New appraisals of Great Northern Paper Inc.’s mills in East Millinocket and Millinocket show the towns have undervalued those properties over the last three years.

The two towns will use the new appraisals to defend their tax assessments, which are being challenged by the paper company.

Great Northern, the largest taxpayer in both towns, disputed the values set by the towns and is asking both communities for tax refunds totaling about $6.1 million. The dispute prompted the towns to commission an Oregon firm to revalue the paper mills.

Town officials said they are pleased with the new figures they released Tuesday.

The documents listing the values of the paper mill properties for the past three years came in higher than the towns’ assessments, except in one case.

In East Millinocket, the new appraised values range from $25.6 million to $5.1 million higher than those done by the town. In Millinocket, they range from $14.2 million to $16 million higher, except one year was $2 million lower than the town’s assessment.

“It is very positive for the town,” said Millinocket Town Manager Gene Conlogue. “This is a classic approach to appraising that gives proper weight to the assets of the company. Both towns have actually been undervaluing GNP for some time.”

The manager said Millinocket’s assessed values of the company were the result of a 1994 negotiated deal with former company owner Bowater that expired in 1998 and left a base value of $115 million.

The company is now under new ownership – Inexcon of Maine.

Conlogue said the town’s assessor did a very good job in picking up additional value, which brought the value up in past years. “During the three-year period, we ended up with a $2 million difference between the appraisal and our actual assessment. That is extremely close and a value we have comfort in. It more than affirms the town’s position,” said Conlogue.

Despite the fact the town paid for the appraisal, Conlogue said the firm used a classic textbook approach to prepare its comprehensive appraisal.

“They evaluated what they saw and measured in the paper mill,” he said.

“I think the appraisal company did a good job,” said John Rouleau, chairman of the East Millinocket Board of Selectmen.

“It gives us a professional opinion of what the mill is worth,” said Selectman Bill Brunette. “We hired what we considered to be one of the best [appraisal companies] and I’m going to listen to them,” Rouleau said.

Great Northern gave no indication Tuesday that it will dispute the new appraisals.

“We look forward to further discussions with the towns now that they have their appraisals,” said GNP spokesman Brian Stetson during a telephone interview Tuesday.

Last March, the two towns hired the same firm – Valpoint of Portland, Ore., a company specializing in commercial and industrial property appraisals – to prepare two new and separate appraisals of Great Northern’s paper mills. The joint effort saved taxpayers about $99,000.

The new appraisal figures compared with the towns’ assessments are as follows:

For East Millinocket, $229.6 million compared with the town’s $204 million in 1998; $237 million compared with the town’s $204 million in 1999; and $217.1 million compared with the town’s $212 million in 2000. “I think we were real fair with them,” said Rouleau.

For Millinocket, $141 million compared with the town’s assessment of $127 million in 1998; $146 million compared with the town’s $130 million in 1999; and $133 million compared with the town’s $135 million in 2000.

Currently, Great Northern is challenging its 1998 and 1999 tax bills in Millinocket and its 1999 bill in East Millinocket. In East Millinocket, the case is pending before the State Board of Property Tax Review.

Millinocket’s case before the state board is on hold pending the results of negotiations for the creation of a tax increment financing district.

Last July, the Millinocket Town Council approved an “agreement in principle” with the paper company that lays the groundwork to resolve the pending tax dispute.

According to the 17-year agreement, the base value of the paper company would be $115 million. The company would drop its tax abatements of $4.7 million.

In return, the town would grant Great Northern a tax increment financing program covering all of the investments the company makes in the Millinocket paper mill for the next five years.

The town would receive 15 percent of the tax revenues from new investments and the company would retain 85 percent of the tax revenues on its new investments for a 12-year period.

“As far as I’m concerned, the agreement in principle is flawed,” said Millinocket Councilor Scott Gonya, pointing to the new appraisal numbers. “The council needs to go back to the drawing board.”

For 1998, the company said Millinocket had overassessed its properties and equipment by $94.9 million, which translates into a $2.3 million tax abatement or tax refund.

For 1999, Great Northern said Millinocket had overassessed its properties and equipment by $98.3 million, which translates into a $2.4 million tax abatement or tax refund.

In East Millinocket, Great Northern is disputing its 1999 tax bill, saying the town overassessed its properties and equipment by $84.1 million, which translates into a tax refund of $1.4 million.