IMPROVING VALUATIONS

When the value of a property goes up, the owners are often pleased – until the tax bill arrives. Revaluations have led to huge outcries in recent years and are one reason behind the push for tax relief. Before a tax relief plan is crafted, Maine should improve its tax assessment system to ensure properties are appropriately valued and that adjustments are made on a timely basis.

Maine’s assessment system is “abysmal,” says Iris Lav, deputy director of the Center for Budget and Policy Priorities, who was in Maine earlier this week. Because municipalities are responsible for their own valuations, some do them regularly, some wait decades. Some use GPS and computer models, some rely solely on pencil and paper.

The Maine constitution requires that property taxes be assessed equitably and according to “just value,” which courts have interpreted as market value. Delaying valuations often means that assessments are no longer equitable. In a town where waterfront property values are rapidly increasing, failure to frequently revalue properties may mean that these homeowners are assessed at only 50 percent of market value while inland owners are at 80 percent.

Towns with low assessment ratios also tend to put off revaluations for fear that residents will be angry with the results. Kennebunkport, where valuations average only 48 percent of prices, according to the Maine Revenue Service, has voted three times to reject funding a revaluation.

Then, when a revaluation is belatedly done, residents are often outraged by the large jump in their property’s value and the accompanying tax increase. More than 1,000 residents showed up at a meeting to protest Auburn’s recent revaluation.

“Poor assessment and valuation practices lead to a general perception that the property tax is unfair,” Ms. Lav said. Many of the people who complain most loudly about their taxes rising because their property was revalued are those who will champion referendums such as last fall’s Taxpayer Bill of Rights.

Addressing some misconceptions would help. For example, many assume that revaluations are a way for a town to raise more tax revenue when they are a way to redistribute the burden. When residential values are climbing faster than commercial values and the mill rate remains the same, residential property owners will see their assessments increase, while commercial ones will drop.

Setting standards for when reassessments should be done, such as when assessed values are well below market prices, would help minimize large jumps. Enforcing the state requirement that valuations be 70 percent of market value would also help. Currently, the only penalty for a town falling below the 70 percent mark is a loss of state tree growth reimbursements, something that does not matter to a town such as Auburn or Kennebunkport.

Ms. Lav suggests “professionalizing” assessments by having them done at the county or state level, which is what other states do. Regionalizing or centralizing assessments could also save towns money by reducing duplicative efforts. The Legislature should examine these potential changes.

They could go a long way in improving the perception of Maine’s property tax without the negative consequences of a valuation cap or other major policy change.