Maine: Real Estate Property Tax Relief Task Force

Sullivan (Maine Revenue Services)

manufactured homes are at 50%, you effectively double them. Right. And throughout your whole structure. So I think the case can be made that if you're so far out of whack that you're below the 70% ratio and it's been 20 years or 10 years or however long in the market, The equity question is, is the greatest thing, and that will show up in the coefficient of dispersion measure because that talks about that equity.

Grajewski

So I think that the question that I want to make sure the legislature considers is, as you're making something that's been inequitable, that is very inequitable and has been inequitable for a while, as you're making it equitable, is it okay to to do that in a stepwise fashion, or do you have to go straight there? I think that's the question that I want to ponder. Not right now. I want to capture it first for myself to ponder with others who are interested in a different day. Mr. Sullivan?

Sullivan (Maine Revenue Services)

Part of the consideration there, I think, would be You're going to have properties that are valued at a higher rate than others within your system. And if you're saying, okay, we're going to take 5 years to increase everyone to the standard, for 5 years that condominium that's at 95% is being inequitably treated. Right. I'm just—

Grajewski

that's why I wasn't— I don't think what's happening right now is constitutional, period. Probably. The question is, once you open your eyes to it, is it okay to keep being unconstitutional? If it's for a set period of time set by the— but this is the question. Uh, Mr. Caliendo?

Caliendo

No, thank you. Um, I do appreciate the inequity that may exist in a community of all property types that has not complied with state law or statute to begin with. But maybe to oversimplify the concerns of getting people square, the valuation is the tail wagging the dog because it's the budget that backs into the mill rate, right? And the shock to all of us, including everyone on this task force, it took at least myself a few meetings to realize, wait a second, the assessed Improvement in our market value is not really the issue because the mill rate should come down when assessed values go up. So just follow the appeal process. Tell citizens, whether they're businesses or residential, just go if you feel like you get a— your new appraisal and your new tax bill is really that out of whack. Because if your appraised value goes up 50%, because it's at 46%, Well, your mill rate should come down commensurate with that. That's what should happen. Just go appeal the valuation with your municipality. That would be because the phasing in and out, because there's already processes in place for that, gets overly complicated given it's ultimately the money that the municipality needs to raise that impacts the end results of the property tax bill. Okay.

Grajewski

That is true that there is a process for people that feel that their assessment is incorrect. Ms. Billings, I could see it stewing over here, which is good.

Billings

You can come in and see the assessor if you want to, but if it Pretty much stands with the selectmen. You'll go to the county commissioners for your appeal, or at least that's what we do in Hancock County.

Grajewski

I guess the question for task force members is, do you feel that you want to vote for the legislature to consider if it needs to create some kind of less abrupt changes or if we feel that the current appeals process is adequate. Mr. Sullivan?

Grajewski

Well, I guess I've been persuaded to just rip off the Band-Aid, for lack of a better phrase. Is there anyone that wants to put something else forward, however, on this subject of softening the blow? Okay, I'm not seeing anything. All right. Now we get to the sticks. I had 2 different sections of sticks. The first one was a penalty for not report— even reporting what your current valuation status is. As a reminder, the MVR reporting had found that 140 record— 140 towns just didn't report what their status is. I just really strongly felt that How can we make decisions if we're not sure what's going on? I'm not— you guys, I'm sure, reported. But some folks haven't. So I just wanted to say that there should be a penalty for that. And I didn't decide really what it was. But if people agree there should be a penalty after a period of time for not even reporting your status, that would be my proposal at this moment. Anyone have any questions, comments on that? Mr. Sullivan?

Sullivan (Maine Revenue Services)

For the 140 municipalities that don't report that on the MVR, they may never have had a revaluation.

Grajewski

Oh my God, I'm going to freak out.

Sullivan (Maine Revenue Services)

They may be— they may be a select board that is doing the assessing in their town, and they've done it, and they may have done it well. They may be very equitable, and they may actually have good results. But they've never had a revaluation. They've never hired anyone to do it, and they've just done the valuation themselves. And that might be what that 140 are. And the question we ask on the MVR is, did you have a revaluation? And they may not have, and legitimately so.

Grajewski

So I guess other than my momentary freakout, maybe the question needs to be rephrased Just so they can answer if they're doing it themselves in that way. We could at least know that that's their method. Like, what is your method? What is your method for following the Constitution on this? Right. Representative Nutting.

Bob Nutting

How do we know? Maybe they're doing a wonderful job. Maybe they just should be left alone. They're in violation of the Constitution. Is that what I'm hearing?

Grajewski

We don't know. Mr. Sullivan?

Sullivan (Maine Revenue Services)

We do a sales ratio study every year on all municipalities, and that looks at the ratio, the sales ratio, and their quality of assessment. So we can find select boards that do this work all on their own. They're not certified assessors or anything like that. They are a select board. They've taken the time and effort to become educated. They do an An adequate job, and the sales ratio study will show that.

Grajewski

Mr. Peters?

Peters (Office of Rep. Bob Nutting)

So, sorry, I represent Bob Nutting. So we have this standard of the certified ratio and the assessment quality. And this kind of is a little weird, but Do we need a revaluation requirement? If— or is the expectation that municipalities will just meet those however MRS determines is acceptable, and if they don't, then they're required to either do the statistical update or revaluation? But it's kind of interesting. I didn't think about that. Is a revaluation actually required if they're If they're doing a good job. I don't know. I don't want to make NMSFality do it every 10 years if they're doing a good job with their statistical updates.

Grajewski

Representative Nutting?

Bob Nutting

What he said.

Grajewski

Mr. Sullivan, do you have any comment on that? Thank you, Ms. Lear. Sorry, I have to be back in 9 minutes. That's reasonable.

Grajewski

For a specific property type? For every—

Sullivan (Maine Revenue Services)

yeah, for every— and you would do that for each class for which you have enough data.

Grajewski

Yeah. I guess in light of what you've said, I'm not— I'm still irritable that I look at what looks like it should be a complete spreadsheet of information and there's just 140 blanks. But maybe it's not the end of the world. It's only a problem if those 140 blanks are correlated to being outside of the 90 to 110% and outside of the 20%, um, metrics. Mr. Sullivan, and then Mr. Caliendo.

Sullivan (Maine Revenue Services)

Um, we can update the MVR to ask the question in a different way. It's just not going to be quickly done because of the way the system works. Our 2027 MVR is already being tested right now. So we probably won't be able to make a change until— Give them a call.

Grajewski

Put me on the phone. Let's get in there.

Sullivan (Maine Revenue Services)

It is possible.

Grajewski

I can live with it not being as comprehensive if the other things get in line. I'll just put it that way. So I could— I can relent on wanting to have a stick for not even reporting for the time being. Mr.— Senator Bickford.

Bruce Bickford

How— I almost said Mr. Bickford. That would be— I was so close. —December you could do that. And I apologize. So I'm thinking now with the stick, if we start looking at, you know, Rev 1 or Rev 2 losses. Why wouldn't it be simple to just say whatever percentage you are, you know, if you're, if you're at 100%, you get 100% of revenue sharing. If you're at 90%, you get 90% of revenue sharing. 86%, same thing. Isn't that an easy formula to put in and leave? And then as you do every year when you do your— Yeah. numbers for all the municipalities with property taxes, you say, oh, here's the number they're at, this is the percentage of revenue sharing they get.

Grajewski

We'll let that simmer while we go to Mr. Kelly-Ando. Yeah, go ahead.

Kelly-Ando

I just— maybe this question is too obvious, but did I understand, Mr. Sullivan, that these certain towns may be doing it on on their own, they're just not reporting it in the manner which appears as 140 blanks? Is that what— they're doing it maybe, but it's not reported?

Grajewski

Mr. Sullivan?

Sullivan (Maine Revenue Services)

The question is, when did you have your last revaluation? Who was the contractor? And what was the cost? I think are the 3 questions we asked in the MVR. And there are towns that have never had a revaluation. They don't have a contractor and they never had a cost, and they're doing it themselves as a select board, or they have an agent that they've hired that does the, the work for them, and then the select board signs off on it. But they've never had a revaluation, so they don't answer that question. There's nothing to fill in.

Kelly-Ando

Okay, so whether the questions need to be modified or not, but I'm kind of with Senator Grajewski that that's what, a third of the municipalities that are blank? And if they're doing something, maybe it's that simple. And thank you for letting me catch up. I thought if there's a manner to recognize that some people are doing it, as long as it's compliant, Constitutionally, I'll leave that up to you about the credentials, but okay. Thank you.

Grajewski

I'm not sure if it is or isn't compliant with the Constitution, just for, for the sake of saying so. Ms. Billings?

Billings

I think if we look at the analogy of towns that, yes, like Vinny said, you've got a third of them not doing it. And I'm going to be in the third that will have to do it every couple years or I'll be beaten with a stick all the time. And then you'll have that middle ground. So that's what's really going to happen out of it probably.

Grajewski

Speaking of sticks, I've got more sticks. I think I really like, Senator Bickford, what you've introduced. And maybe we can fold it kind of into the stick. Stick section, the next stick section. So this one I had structured as penalties for noncompliance, and by that I meant to the actual requirements in statute around the ratios and the quality metrics. I suggested that after 5 years of creating financial supports for municipalities, that if they hadn't contracted with anybody even, that that's when the sticks come through. Okay. But it— that's obviously just— I chose a random number. And then the sticks I proposed was instead of using tree growth and homestead to replace with a revenue 1 loss, and perhaps we could consider sort of what Senator Bickford recommended. I guess my only feedback on that would be I think people that are within the standard, I wouldn't Because it's hard to dial into exactly 100, I guess. I would guess, like, I wouldn't want them to be penalized at like 90% or 110%. Like, what does that mean, right? But anyone who's outside of it, maybe you could do a percent. Just winging it over here. Mr. Sullivan and then Mr. Leishman.

Sullivan (Maine Revenue Services)

Statute allows— when we do our state valuation work and we produce our ratio study, We come up with what's called the developed parcel ratio. That's just the name of it. And a municipality can then look at that developed parcel ratio and they have the ability to certify or declare a ratio after that that is 10% of that developed parcel ratio greater. So if they are at 70%, they can certify or declare it 77%. Okay. If they're at 91%, they declared at 100%. So there's different ratios that you have to consider in what they are, you know, if you want to say it's the developed ratio, the certified ratio, declared ratio, or whatever. That's— but there are different standards involved in the whole thing. Okay.

Grajewski

I just— Mr. Leishman, you were next.

Leishman

Well, that's, that's what I was going to say. But to further illustrate that, that's why I do adjustments anytime I dip below 91, because at 91 I can certify at 100.

Grajewski

I don't know, Mr. Leishman, if you should be the captain of all assessing in the state of Maine, but it feels that— feels like you're You're really trying to do it correctly, and I appreciate that. From what I have heard, again, I'm no expert. I literally just looked through all these spreadsheets to be like, what looked like good ideas to get us on track here.

Bruce Bickford

In light of your comment, may I just for a moment?

Grajewski

Sure.

Leishman

I learned from Maine Revenue what a COD was, coefficient of dispersion. Didn't hear until today that what we do is not actually a coefficient of dispersion. So my mea culpa, please.

Grajewski

Sounds like it's not way far off, though. Senator Bickford.

Bruce Bickford

Thanks. So can I ask, with these different numbers, when you do your ratios, which one is it that shows up on the tax bill? Is that the one that the state says, or is that the one the municipality decides to adopt?

Sullivan (Maine Revenue Services)

Mr. Sullivan. In April, we send out a certified ratio declaration form to the municipalities, and on that form it tells them what their last developed parcel ratio from the state valuation was. It then gives them the 2 options: they can accept that developed parcel ratio as their ratio, or they can accept the 10% increase, or they can say that they qualify for a greater ratio than that because they have done a statistical update, they have done a revaluation that's, that's being implemented that year, and they have to provide to Maine Revenue proof that that has occurred. So when Kerry does his statistical update, He's required— if he's outside of that 10% originally and he wants to certify at 91, then he has to provide to us an updated sales ratio study that proves that. So those— but that certified ratio at the end that they— we approve or disapprove is what is used by the town when they calculate.

Bruce Bickford

That's the one we see on the tax bill. Okay, thank you.

Grajewski

All right. How do members feel about the sticks? Whack 'em. The first part was, you know, creating a grace period to try to help everybody before the sticks become— come into place. And then I think the second major part was to shift what the sticks are to be something that's more meaningful. For communities. And then the third one in here, sort of a sub-bullet, was to— I don't know if MRS currently has the authority to do a reval for a municipality, just do it for them. But that was one of my proposals for how to just— if at some point it's like everything's way out of whack here and you're not doing anything and the sticks aren't working, we're just going to do it for you. I see that some people don't like that, but— I think that's a good idea. It was an idea that I floated. Mr. Solomon, maybe?

Solomon (Maine Revenue Services)

I believe we do have statutory authority to require a reevaluation. The question then runs into who pays for it. Are we mandating it, and is it then the state that has to pay for it, or is it the municipality? And that's been part of the reason why it's never— it's, it's not something that has been enforced.

Grajewski

Senator Bickford?

Bruce Bickford

There's got to be something that sticks though as a penalty. I mean, there's got to be something that forces that municipality because, you know, as homeowners, don't you hate it when you get your tax bill and the homestead exemption is not $25,000 because the municipality isn't at 100%? You know, it's at $20,000 or $21,000, whatever. Anyways, there's got to be some kind of penalty to the municipality if they go too far below. Yeah. Like, say the final number is below 90%. Can we then attack them with— give them— if it's 80%, give them 80% of revenue sharing?

Grajewski

Well, I guess I would just propose for us to consider that after the 5-year period to help everybody get on track. There's still no plan, then after that point, you could say that if the municipality is out of whack on both the certified ratio and the maximum rating of quality assessment, that their Revenue 1 sharing is docked. 100%. Because that does seem to impact more municipalities than the current ones. And I'm fine with the by the same percentage proposal if you're outside of the 90 to 110 and call it good on the stick proposal. Folks have any recommendations, any adjustments to what I just articulated? Mr. Peters.

Peters (Office of Rep. Bob Nutting)

If we say 5, will people come back and say, how about 7 or 10?

Grajewski

We could start with 3. I'm just—

Peters (Office of Rep. Bob Nutting)

I know people like to negotiate, and so—

Grajewski

It's true.

Peters (Office of Rep. Bob Nutting)

I don't like to. I would just say 5, hoping somebody would say 5, but—

Grajewski

Well, I think that the way that I had structured it, that there has to be like a contract with an assessing firm so that you're not being penalized if you're in the queue, I think you could do a shorter number of years, and that would be reasonable to have a couple years to know that an It's going to be paid for for you. You've just got to sign up with somebody if we're combining this with the carrot situation. So I'd be okay with taking it to 3 or whatever. I just— I said 3, but I don't know if that's what you were thinking. Okay. Or 1. You want to say 1? Ms. Billings.

Billings

You're going to hate me, but I'm going to say it anyway.

Grajewski

Go for it.

Billings

Why don't you make that $100,000 carrot to them and say you've got to do it to get your $100,000? valuation and the state pays for the whole $100,000 and you get everybody all lined right up.

Grajewski

Just to clarify what you're saying, you're saying the state would pay—

Billings

Give the $100,000 homestead exemption and make that the big tax carryover. Sorry, I thought you meant $100,000 total. I know you'll hate me, but anyway, I just had to say it. It's late.

Grajewski

I'm trying— I'm just not wrapping my head around what You're recommending to add to them?

Billings

You want everybody to do a reval, right?

Grajewski

Yes.

Billings

And their homestead is down. And if you're going to get some sort of compliant— you were talking about carrots and sticks and stuff. I mean, you know, it just feels like the homestead is going away. But if you want to get everybody all relined up and you want to get people sort of lined up with a house value or have some sort of effective way of saying that we tackle this, However way it goes, mill rates, offer $100,000. Reward them. And reward them and say you can't have it unless you revalve, so we know where you are and where you're at with it. At least you'd get it and that would jumpstart it.

Grajewski

$100,000 homestead exemption. Okay. I don't know that I want to like reopen the conversation about relief programs. To double the doubling we already voted for. But what I'm hearing you say, Ms. Billings, is there is a value to keeping the homestead exemption as part of the current stick scenario, keeping that in the system in the future. In which case, my proposal would be— I'm trying to help everyone here— remove the tree growth reimbursement stick because that's not Seeming very fair or effective. Keep the homestead exemption reimbursement stick and add to it a Revenue 1 loss stick. Mr.

Sullivan (Maine Revenue Services)

Sullivan? There is no reduction of homestead reimbursement based on the evaluation. Because if you look at it, yes, we were reducing the value of the homestead, but concurrently, when you do that, you have a higher mill rate. And since homestead reimbursement is based on the loss of tax that the municipality gets, so we're giving 76% of the lost tax tax revenue because you've got a lower homestead, you've got a higher mill rate, and the net effect is the reimbursement stays the same. The person looking at it gets less value, but the municipality's reimbursement doesn't get affected to the same extent.

Grajewski

I would just clarify that whatever I said What I meant to say was, have the current stick that shows a community member who's a homesteader, I'm not getting the full $25,000 because my community's out of whack. If that becomes $50,000, then you have— community members can see a reason that the reval is benefiting them in a way, right? Or at least even if it's mathematically not. Right. so much. It appears that way, right? Mr. Peters?

Peters (Office of Rep. Bob Nutting)

I think what Mr. Sullivan— he talked about on the municipal side, but I think also as a homeowner, say your home is valued at $100,000 and the homestead is $200,000, the homestead's $25,000. If actually municipality is valuing your home at $100,000, then the mill rate is going to be higher. And that's why your homestead is valued at half. And so the effect is the same. You're not— there's no less benefit because everything's proportional, I guess. Right?

Grajewski

I would just propose that we not touch that current stick. And there's many reasons I think some of us are Yeah. Understanding or not understanding and not wanting to have to understand at this point in the day. So I changed my don't touch whatever is happening with the homestead exemption stick. Do add a stick regarding losing a percent of your revenue sharing. And we could tie it in, at least for the sake of the proposal, to what Senator Bickford proposed. So if it's under 90% and it's, say, 80%, you get only 80% of your revenue sharing. I would just correct you, under 91%. Under 91%. Okay. If it's outside of what the statute requires, then you do that percent. Representative Nutting.

Bob Nutting

So help me understand. If I live in a community that's doing everything by the books, we just had a revaluation. Next to me is a I'm from a community that hasn't had one ever, 40 years along here. Who's the aggrieved party? Who have they disadvantaged? Does it affect me?

Grajewski

Mr. Sullivan?

Sullivan (Maine Revenue Services)

Yes, it affects you. For instance, my town has not had— let's see, my daughter's 38, so some— somewhere around 35 years in my hometown. Our bill— our certified ratio is 63. My home is valued at $130,000. Sure. If my town were to do a revaluation, I would be in the third that pays more tax because right now I'm undervalued as compared to other people. And certainly anyone who has a new home that was built more recently, they're paying a greater tax than I am as a proportion. So when you— when we talk about revals, we often throw out the thing that it's a third, a third, and a third. A third goes up, a third stays the same, and a third drops. In my case, I'd be in the third that goes up, so I'm not in any hurry for my town to do a reval.

Grajewski

But you know it's the right thing to do.

Sullivan (Maine Revenue Services)

I do, I do.

Grajewski

We're going to shame you a little bit here.

Sullivan (Maine Revenue Services)

My homestead is also low. So anyway—

Bob Nutting

How does that affect me?

Sullivan (Maine Revenue Services)

How does it affect you? Yeah. If you're the one that's paying more tax than me over in the neighboring town— I'm in a different town. Oh, that doesn't affect you at all.

Bob Nutting

Does it affect me at all?

Sullivan (Maine Revenue Services)

Well, the other town may be losing some of their tree growth reimbursement. It doesn't affect you.

Bob Nutting

So, so these towns that are doing what they're doing or not doing what they're not doing, uh, don't affect the other towns that are doing it correctly. And, and therefore, I wonder why we care. The state has the ability, evidently in statute, to, to go into the community and do it for them. And if the town— if the state doesn't choose to do that, Right. If somebody in that town is aggrieved, you'd think they could bring a lawsuit to force their town to do a reval. But absent that, I don't, I don't see why I care.

Grajewski

Mr. Sullivan.

Sullivan (Maine Revenue Services)

If, if the towns are not assessing up to the standard, when we do our state valuation to equalize everyone, which is used for revenue sharing distribution, school funding, and And the distribution of county tax. We're starting from a bad number. Okay, so our state valuation is still— even though we have equalized it and raised them to a theoretical 100%, if they are so far out of whack in their assessing, we should be raising them to a greater degree. Right. Then they are getting the benefit of having a lower state valuation, which affects their revenue sharing. So they would get more revenue sharing. So if your— if your community has done a reval and is good, we come in and do a state valuation the next year, we may actually drop the state valuation from the year before because now your assessment is correct and— Correct. accurate, and there's no need for us to adjust it. The municipality next door that hasn't done anything for years and isn't doing it right is getting potentially a benefit by having a lowered state valuation, which again, that's revenue sharing, school funding, county tax.

Bob Nutting

So now we give them the stick.

Grajewski

Well, yeah, I mean, I think what we're trying to do is create fairness within municipalities and between municipalities. And the core of that is revaluations or just proper assessing, I guess I should say.

Bob Nutting

I was trying to take something off our plate. I really—

Peters (Office of Rep. Bob Nutting)

What if we are removing rev sharing due to the other proposal?

Grajewski

There was no proposal to remove all rev sharing.

Peters (Office of Rep. Bob Nutting)

Okay. I just want to—

Grajewski

So it is no matter what happens.

Peters (Office of Rep. Bob Nutting)

I just said decrease. Okay. That's fine. Sounds good. Thank you.

Leishman

Wait. We just want to clarify because we're not sure we understood the reduction in— Rev sharing. So we both interpreted it slightly differently. If let's say you're at 80%, does that mean that you're only going to get 80% of your rev share? Or did you mean that you are now— I'm going to go with 90 instead of 91, but you're 10% out of compliance. Is it that you're now— your rev sharing is reduced by 10%? Yeah.

Grajewski

Well, I think we could go either way.

Leishman

So there would— I think the bigger the stick, the better.

Grajewski

Right. But you'd end up in a situation like a town at 90 and a town at 100.

Leishman

They would both be getting their 100%. And then anyone that's— then you have a bigger jump. So think about that way. And then also on the flip side, and I don't know how often or if this happens, but if What happens if you're at 120%?

Grajewski

You don't get a bonus. No bonus.

Leishman

I didn't think that's what you were proposing, but are you then— are you losing 10% of rev share?

Grajewski

Oh, I see.

Leishman

All right. You know, on that side, so—

Committee member

If you tie it to the percentage that they sort of by which they are out of compliance, I think that would adjust for the 120% situation as well as Mr.

Sullivan (Maine Revenue Services)

Sullivan? The minimum assessing standards say that they should be between— they— the minimum assessing standard is 70, and it should not normally exceed 110. So it doesn't say that you can't.

Grajewski

Well, we're going to revise it.

Grajewski

Okay. Well— To whatever the current IAAO is.

Sullivan (Maine Revenue Services)

But I'm just pointing it out that the The legislative language right now says should not normally exceed. If you want to change it so you shall not exceed, that's fine.

Grajewski

Lawyers need to help us out of this one. I think the point is we want ideally in some period of number of years from where we are now, we want everyone between 90 and 100%, 110%, because that is what I have learned that the Experts think is the right thing. So whatever language is needed to make that happen, I think, is what we want. What? And then the question that you have is—