PORTLAND — Portland officials are poised to walk down what can often be a politically perilous path – one that could lead to significant property tax increases for some property owners, and tax reductions for others.
On Monday, the City Council will receive an overview of a request from city staff to conduct a citywide revaluation that could led to tax increases for about a third of Portland’s property owners. Many of those people are likely to be condo owners, said Christopher Huff, the city’s tax assessor.
“Nothing strikes terror in the hearts of residents and elected officials like the word ‘revaluation,’ ” Huff said. “(But) it’s a necessary evil every municipality has to do at some point.”
The council will be asked during Monday’s workshop to consider funding the project as part of next year’s budget. The project could cost about $1 million, although there is no final estimate, said City Hall Communications Director Jessica Grondin.
Revaluations are revenue-neutral for the city because property taxes are determined by the amount of spending approved by the City Council. But they do redistribute the tax burden. Oftentimes, the city’s overall tax rate will go down, since overall property values increase. And those properties that increase most will see the largest tax increase, while those at the other end could actually see a decrease.
Huff said typically a third of property will see an increase, a third will see no change and third will see a decrease.
Portland completed its last citywide revaluation in 2004. And the results shocked many residents, especially those living on the islands, some of whom saw their values more than triple and their tax bills double.
Residential home values citywide doubled, while commercial property values increased by 55 percent. As a result, residential taxpayers ended up paying a larger portion of the city’s taxes, increasing from 60 percent to 66 percent, while commercial property owners paid less, from 37 percent to 31 percent.
The increase in home values led to an outcry from island residents, who gathered to protest on the steps of City Hall. About a dozen residents chanted, “High taxes make us move.” Children held signs saying, “Don’t make me leave Peaks Island” and “Don’t tax us out of our homes.”
That year, the council voted to postpone implementing the new property values for a year, in hopes the state would enact tax reform that would benefit taxpayers in Portland, which is major driver in the state’s economic engine.
That hope did not materialize and the new values were phased in over a two-year period, with the new values being fully rolled out by August 2006.
The state recommends communities conduct a revaluation every 10 years or so, and requires municipalities to keep their tax assessments at least 70 percent of fair market value.
The state set Portland’s values in 2017 at 88 percent of fair market value, Huff said. But that ratio, which is based on sales data that is nearly two years old, is expected to drop 80 percent next year – a trend that is expected to continue as recent high sales prices are taken into account, Huff said.
Island residents were the hardest hit last time around. A tripling of property values on Peaks Island ignited an unsuccessful effort to secede from Portland.
But Huff said islanders appear to be well-positioned right now. He said that island properties are currently assessed at 91 percent of their fair market value.
Condos, however, may be a different story.
“Condos will see a definitely increase in value,” Huff said.
Huff said he did not have a full analysis available for Portland’s neighborhoods. But in 2004, Munjoy Hill saw values increase by 130 percent, while the West End saw value increases of 126 percent and the downtown business district increased by 112 percent. Areas that saw the lowest increases were Nason’s Corner, Riverside and Riverton, which increased by 67 percent, 68 percent and 74 percent, respectively.
In recent years, development activity has been rapid on the East End and in the India Street neighborhood.
Mayor Ethan Strimling said he sees revaluations as a way to make property taxes more progressive. He noted that the newly enacted Portland Senior Tax Equity Program, or P-STEP, should provide tax relief to residents over the age of 62 who live in homes that see a significant increase in value.
The program is open to people with a maximum adjusted gross income of between $33,333 and $53,000, depending on the size of the household. And property taxes paid must be more than 6 percent of the household income, while rents must exceed 40 percent of household income.
P-STEP would provide tax rebates of up to $600 for residents between the ages of 62 and 65, while those over 65 could receive up to $900. Those maximum amounts match what is available under the state program.
“In some ways, valuation tracks someone’s worth,” Strimling said. “It’s about fairness and equity. I’m glad we’re moving forward with a revaluation. I think we should do it more often.”