Why does my property description notice list me as having an attached garage? I don’t even have a garage.
The property description notices are a document created using several pieces of information from different data sources. The property valuation at the bottom of the paper is directly from the assessing database, and it is correct. The garage information was a printing error and did not affect the values in the assessing database. To put it another way, if you do have a garage, then the total valuation listed on your letter accurately reflects that, and if you don’t have a garage, then your total valuation correctly does not include one.
How did they value my land? I am in a commercial zone, but I just own a regular home.
All properties are valued based on “fair market value,” the amount a willing buyer would pay a willing seller. Commercial zones allow other types of uses, however, the property value is based on what similar homes are worth in that area.
How did they value my land? I am in the agricultural zone and my land can’t be worth that much.
Agricultural land, like all other property, is valued based on use and “fair market value.” If a home is located on land that is zoned for agricultural use, the house lot (the amount of acreage needed for a house in that zone) is valued at the fair market value for a house lot and the home is assessed based on similar homes and house lots in that area. The remainder of the property will be valued at agricultural prices, which is approximately $800 per acre.
Why did the city wait so long to perform a revaluation?
Revaluations are performed when assessed property values are no longer in line with the market place. The state of Maine audits each municipality every year to determine its ratio of assessed value to fair market value. If the assessed values fall below 70 percent of what properties are actually selling for, then state law requires municipalities to do a revaluation, or equalization, to bring values into line with the market and in compliance with state law.
The last city-wide valuation was completed in 1990. Shortly after its completion, Maine and the United Stated entered a deep period of recession. From 1991 through 1994, the city lost total assessed value. In fact, there was a decrease in the values of some types of properties. For the remainder of the decade, the housing market was stagnant and there was no growth in residential property values. In 2000, the city’s ratio dropped below 90 percent for the first time, and in 2001 the city began the revaluation process. The city decided to perform the revaluation in-house with the city’s trained professional assessing staff in order to save over $500,000 and to ensure that it was being performed by professionals who understood the local market valuation and who cared about the residents.
The city started seeing growth in the housing market in 2002 when some new housing started to be constructed, house prices started to climb and developers were building housing subdivisions. The revaluation work was largely completed in the spring of 2005, however, the city council decided to postpone the implementation of the revaluation in order to give people adequate notice and to give the council an opportunity to consider all options as they worked with citizens throughout the budget process.
How do I calculate my tax rate? Why was $22 used for the mill rate?
Property tax rates are calculated by dividing the amount that needs to be collected in property taxes by the total assessed value of the city. This year, it took approximately $40 million in property taxes to fund the school and city budgets. The total assessed value was $1.3 billion and Auburn had a tax rate of $30.48. If you take that same amount (i.e.. the spending remains the same at approximately $40 million), and the total assessed value is increased to $1.8 billion, then that will change the tax rate.
By dividing the amount that is needed by the valuation, you can determine the tax rate per thousand dollars of assessed value, which is $22.22.
That figure is the tax rate example that was included in the revaluation. It was revenue neutral (no increase in spending) and was based on an increase in the total assessed value. The actual valuation and tax rate will be set in May and June during the budget process.
Why was a sample tax rate included in the revaluation notice now? Why didn’t the city wait until the budget was done to tell people what the tax rate would be?
The city sent out the revaluation notices now because the council wanted to make sure people had sufficient time to review their new value and understand it, and they wanted to have this time to work with the citizens as we consider all options.
The city council included the sample tax rate because they thought people deserved to be informed about how a change in their property value could affect their property taxes. During the revaluation process, the council heard from people that, while they wanted to know the value of their homes, what they cared most about was what their tax bill might be. The council thought it was important to give people an estimate based on current information.
The budget process is beginning earlier this year in order to hear from more people and to encourage more people to be involved in the budget process.
Q: How much is Auburn’s budget and where does the money go?
The city has worked to have a track record of modest growth in the tax rate and spending. The city council does not raise taxes any higher than necessary to fund basic city services – services that the citizens expect. For the past 10 years, the combined city and school budget has increased about 3 percent annually. The average annual increase in the property tax rate during the past decade has been 1.6 percent.
Auburn’s current budget is $61,427,000, which includes a municipal budget of $28,281,000, an education budget of $31,401.000 and a county budget of $1,745,000.
To offset the costs of local government, the city receives about $22,500,000 in state and local revenues. The rest, about $40 million, comes from local property taxes. The expenditures and revenues are displayed in the charts below:
Why doesn’t the city reduce its workforce?
The city has reduced the number of municipal employees. Whenever there is a vacancy, the city does not automatically fill that position. It evaluates whether that position should be filled and uses vacancies as an opportunity to change and improve how the city does things. It takes a certain number of people to accomplish the work that needs to be done and that number is reviewed each year during the budget process. The city cross-trains staff in order to be more efficient, and is making greater use of technology in order to improve services and reduce the amount spent on salaries and benefits. In the past five years, the city has reduced the number of municipal (non-school) employees by 17.25 positions or nearly 7 percent.
Do city employees receive better benefits than most people, including fully paid health insurance, and medical coverage after employees retire?
No. All city employees pay a percentage of their health insurance, and the city does not pay for heath insurance after an employee retires. The municipal employees have paid a portion of their health insurance for more than 10 years. The employee share for health insurance has increased from 10 percent in 2002, to 12.5 percent in 2004, to the current employee cost share of 15 percent. The city, like all employers, needs to attract and retain talented staff. To do this, the city needs to offer competitive wages and benefits, while balancing the cost to the taxpayers. The city’s health plan is a regular managed care program with primary care physicians, co-pays and co-insurance costs that the employee pays. The city regularly reviews health insurance plans in an attempt to provide competitive coverage for employees, while still being as cost-effective as possible. In 2003, the city changed to a plan which offers excellent coverage, but which also reduced our health insurance costs by 14 percent. This resulted in an initial savings of $350,000 and continued savings each year of approximately $400,000.
Do businesses pay a different tax rate than residential property owners?
No. In Maine, all property owners pay the same tax rate. In some states, municipalities can charge a different (higher) rate for businesses than for homeowners.
However, Maine does have a property tax that is charged only on businesses – the personal property tax. Personal property taxes account for 18 percent to 22 percent of Auburn’s property tax revenues. These are property tax revenues that come from businesses, not residents, in addition to the property taxes paid by businesses on their real estate property.
Is the reason that taxes increase is because the city gives tax breaks and TIFs to businesses?
The city doesn’t give “tax breaks” to businesses. As explained in the question above, businesses pay the same tax rate as citizens. One of the economic development tools that Maine allows municipalities to use is Tax Increment Financing, also known as TIFs. TIFs are used selectively in order to retain or expand existing businesses, or to encourage new businesses, which meet certain criteria, to locate in Auburn. Auburn has a policy that requires any business, which applies for and receives a TIF, to meet performance measures such as creating at least $2 million of new investment and at least 26 new quality jobs – jobs that pay a decent wage and have benefits.
TIFs are a benefit to the businesses that receive them, but they are also a benefit to the other taxpayers of Auburn, including homeowners. The majority of the city’s revenues come from property taxes. However, Auburn also receives some state funds, including state aid to education, revenue sharing and local road assistance. The state reduces these funds when the city’s assessed valuation increases. The state allows municipalities to use TIFs in order to encourage communities to do economic development to create jobs and expand the tax base, without being penalized by having their state aid reduced.
In Auburn, the city can provide up to a 40 percent TIF to a business, and still keep the entire amount of each new tax dollar generated by new development by putting the new revenue in a TIF district, thus not losing state aid. Example: If a new business valued at $5 million locates in a city and pays $100,000 in new taxes, the city would only gain $60,000 in new revenues because it would lose $40,000 in state aid and in a higher county tax bill. However, if that same business is located in a TIF district and the city agrees to spend that 40 percent in infrastructure improvements or to assist a business with costs of development or improvements by giving the business a 40 percent tax rebate to reinvest in the community, then the city would receive 100 percent of the new revenue because it would not have its state aid reduced and it would not be obligated to pay a higher county tax bill.
If the city’s state aid for education is reduced when it expands its tax base, why is the city working to attract economic development?
The city has put much effort into attracting businesses, both large and small, to our community in order to have a diversified and balanced tax base. To be a well-rounded community, we need a combination of residential neighborhoods, commercial districts and industrial areas. By doing this, the entire cost of government is spread over both homeowners and businesses.
The City has a track record of modest tax rate and budget increases. The only way to get new revenues without raising people’s taxes is to expand the tax base through new development.
But it takes a lot of new development, which adds new value to the tax base, to fund even small budget increases. For example, a 1 percent increase in the municipal and school budget would amount to about $600,000. To come up with funds to pay for that, without requiring a tax rate increase, the city would need to add significant new value to the tax base. As an example, if the tax rate is $22, the tax base would need to increase by $27,300,000 to fund a 1 percent increase in the budget. To give you an idea of how much new development it would take to generate that new revenue, the city would need this amount of development:
• A new $12 million shopping mall would generate $264,000;
• Two new $3.5 million manufacturing plant would generate $154,000;
• Two new $1.5 million businesses would generate $66,000;
• Two new $1 million office buildings would generate $88,000;
• Two new $500,000 restaurants would generate $22,000;
• Two new $150,000 homes would generate $6,600.
The total of all that new development in revenue is $600,600.
To keep spending and taxes within a modest increase, the council’s budget discussions always include a discussion about spending cuts and the tax base.
Is it true that a revaluation is just a way for the city to take in a lot more money? Sure, the tax rate is reduced, but with the new values, the city can get a lot more money, right?
No. The purpose of a revaluation is to meet state law and to bring equity among all property owners. The revaluation lowers the tax rate, but if certain property values increase, then some property owners can have a larger tax bill. The only way the city could take in more money from property taxes than in the prior year would be if the city council voted to increase spending – and then raised the tax rate or if the tax base expanded through new value.
What about property tax relief? Didn’t the state Legislature approve property tax relief?
The state of Maine Legislature did approve L.D. 1 in 2005 after the defeat of the “Palesky” tax-cap proposal. The Legislature did three basic things to promote property tax relief.
• Members voted to change the local aid to education formula and increase the funding available for this program. The changes in this program benefited various communities differently. Lewiston, for example, received about $3 million in additional funding, while Auburn only received about $300,000 in additional funding.
• Members instituted a larger homestead exemption, increasing it from $7,000 per resident to $13,000 per resident. However, even as they increased the amount of exemption, they required municipalities to pick up the additional amount. This means that half of the homestead exemption is funded by local property taxes, about $.55 of the current mil rate.
• They developed a spending cap to limit the amount of property tax increases in any one year. The city of Auburn has traditionally spent less than the spending cap contained in the new law. The tax increases in Auburn over the past 10 years have averaged 1.6 percent per year.
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