Many Maine communities are going through a revaluation process, and residents could see their property tax bills change substantially as a result.

Gardiner, Fairfield, Oakland, Winthrop and others are set to begin revaluations, but details of the revaluations, how they are done and how they impact property taxes can be complicated and murky.

What is a revaluation, and why do communities need them? 

Municipalities need to raise revenue to pay for schools, roads, general assistance and other services. Almost always, the biggest share of that revenue is property tax.

At its most basic level, a revaluation is a rebalancing to ensure property owners are paying their “fair share” of municipal taxes, with higher-value properties owing more and lower-value properties owing less.

Municipalities are not doing this of their own accord. The Maine State Constitution requires “all taxes upon real and personal estate, assessed by authority of this State, shall be apportioned and assessed equally according to the just value thereof.”

This means communities are required to collect taxes based on the true market value of properties. And since market values change over time, municipalities must periodically reassess property values.

How does a revaluation work? 

A full revaluation requires a community to hire a professional firm to visit every property in the municipal limits and record data points on the properties, like home additions or the quality of construction. The firm will also collect data on acreage, topography and sales as of April 1 of that year.

In many cases, the process takes years. In Fairfield, which began its revaluation process last year, the town will assess properties over four years — a quarter of the town each year.

Property owners usually have the ability to ask questions of the assessing firm. They can also appeal their tax bill if they feel their property was valued inaccurately.

If property owners do not want to let an assessor into their home, they automatically waive their right to an appeal on the newly assessed value.

What happens if a municipality does not do a revaluation? 

The general guidance is that municipalities should pay for a professional revaluation about every 10 years to make sure taxed values keep up with increasing market values. But revaluations can be unpopular and are often put off for much longer.

To help enforce regular revaluations, the Maine State Legislature enacted a law in 1975 that requires a community’s properties be taxed at least 70% of the state-defined market value, which is determined by area property sales and other factors.

If municipalities do not meet that threshold, residents’ homestead exemptions can be affected.

The state offers homestead exemptions to permanent residents to exempt up to $25,000 of a home’s value from being taxed by the community. But that $25,000 is adjusted to the local property tax assessment ratio of a municipality.

So, for example, if a community were assessing its properties at 70% of the market value established by the state, residents living in the municipality would only be eligible to receive 70% of the $25,000 homestead exemption.

Winthrop, which has not done a revaluation since 2007, is in that boat.

“The main question that we’ve gotten from our taxpayers once the tax statements went out is, ‘How come I’m not seeing my $25,000 homestead exemption?'” Winthrop Town Manager Anthony Wilson said. “Because instead, it’s somewhere around $16,000, and so people are upset that they’re not realizing the full $25,000 exemption.”

The only state-enforced penalty for communities below the 70% threshold is from the state’s Tree Growth Tax Law, which reimburses municipalities for large wooded properties enrolled in the program. That reimbursement is often uneven: Fairfield officials estimated the penalty could add up to about $40,000 a year, while Hallowell would only lose about $900 per year.

Will my property taxes increase after a revaluation?

Not necessarily.

Following a revaluation in a community, Wilson said, about a third of the property owners normally see their tax bills increase, about a third see their bills stay the same and about a third see their tax bills decrease. In Winthrop, lakefront properties will likely see the largest tax increases, while inland homes could see reductions.

“One of the fallacies of revaluations, or misconceptions, is that people think that their taxes are definitely going up, and that’s not the case,” Wilson said. “The taxes go up when the expenses go up. Ultimately, it’s either an elected body or the town meeting voters who determine what the budget is going to be.”

The revaluation process is a shifting of the tax burden, and communities do not suddenly and punitively collect millions more in taxes after a revaluation has increased some property values. Instead, municipalities raise the amount of money they intend to spend.

To determine how much to charge each property owner, each community calculates its tax rate.

Officials first establish how much the municipality will need to spend during that fiscal year, including required contributions to local school districts and the county government.

The community will then subtract known revenues — including grants and, sometimes, funds leftover from the previous year — from the total expenditure amount to determine how much the municipality must raise in taxes. Using Hallowell’s case, this ended up being about $6.77 million of the $9 million budget.

The municipality then divides the amount of needed revenue by the total value of all property in the community, including up to 5% of wiggle room for emergencies.

This number is then multiplied by 1,000 to create a taxable amount per $1,000 of assessed property value, resulting in the tax rate that property owners pay. As an example, the tax bill on a property assessed at $250,000 in Hallowell, which has a tax rate of $19.90 per $1,000 of assessed valuation, would be $4,975, if no exemptions.

After Winslow’s most recent revaluation, the property tax rate decreased by about $6 per $1,000 of assessed valuation. But because the tax burden was shifted heavily toward residential properties in the revaluation, many residents saw a large increase when they received their tax bills, prompting several to express frustration with the Town Council.

When is my community doing its next revaluation?

In most communities, the next revaluation has not been scheduled.

Reach out to elected officials or the municipal clerk to see if one is in the works, and keep your eye out for mailers or other public notifications about a revaluation.

Communities are required to notify members of the public well in advance when a revaluation is upcoming.