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Homeowners Guide to Property Tax
What Property is Taxed?
Property taxes in Maine generate $1.2 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 biggest slice of the revenue pie.
Property taxes account for 44% of the revenues in Maine generated by the three major
taxes. Income taxes make up 30%, and sales tax adds 26% to the total.
Property taxes have been with us since colonial times when a person’s wealth could
be measured by the amount of property he owned. Although it is the oldest form of taxation
in Maine, it remains the most widely misunderstood. As our economy has changed from an
agricultural society to a more widely based economy, the patterns of ownership have
changed and the property tax has become quite regressive because it is no longer based on
a persons’ wealth or ability to pay.
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 excise tax for motor vehicles and boats. Since home furnishings are
largely exempt from personal property taxes, the property tax for most Maine homeowners is
based on the value of 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 1st 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.
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. One method compares the selling price
of similar types of property. A second method determines how much it would take at the
current price of materials and labor to replace a building, then subtracts our how much
the building has depreciated. The third assessment method evaluates how much income the
property would produce if it were rented, like an apartment house, store or factory. 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 significantly higher value, than an identical home
without water frontage.
To implement the constitutional requirement that real estate be assessed at it’s
"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 property must not fall below 70% of fair market value. Another standard
is that the quality rating of assessments not exceed 20 (which basically means that
the difference in valuation between similar properties should never be greater than 20%)
Revaluation’s are commonly used when a community falls below the assessing
standards. During a revaluation, all property in the town is inspected and assessments are
adjusted to their fair market value.
The total value of taxable property in Maine is over $68 billion, which generates about
$1.2 billion in property tax revenue to fund the operation of Maine’s 492 cities,
towns and plantations.
How Are Taxes Collected?
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 24.30mills, then your tax bill will be $2340.00
(or 24.3 x 100)
In calculation a property tax rate, the legislative body of the municipality (City
Council) determines the amount of revenue needed to be raised by the property tax to fund
municipal services. That amount is divided by the total local assessed valuation to get
the local tax rate.
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 24.3 then your taxes are equal to 2.43% of
your homes value.
The municipal assessor calculates how much must be raised in property taxes based on
what the legislative body has approved. A tax commitment listing all the property in town,
its value and the taxes that are owed is then signed and given to the tax collector who
sends out the tax bills. Taxes in Brewer can be paid in one lump sum or can be made in two
payments usually in September and the following March. If you have your taxes escrowed by
your lender you will need to send a copy of your bill to them so payment can be made from
your escrow account.
What Do My Taxes Fund?
Maine municipalities fund a vast array of services, including police and fire
protection, winter and summer street maintenance, code enforcement, planning, economic and
community development, schools, libraries and recreational facilities, parking, solid
waste disposal, health and human services, and emergency medical services. Property taxes
on average fund about 71% of the costs of local government, the remainder come mostly from
the State in the form of General Purpose Aid to Education, and Local Road Assistance.
The largest portion of your taxes is used to fund Education. The average Maine town
uses about 68% of the tax revenue to fund education. The total statewide cost of K-12
education is about $1.5 billion annually.
The legislative body decides the level of services provided. The City Council is
responsible for determining the size of the budget, and thus the amount of taxes, which
are raised. The electoral system is used to decide which people best reflect the views and
attitudes of the community.
Federal and state laws mandate some of the services provided. Environmental laws
governing disposal of solid waste and setting standards for water and air quality,
requirements for a minimum level of education funding, and a variety of public safety
standards all affect the size of the municipal budget and therefore the property taxes
that are needed. Many federal and state mandates are not paid for by federal or state
funds.
Programs to Help Reduce Your Taxes
Revenue Sharing: In the early 1970’s the State Legislature created the
state-municipal revenue sharing program which distributes to all cities, towns and
plantations a share of income and sales tax revenues. Slightly over 5% of the state’s
tax revenues are distributed, and municipalities share is based on its population and
property tax burden. This money, when received, is used to reduce the property tax mill
rate.
Circuit Breaker: In 1987 the Legislature enacted a property tax relief program
directed to individuals whose property taxes exceed a certain percentage of household
income. Renters can also receive the benefit of the circuit breaker program if the rent
paid exceeds a certain percentage of income. Applications for the circuit breaker program
are taken between August 1 and January 31st. For information contact the State
Bureau of Revenue Services. Applications are available in our office during the time
applications are being received.
Homestead Exemption: In 1998, the Legislature responded to the increasing
over-reliance on the property tax by enacting a "homestead exemption". This
exemption parallels Maine’s longstanding property tax exemption for veterans of war.
The homestead exemption reduces the property tax bill of all eligible Maine homeowners who
apply for the exemption by subtracting $7,000 in just value from the assessed value of
their "homestead".
100% of revenue lost to the City because of this exemption is reimbursed from the
State’s General Fund.
More Information
Property taxes are the primary source of revenue for the City of Brewer. Other than
excise taxes on vehicles and boats, we are barred by law from using any other form of
taxation to raise money to fund local services. Property taxes also fund our share of
County Government.
While it is true that property taxes no longer reflect on a persons ability to pay, it
is nonetheless also true that property taxes in Maine are a bargain when you look at the
quantity and quality of the services that are provided.
Local Government is the level of government "closest to the people". It is
the level of government which citizens have the greatest access to and the most control
over. It is as close as we come to self-government. However, with this right to
self-govern comes the responsibility to be informed and to make thoughtful decisions that
are in the best interest of all citizens in our community. Being active in municipal
affairs is the responsible way to exercise this right of self-government.
Used with permission of the Maine Municipal Association
Tax Office
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