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Fort's Property Value Increased, But Overall Tax Bills to “Decrease”...Sort of


By:  David Deschesne

Fort Fairfield Journal

September 23, 2020

   The town of Fort Fairfield is on the tail end of a town-wide revaluation process being done by a third-party contractor.  So far, many homeowners have found their property values have increased significantly, but the town council voted at their September, 2020 council meeting to set the mil rate nearly 5 points lower in an effort to offset the increase and still fund the budget they approved in June.

    Nobody really “owns” their own property - even if they paid for it in full.  Under the taxation system here in Maine, as well as most of the U.S., property owners live under a quasi-feudal system where they pay for their home, but the town they live in is the actual title holder at the end of the day.  Homeowners merely “rent” their homes from the town they live in.  But, unlike a traditional landlord/renter arrangement, these renters are responsible for all the upkeep of the homes that ultimately belong to the town by virtue of the lien/foreclosure process which allows the town to take possession of a fully paid for house for back taxes (i.e. “back rent”) of even a couple hundred dollars.

   “We recently had a total town revaluation and our total town revaluation eliminated the disparities that arose when the fair market values changed over time.  Our last total town revaluation was 1997.  Our ratio before the total town revaluation process was 76%.  After the total town reevaluation we are now at 100 percent,” said Town Manager, Andrea Powers.  “The revaluation project was undertaken by our municipality to appraise all real property and personal property within the taxing district according to its full and fair value.  Full and fair value is the price at which the assessor is certain a property would sell at a fair and bona fide sale by contract by October 1 of the pre-tax year.  The revaluation project sought to spread the tax burden equitably within our municipality.  Real property must be assessed at the same standard of value to ensure that every property owner is paying his or her fair share of the property tax.” [editor: read property tax as “rent” under our current property taxation system]

   Ms. Powers told the council that both the interior and exterior of the properties were physically inspected and building dimensions were noted in the valuation process.  “In addition, recent sales of properties were studied and adjusted to estimate the value of property that has not been sold.  All information believed to have influence on value was gathered, reviewed and analyzed in order to make a proper determination of each property's full and fair value.”

    “Although revaluation did result in an increase of nearly each individual assessment, there were some that did lose value.  It does not mean that all property taxes will increase.  Again this is value, not tax,” explained Ms. Powers. 

   That statement can be a bit misleading because the taxes are invoiced annually by the mil rate as it is applied to the property's value.  If the value of a piece of property increases, even if the mil rate stays the same, the property tax bill will increase.  For example, with a hypothetical mil rate of 20, and a home value of $50,000, the property tax bill will be $20 per every $1,000 in value.  That would be $20 x 50 = $1,000 for the property tax bill in this example.  If the home's value in this example is then increased to $100,000 and the mil rate remains the same, then the taxes would be figured as: $20 x 100 = $2,000 for the property tax bill.  So, if the valuation increases, property taxes, following basic arithmetic, will also increase.

   The current property tax revaluation will result in the town of Fort Fairfield nearly doubling its valuation and in effect, increasing the amount of money that will be invoiced out for property taxes unless a corresponding reduction in the mil rate takes place, since an increase in value doesn’t necessarily mean the homeowner now has more money to spend on taxes.

   Anticipating this, and relying on a State-mandated formula, Fort Fairfield's town manager suggested a lowering of the town's mil rate to a point that would help offset the increase to people's property taxes, adequately fund the town's 2020-21 budget and still remain within the State mandated mil rate guidelines.

    At the September, 2020 council meeting, Ms. Powers recommended town council approve town order 20-07 to adopt a 20.5 mil rate to support the Fiscal Year 20/21 budget the town council approved on June 17, 2020.  Fort Fairfield's mil rate previously was 25.02.   “At the $50,000 value would have been a tax of $1,251.00,” explained Ms. Powers.   “A $100,000 value would have been $2,502.00.  The new mil rate at 20.5, a $50,000 value would be $1,025 which is a decrease of $226 and a $100,000 value home will be $2,050.00 - a decrease below the current 25.02 rate of $452.”   

   But, the taxes would go down only if the property value remains the same.  With the current revaluation, nearly everybody’s property value in Fort Fairfield increased.

   What this mil rate “reduction” means in simple terms, with an increase in property value, is if a $50,000 home at last year's 25.02 mil rate was invoiced for taxes at $1,251, then had its value increased to $80,000, the new, lower mil rate of 20.5 would make the tax bill increase to $1,640 instead of the $2,001.60 that it would have under last year's mil rate.  While the mil rate is lower, the taxes increased $389.00. It is with this sleight of hand that the council can “reduce” the tax rate while at the same time increasing the tax revenue to the town at the end of the day.

   Town councilman, Bob Kilcollins attempted to move to table the mil rate pending future research and discussion on the topic.  But the council wasn't really in a position to do so legally.

   “We can't table the mil rate because we commit taxes on October 1,” explained Ms. Powers.  “So, we have to set a mil rate.  There's a State formulation based upon what our real estate value and personal property value is and homestead and everything.  The numbers get plugged in and it tells us what our minimum tax rate and maximum tax rate are.  If we were to do the maximum tax rate that's allowed, it's 21.11 mil with an overlay of $211,530; minimum tax rate is 20.10 with only $24,813 overlay - I do not recommend that.  The overlay that I am recommending at the 20.5 mil rate is $98,761.  As we have seen this year, there are so many things and factors that take place.  If we do not properly plan for an overlay, we may find ourselves in a situation that we do not want to be in.  So far, we've been very good, we've been able to get through all of this craziness of COVID-19 without having to reach into our TAN (Tax Anticipation Note).  So, I think this will help us should we come up against anything else.” 

   But, of course, that’s if the taxpayers, who are also dealing with this “craziness of COVID-19” actually have the extra money to give to the town.  After all, just because a person’s property value magically increased, they’re not necessarily bringing in any more money at the end of the day.

   Kilcollins expressed his concern that the revaluation may have been unfairly assessing Fort Fairfield's property as if Fort Fairfield had a larger economy, such as Bangor, or Portland.  He noted how there is only a certain amount of economic activity in Fort Fairfield that might not be able to support an overall increase in tax bills.

   Tony Levesque, Fort Fairfield's tax assessor - who was not involved in the setting of valuations in this most recent reval - explained that the third party assessor who the town contracted to appraise property values only used historical sales of homes and structures in Fort Fairfield alone in determining value - not values from other towns or cities anywhere else in the State. 

   A hesitant town council voted 4-1 to approve the new mil rate of 20.5 with Kilcollins being the only dissenting vote.