cases of true hardship or poverty, the select board has the legal authority to provide property tax relief.
8. Everyone gets a chance to be unhappy. An overdue revaluation has the potential to make everyone unhappy. Homeowners whose taxes go up can be unhappy because, well, their taxes are going up. Those whose taxes go down can be unhappy because that suggests they’ve been paying more than their fair share. Delayed revaluation turns out to be an equitable redistribution of unhappiness, not just the tax burden.
Nothing is certain, Ben Franklin supposedly said, except death and taxes. While revaluation won’t make your property taxes disappear, it will make them fairer. That’s reason enough to watch for the letter that’s coming your way.
