Lewiston-Auburn merger: The impact of a property revaluation

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LEWISTON — If Lewiston and Auburn voters decide to create one consolidated city this November, part of the transition process will require the cities to make sure the values of the properties in each city are assessed at the same levels — a task already causing controversy.

Auburn’s properties are currently assessed by the city at about 100 percent of their actual market value. But because Lewiston’s properties are currently being assessed by the city at either 82 or 91 percent of their actual values, a property revaluation will be needed to bring those up to 100 percent.

Revaluations are not only a source of anxiety for some property owners, but people critical of the merger say the revaluation will cost hundreds of thousands of dollars and will increase taxes on some property owners, and therefore is another reason to avoid a merger.

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Proponents of the merger, however, say the cost of evening up the two cities’ valuations would be much less; it would ultimately be offset by far more substantial savings from the merger. They note that Lewiston was facing a revaluation regardless.

As part of the Sun Journal series on the merger, we take a closer look at the complicated issue following a recent Lewiston City Council workshop where it was discussed.

On the simplest level, City Administrator Ed Barrett acknowledged Lewiston will likely have to do a revaluation in the near future, merger or not.

“It all depends on how fast (the economy rebounds and property values rise). So, it’s an open question whether a reval will be needed within five or 10 years,” Barrett said. “But, at some point, it will likely be inevitable.”

He also confirmed that after a revaluation, regardless of why it is done, tax bills for residential property owners will increase, while tax bills for business owners will decrease, on average.

Here’s why: Currently, certain types of properties in Lewiston are assessed at different levels. While Auburn, which went through a revaluation in 2006, is assessing all properties at about 100 percent of their actual value, Lewiston assesses residential and commercial properties differently.

Lewiston has a “sales-price ratio” of 82 percent for residential properties, meaning that homes, on average, are assessed and taxed at 82 percent of their full market value. Commercial and industrial properties in Lewiston are assessed and taxed at 91 percent of their value.

A revaluation would equalize those values, shifting the tax burden slightly away from businesses and toward residential property owners. 

During the recent council workshop, Councilor Michael Lachance said that no matter what happens with the merger referendum, the “undervaluing” of properties in Lewiston must be resolved.

“I don’t like the existing disparity,” he said.

Despite the differences, Barrett said, the city currently meets state standards for assessments.

Impact without a merger

Based on 2016 budget figures, Barrett said if the city conducted a revaluation it would represent, on average, an estimated 5.2 percent tax increase for residential properties, and a 5.2 percent decrease for commercial and industrial properties. Utilities would see a 9.2 percent decrease. He referred to the impact as the “equalization factor.”

The last revaluation in Lewiston took place in 1988. A revaluation in 2006 was mostly completed but never implemented — likely because it would have had the same negative impact on residential property owners, and city officials opted to avoid it.

Barrett said most cities set values and leave them, and that municipalities more often are now doing annual adjustments in to “avoid big and controversial revaluations.”

Barrett noted, “It would be possible for us to make smaller adjustments from time to time to either maintain our ratio or move it closer to 100 percent. Two budgets ago, we suggested that the council might want to implement a small increase in residential values, but they decided not to.”

He continued, “If we have a good budget year with a significant growth in assessed value, that would allow for a tax rate reduction. That might be the time to make a residential value adjustment when residents would, even with the adjustment, not see an actual increase in their bills.”

Impact with a merger

Barrett’s numbers also show that a merger could potentially soften some of the tax shift, thus relieving homeowners of at least some of the impact.

During last week’s workshop, Barrett said a revaluation prompted by a merger would likely pose a lower tax increase for residential property owners — from 5.2 percent to 3.6 percent — because of the merger’s effect of consolidating the two cities’ tax bases. He cited numbers in the Joint Charter Commisson’s study done by municipal consulting firm CGR.

Further, according to Barrett’s findings, if the budget savings presented in the CGR merger study were realized following a merger, the tax increase caused by a revaluation would be even less for residential property owners, 1.1 percent, while commercial and industrial property owners would see an 8.9 percent decrease. 

If the maximum savings outlined by the CGR analysis were to occur, the residential tax rate could decrease by about 0.8 percent, Barrett added. 

Robert Reed, a member of the Coalition Opposed to Lewiston-Auburn Consolidation and chairman of the Lewiston Finance Committee, said that Barrett’s figures presented to the council are accurate, but Reed believes the numbers and findings of the CGR study are flawed.

He pleaded with councilors last week to “ignore” the figures included in the study.

On the other side of the river, officials said that if Auburn’s property assessment ratio of 101 percent had to be lowered to 100 percent to meet the same levels as Lewiston, the effect on taxpayers would be minimal.

Revaluation cost

The overall cost of a revaluation itself has also been debated. Merger opponents have quoted figures ranging from $500,000 to $1 million.

Barrett told the City Council last week that it would be “relatively feasible” to do the revaluation with in-house staff, using outside help to adjust the figures from the 2006 revaluation that wasn’t implemented. Or, he said, the city could pay a consultant to conduct an entirely new valuation, which he estimated would run the city between $480,000 and $550,000.

He suggested the city do the work with in-house staff. He also added that, “Auburn’s sales-price ratio is currently so close to 100 percent that minimal changes would be required, and could easily be undertaken in-house.”

Merger opponents believe a Lewiston revaluation would cost more than presented. 

Reed calculates that a revaluation would cost about $600,000, not including the cost of software and staff members working on appeals, which he said boosts his estimate to at least $750,000.

“There is no way staff could perform current duties, prepare for a merger and do the appraisals in the short time frame given,” he said.

In response to the concerns of the coalition, Gene Geiger, chairman of the Joint Charter Commission, said if Lewiston could successfully tweak its software and use its 2006 figures to do the work with in-house staff, “Why would it spend $500,000?”

arice@sunjournal.com

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