Property tax bill loses in Senate Gov. Baldacci sought measure

AUGUSTA – A bill designed as companion legislation to Gov. John E. Baldacci’s property tax relief measure failed Thursday in the Maine Senate after minority Republicans rallied enough votes to block the proposal.

LD 2 is a bill submitted by the governor for a constitutional amendment allowing municipalities the option of limiting increases in the local tax rate on homestead land. Under the proposal, communities would be allowed to assess a tax rate lower than fair market value on the land when the property is designated as the taxpayer’s principal home.

In order to go out to the voters, a constitutional amendment requires two-thirds support in both legislative bodies. Although the bill achieved that threshold in the House, it failed by two votes in the 35-member Senate. LD 2 was defeated 22-13 after four Republicans voted in favor of the bill and one Democrat voted against it. The bill, which required 24 votes to make it, was referred back to the Taxation Committee.

A second constitutional amendment, LD 299, would have allowed commercial fishing property to be taxed at a lower rate like agricultural land, forestland and open spaces. Sen. Dennis Damon, D-Trenton, the Senate chairman of the Legislature’s Committee on Property Tax Reform, also referred LD 299 to the tax panel for further study after he failed to convince GOP lawmakers to pass LD 2.

“I didn’t want that to suffer the same fate as the first one,” Damon said. “I wasn’t sure what its strength was in the Senate.”

But Senate Republican leader Paul Davis of Sangerville said Damon should have let the vote on LD 299 take place, because it would have received two-thirds backing.

“There was strong support among Republicans for the second one [LD 299], but I was told the Democrats wanted to amend the second one, so they sent it back to the Taxation Committee,” Davis said.

In an emotionally tinged floor speech, Damon emphasized LD 2 was really about families who are increasingly losing their ability to retain their waterfront homes due to spiraling tax revaluations spurred largely by a real estate market driven by out-of-staters. While critics of LD 2 have maintained that the financial windfall many homeowners receive when they sell their waterfront properties should be compensation enough to justify a sale, Damon observed it’s hard for Mainers to let go of something they dearly value.

“In order to realize that monetary reward, they indeed have to do something that I find personally repugnant,” he said. “And that is, they have to leave their home – not their house – but their home. A home that in many instances they have resided in not only all of their lives, but the lives of generations of their families before them. A home that has now escalated in such value that they can no longer afford to pay the property taxes on that home.”

Regardless of the phenomenal growth in property values affecting Maine’s shorefront property, Sen. Richard Nass, R-Acton, said the artificial lowering of the value on some properties in a community only shifts the tax burden onto another property owner. Under the law, in some cases dozens of property owners would have to experience a tax increase in order to offset the loss from extending LD 2’s tax relief to the owner of some high-value shorefront land.

“You talk about someone’s home, family and their heritage – all of those things apparently would be impacted by this proposal,” Nass said. “The reality of this is that this is a shift and we’re asking somebody else to pick up the burden. It would be nice if things were more stable and we didn’t have to face these kinds of problems. But shifting is not a fix.”

Speaking for the governor, Lee Umphrey described Thursday’s vote on LD 2 as “unfortunate,” but observed the two-vote margin needed to win two-thirds support may yet be achievable later in the session when the bill is reported out of the Taxation Committee.

“We’re still confident,” Umphrey said. “This is just part of [the] necessary process of the Legislature.”