- Why have a property tax?
- What Property is taxed?
- How is property assessed?(market value)
- How is the mill rate (tax rate) determined?
- How does my property value (valuation) affect the amount of taxes I pay?
- What services do property taxes fund?
- Why do assessed values change from year to year?
- Why has my Homestead/Veteran’s exemption changed?
- How can I appeal my valuation?
- How can I appeal the tax rate?
- How can I submit address changes or corrections?
- Was my Homestead Exemption applied to my bill?
- Where can I get further information?
Why have a property tax?
Property taxes in Maine generate over $2.0 billion a year to fund local government services. Of the three major taxes – income, sales and property – used to fund Maine State and local governments, property taxes comprise the larger slice of the revenue pie. Property taxes generally account for 44% of the revenues in Maine generated by the three major taxes. The income taxes (corporate and personal) generate 30%, and the sales tax generates 26% of the total.
Property taxes have been with us since colonial times when a person’s wealth could be measured in the amount of property a person owned. Although it is our oldest form of taxation in Maine, the property tax still remains widely misunderstood. As the fundamental structure of our economic system has evolved from an agricultural economy to a manufacturing economy to a services-based economy, the patterns of ownership have changed and the property tax has become quite regressive because it is no longer necessarily based on a person’s wealth or ability to pay.
Properties are appraised so that those of us who want the advantages of having schools, fire and police protection as well as other public benefits can absorb our fair share of the cost, in proportion to the amount of money our individual properties are worth. The property tax is part of a well-balanced revenue system. It is a more stable source of money than sales and income taxes because it does not fluctuate when communities have recessions. When the community spends your tax dollars on better schools, parks, and so on, your property values rise. Some of the windfall benefits you receive are recaptured by the property tax.
What property is taxed?
Both real (land and buildings) and personal property (tangible goods) are subject to taxation, unless they are exempted by law or subject to another form of taxation, such as the excise tax for motor vehicles and boats. The property tax bill for most Maine homeowners is based on the value of the land, the house, and the outbuildings.
Local assessors are required by law to "ascertain as nearly as may be the nature, amount and value as of the first day of April of the real estate and personal property subject to be taxed . . ." This means that if on the 1st day of April you own property that is subject to taxation, then you are liable to pay those taxes to your municipality.
How is property assessed? (market value)
The Maine Constitution says that property shall be assessed at its "just value." The courts have interpreted "just value" to mean fair market value or in other words "what the property is worth." A property’s worth is commonly looked at as "what a willing buyer would pay a willing seller" for a particular piece of property.
Determining the market value of property is no easy task. Local assessors use three basic methods to determine a property’s worth. To find the value of any piece of property the assessor must first know what properties similar to it are selling for, what it would cost today to replace it, how much it takes to operate and keep it in repair, what rent it may earn, and many other dollar facts affecting its value, such as the current rate of interest charged for borrowing the money to buy or build properties like yours.
Using these facts, the assessor can then go about finding the property's value in three different ways.
SALES COMPARISION APPROACH
The first method compares your property to others that have sold recently. These prices, however, must be analyzed very carefully to get the true picture. One property may have sold for more than it was really worth because the buyer was in a hurry and would pay any price. Another may have sold for less money than it was actually worth because the owner needed cash right away. The property was sold to the first person who made an offer.
When using the sales comparison approach, the assessor must always consider such overpricing or under pricing and analyze many sales to arrive at a fair valuation of your property. Size, quality, condition, location, and time of sales are also important factors to consider.
A second way to value your property is based on how much money it would take, at current material and labor costs, to replace your property with one similar. If your property is not new, the assessor must also determine how much it has depreciated. In addition, the assessor must also determine how much a lot like yours would be worth if vacant.
The third way is to evaluate how much income your property would produce if it were rented as an apartment house, a store, or a factory. The assessor must consider operating expenses, taxes, insurance, maintenance costs, and the return most people would expect on your kind of property.
One, two or all three of these methods might be used to help the assessor determine the fair market value of your property. It is also important to note that land and buildings are valued separately. Therefore, a home with water frontage may be assessed at a significantly higher value, because of the land’s value, than an identical home without water frontage.
To implement the constitutional requirement that real estate be assessed at its "just value," and in recognition of the tremendous difficulty and costs to a municipality to maintain a "just value" assessment, the Maine Legislature enacted assessing standards that municipalities must meet. One standard is that the total local valuation of taxable property not falls below 70% of fair market value. Another standard is that the quality ratings of assessments not exceed 20 (which basically mean that the difference in valuation between similar properties should never be greater than 20%).
Revaluations are commonly used when a community falls below the assessing standards. During a revaluation, all property in the municipality is inspected and assessments are adjusted to their fair market value.
How is the mill rate (tax rate) determined?
Property taxes are levied according to a mill rate. The mill rate is the dollars/cents per $1,000 of value that you will pay in property taxes. For example, if you own a home valued at $100,000 and the tax rate is 20 mills, then your tax bill will be $2,000 (or $20 x 100).
In calculating a property tax rate, the Ellsworth City Council determines the amount of revenue needed to be raised by the property tax to fund all of our municipal services. That amount is then divided by the total local assessed valuation to get the local tax rate. For example, a town that has a local assessed valuation of $100 million and needs to raise $2 million in property taxes will require a tax rate of 20 mills to do so ($2,000,000 divided by $100,000,000 equals .020).
Another way to look at the mill rate is as a percentage of value. For example, if your home is valued at $100,000 and the mill rate is 20, then your property taxes are equal to 2% of your home’s value; if the mill rate is 15, then it is 1.5% of the home’s value; 10 mills is 1%.
The assessor calculates how much must be raised in property taxes based on what the City Council has approved. A tax commitment listing all the property in town, its value and the taxes that are owed is then signed by the municipal officers and given to the tax collector who sends out the tax bills. In Ellsworth, property taxes are paid in two installments due in September and March. Property taxes may also be escrowed and payments made as part of a homeowner’s monthly mortgage payment.
The April 1, 2009 (FY2010) tax rate for ELLSWORTH is:
$13.35 per $1000 of valuation
How does my property value (valuation) affect the amount of taxes I pay?
Your tax bill is determined by multiplying your assessed value times the tax rate. The Assessor’s Office determines your assessed value and the tax rate is based on the budget approved by the City Council. Since assessed values can change over time in response to market conditions and property improvements, the revaluation process updates property values to ensure those properties with greater value pay a larger percentage of the overall property tax obligation.
What services do property taxes fund?
Maine communities provide a vast array of services, including police and fire protection, winter and summer road maintenance, code enforcement, planning, economic and community development, issuance of licenses, recreation, parking, solid waste collection and disposal, water and sewer services, emergency medical services, health and human services, and sometimes more depending on where you live. Property taxes on average fund about 71% of the cost of local governments; the remainder comes mostly in the form of state assistance.
Why do assessed values change from year to year?
When market value changes, naturally so does assessed value. For instance, if you were to add a garage to your home, the assessed value would increase. However, if your property is in poor repair, the assessed value would decrease.
Why has my Homestead/Veteran’s exemption changed?
Based upon the result of the annual sales study conducted by the State of Maine Property Tax Division, the town has declared an assessment ratio of 100% for the current tax year.
Homestead and Veterans Exemptions, by state statute, are adjusted each year by the local assessment ratio. Therefore the allowable Veteran’s exemption is 6,000 (6000 x 100%). The Homestead exemption is $10,000 (10,000 x 100%).
How can I appeal my valuation?
Pursuant to state statute tax appeals must be filed in writing with the Tax Assessor within 185 days of the commitment of the taxes. Tax appeals must be based upon a claim of over valuation of the property not upon the amount of the tax bill. A taxpayer may only appeal the current assessed value stated on the tax. Please see the Forms page for an Abatement Request Form.
How can I appeal the tax rate?
The tax rate, which is set once a year by the City Council, cannot be appealed. Your valuation, which is set by the Assessor, can be appealed by following the procedure outlined above.
How can I submit address changes or corrections?
To submit an address change or correction you will need to present to the Assessor’s office a signed, written statement of the changes needed or, return the tear off portion of your tax bill with the noted changes.
Was my Homestead Exemption applied to my bill?
On the right side of your tax bill look for the “current billing information box”. If you received the Homestead Exemption you will see the amounts of $10,000 in the “Homestead” field.
Where can I get further information?
For information regarding payment of taxes, amounts owed and interest charges, visit the Tax Collectors Office in Ellsworth City Hall or call 207-669-6603.
For information regarding valuation of property and ownership information visit the Assessor’s Office in Ellsworth City Hall or call the Assessor’s office at 207-667-8674.