AUGUSTA — Skyrocketing home sales prices could require the city and other Maine municipalities, to conduct a property revaluation that in the current market is expected to increase the value of, and taxes on, residences while lowering the tax burden on commercial properties.

That is prompting some officials to express concern the potential shift in the property tax burden could force some residents out of their homes. Specifically residents who may have now-more-valuable homes but low incomes and thus difficulty paying a higher property tax bill.

City administrators told city councilors, during a recent discussion about putting $200,000 into the capital improvement plan for a future property tax valuation, that the city’s assessed property values are far below what homes are selling for in the hot real estate market. Because of this, the city may need to have a property revaluation done to bring its assessments more in line with selling prices.

And City Manager William Bridgeo warned that because commercial property values have not escalated as much as residential properties the new residential property values likely to result from a revaluation will increase the property taxes on residences and decrease it on commercial properties, even if the total amount of property taxes collected by the city remains the same.

“Commercial property valuations have not increased like residential property valuations have increased,” Bridgeo told city councilors at their Aug. 26 discussion. “The problem is going to be that more of that $35 million (needed in property taxes) is going to end up, legally, having to come from the residential side than the commercial side.”

Ward 1 City Councilor Linda Conti said news reports about a property revaluation in Portland indicated some residents there saw huge property tax increases, and some said they would have to sell their homes because they couldn’t afford their new higher property tax bills. She expressed fear that could happen in Augusta, too and asked how people in that situation might be helped.

“There are some people who are land rich, maybe, and cash poor,” Conti said. “How will we deal with them? Will we offer them ways they can … stay in their homes, or are we going to force them to sell and move? What if there are people in that situation, how do we deal with that? Just say, ‘Oh, too bad, your house is worth a lot of money.'”

Bridgeo responded that there are a few programs available that could help low-income and, in particular, elderly residents, such as the circuit breaker program and the property tax credit. And he said it is possible that the state Legislature, since the matter could be a problem across much of the state, could take action this session to try to help by enhancing programs such as the homestead exemption, which allows residents to reduce the taxable value of their homes. But he said those programs are limited in Maine. He said municipalities in Maine, unlike in some other states, can’t charge different tax rates for commercial properties than it does for residential properties.

“Maine municipalities are very limited by law in what flexibility they have,” Bridgeo said. “Maine is one of those states that relies way too heavily on the property tax, and that’s what we’re stuck with in some regards. And there probably will be, unavoidably, some pain.”

City Tax Assessor Lisa Morin said state law mandates municipalities not allow their assessments to fall below 70% of market value. She said Augusta has largely been at 100% since 2006, when its last revaluation was done. She said in the past year the city’s ratio, between its assessed values and market values of homes, has taken a nose dive, to between 50% and 60% of market value.

Bridgeo said that means a house the city is assessing at a value of $100,000 could be selling for as much as $200,000 in the current local real estate market.

And with many Maine communities also experiencing a hot residential real estate market, Morin and Bridgeo warned appraisal firms capable of doing a revaluation could be in high demand. So Morin said she’d like to see Augusta line up a firm and get a revaluation scheduled.

The city’s proposed new capital improvement plan includes $100,000 each year in fiscal years 2022 and 2023, for a total of $200,000 for a revaluation.

Susan Robertson, human resources director and assistant city manager, said the city may find itself needing to move more quickly on a revaluation than the initial draft of the capital improvement plan would finance.

Bridgeo said a property tax revaluation would be discussed as a standalone item at a future council meeting.

He also said there is a chance the current high residential real estate prices could come back down, if the current escalating trend changes.

“If we’re in a bubble, a residential real estate bubble, and the bubble breaks in the next year or so before a revaluation is completed, that would change the whole dynamic, to the good for those of us who have residences in the city and pay taxes on those,” he said.

Councilors said it will be important for the city to have a strong communication plan to inform residents if and when a revaluation is done, so they aren’t shocked or fearful. Bridgeo agreed and said that the city’s newly hired director of marketing and communications, Haley Gauvin, could take on the responsibility of working with other staff to provide information to residents on a revaluation.

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