A taxing situation

Maine’s method of assessing property values threatens to kill tight-knit communities like Chebeague Island, where the latest round of revaluations has revealed, among other things, that the town doesn’t even know who owns what — never mind what it should be worth.

By Jess Kilby

UNCHARTED TERRITORY: the beach that once belonged to Monroe Hamilton.

It started, as most fiascos do, with the best of intentions. Twenty-two years ago, a civic-minded Chebeaguer named Munroe Hamilton deeded all the water frontage on his sizeable plot of land to the town of Cumberland (to which the island belongs). Granted, the 1500 feet of frontage is more mud flat than sandy beach, but, circa 1980, they were the town’s mud flats, goddammit, and anybody could use them.

Eventually, Hamilton’s land was carved up and sold, becoming the subdivision that is today known as Division Shores. According to various deeds and the recollection of town officials, Hamilton himself sold off about half the land, giving buyers “rights in common” to use the waterfront land he’d sold to Cumberland.

After Hamilton’s death in 1984, the rest of the sales were handled by his heirs — flatlanders from Lexington, Massachusetts. And this is where it gets tricky: Apparently, the kids re-sold

the waterfront. It’s unclear whether they were aware of the 1980 document deeding that strip of land to the town; the younger Hamiltons have been incommunicado on the matter, despite several phone calls.

It’s also unclear why nobody from the town picked up on the discrepancy, at least during those early sales, when the memory of Hamilton’s original transaction would have been somewhat fresh.

But, as those parcels of land changed hands over the years, “ownership” of the waterfront has been handed down as well. And the town of Cumberland, for the past 22 years, has blithely taxed the owners of those seven “waterfront” lots accordingly — despite the deed lurking in its own files.

This year, however, Cumberland conducted a town-wide property revaluation, as state law requires municipalities to do every so often. For various reasons, the revaluation sent the appraised values of many island homes — particularly waterfront lots — through the roof.

In the uproar that ensued, Cumberland Town Councilor Donna Damon gathered her furious neighbors on Chebeague and scoured their new property cards, looking for situations where some relief might be possible. Was a home incorrectly listed as a year-round residence? Did it really have an ocean view? Had appraisers missed the fact that a parcel had a conservation easement in place, making the land undevelopable?

Damon found examples of all these errors, and more. But when one resident approached her about the possibility of applying for an easement on his property, she looked at him quizzically.

“My usual thing is ‘We’re putting together a workshop, and I’ll let you know when it is,’ ” she recalls. “And then I said, ‘Wait a second — what are you going to get an easement on?’

“And he said ‘The shore. Letting people go along the shore in front of my house.’ And I said ‘Yes, but it already belongs to the town.’ And he said ‘No, I have a deed to it.’

“And that’s when I realized there was a problem,” Damon concludes. “So I immediately contacted the town, and the town then had to contact the town attorney, and then the town attorney said ‘Yes, in fact, the town does own this.’ And so they made an adjustment on the people’s assessment.”

The homeowners involved have had mixed reactions to what Damon diplomatically describes as a “comedy of errors.” Some are incensed that the town has no plans to compensate them for back taxes they’ve all theoretically overpaid. Some are more concerned about the island-wide (and state-wide) property-tax crisis, of which they see their situation as only one small part. Others still appear to be completely unfazed.

The town, for its part, is downplaying the entire incident.

“On one property, for example, the adjustment made a difference of about $20,000 in total assessment,” says Cumberland Tax Assessor Bill Healey, “which is, with our current tax rate, about $300 in taxes.”

“We have different categories for properties,” he explains, “and the fact that they have all of the amenities of ocean-front, but don’t actually own that little ten-foot strip of land, did not have a huge difference in the valuation of these properties.”

Healey’s only been on the job a few years, so pinning the original screw-up on him would be pointless. Only a psychic would think to check for a deed he didn’t know existed. But 23-year town manager Robert Benson, on the other hand, needs to work on his story.

When asked how the situation arose in the first place, he pauses for a very long, very tense moment.

“The — well, have you talked to Donna Damon about this?” he asks.

Yes, we have.

“Well, she is far more knowledgeable about that than I am,” he says. “I don’t know what she said, but we talked about it — that she had talked to you — and essentially, what happened was, there was some, I think, some confusion in the deeds, that the developer later on, I believe, deeded a strip of land to the town along with a right of way to the beach. And it evidently didn’t get reflected on the town tax maps. Now that we’re aware of that, the assessor has made an adjustment in the assessments.”

Hmmmm. Okay, so Benson’s not the assessor. Maybe he’s not privy to the minute details of the town’s tax map, and we shouldn’t expect him to know whether a town purchase would be duly recorded there. But he also said he believes the developer deeded a strip of land to the town, along with a right of way to the beach.

Funny, Benson was honored for his part in that deal, when he received one of the inaugural Blanchard W. Bates Conservation Awards, from the Cumberland Mainland and Islands Trust, in 1996. In an article penned by Damon for the December 1996 Inter-Island News, she mentions that Benson earned the award for, among other things, “acquisition and access to more than one thousand feet of shoreline at Division Point.” Damon confirms that the shoreline she refers to in the article is indeed Hamilton’s erstwhile waterfront.

To its credit, the town did correct the matter as soon as Damon came knocking — which was about a month ago. And the correction was across the board, not just for land owners who complained: some of the affected residents didn’t even know about the error until a letter from the assessor’s office landed in their mailboxes.

But the fix is only for this year, and, presumably, into the future. Sins of the past will remain unrectified, unless homeowners can prove their land was overvalued by at least 10 percent because of the misclassification. Even then, Healey says, state law only requires the town to go back three years from the date the incorrect taxes were levied, in offering an abatement. Since the error was fixed before this year’s taxes were calculated, the best a disgruntled taxpayer can hope for is some sort of refund on taxes paid in 2001, 2000, and 1999. Healey says he’s seen no such applications for abatement yet, but he won’t be surprised if a few eventually roll in.

Chebeague newcomer Terry Bennett, who bought his Division Shores summer home in 2000, is livid with town officials and their nonchalant attitude toward the entire mishap.

“It’s either sloth and ignorance or outright chicanery,” he says. “You can take your choice.”

“They’ve never maintained [the waterfront land]; they’ve never told anybody it wasn’t theirs to maintain,” he adds. “And they’ve cheerfully taxed us all for waterfront. It goes back 22 years, and we’re talking hundreds of thousands of dollars in taxes they’ve acquired totally without legal grounds.”

Bennett says he plans to pursue legal action, and has been in touch with a local attorney. He hopes to get his neighbors and other indignant Chebeaguers to join a class-action suit against Cumberland to protest both the town-wide revaluation and the 22-year gaffe at Division Shores.

He’s got support from his next-door neighbor, Alice Mellin, who has owned her parcel of land since 1982. Mellin thinks the $249,600 appraisal on her 1.09-acre lot and modest cottage (“It only cost us about $4000 to build!” she exclaims) is still too high, even after the town adjusted the value downward to account for its mistake.

“They’re not differentiating between who’s got mudflats and who’s got deep-water frontage,” she says.

FLAT TAX: the Emerys, like their neighbors, have been paying waterfront taxes on mud flats they don’t actually own.

But Bennett may not have much luck recruiting Vicki Emery, who, along with her husband Chip, own a home two doors down from the Bennetts.

“Um, I think I heard something about it,” she says of the waterfront error, “but I imagine they sent the paperwork to our house in Massachusetts. I’m actually on my way out to play tennis right now. Sorry.”

Playing the centrist among his neighbors is Gilbert Eaton, who takes the town’s mistake in stride but thinks Maine’s property-tax laws — and Cumberland’s method of applying them — are in need of some serious reform.

Eaton, who bought his Division Shores property in 1999 and built his own home on it, believes — like Mellin — that his land has been overvalued regardless of the town’s recent adjustment.

“I’m not going to argue with the assessment of the house,” he says. “I’m sure $110,000 is the ballpark for a house like that anywhere in Cumberland. But $325,000 for that land? We didn’t pay that much for it — it was on the market for a hell of a lot less than that just two years prior, and nobody would touch it. It just doesn’t make sense that land that had been on the market for $95,000 and had languished on the market — and lots of people had looked at it, and said ‘no way’ — would instantly become worth $325,000.”

And that, as Eaton says, is the rub. What’s angered so many Chebeaguers about this recent town-wide revaluation — the last one was five years ago — is the fact that nearly all the oceanfront and water-view plots on the island were assessed based on the lucrative selling prices of just a few parcels. Although this practice is legal, the prevailing theme from tax-reform advocates is that it’s just not fair.

“Because, in fact, there have been people who have come in from away, with some money, who have been more than happy to throw half a million, a million bucks, at some of these properties,” Eaton says. “And, as Maine people, we look at these homes and we look at this amount of money, and we say ‘This is unrealistic. Someone is just taking mom and dad’s inheritance and just saying ‘frig it — I want a piece of Maine property out there, and I don’t care if it’s a million bucks.’ And then it just ripples up and down the coast.”

This ripple, some contend, is forcing long-time residents out of their homes, simply because they’re lucky enough to live somewhere with a beautiful view. Chebeaguer Dave Hill says he sees the phenomenon happening all over the state.

“If you own property at the top of a mountain, or next to a lake, or along a river, as long as there’s somebody willing to come in and spend megabucks — the only thing worse than that is when your neighbor sells,” he says. “And then, up goes your property. And it doesn’t matter — it’s not a shoreside thing. It’s not a coastal thing. And it certainly isn’t just a ‘rich people complaining about paying taxes’ thing.”

“That happened on our end of the island,” Hill adds. “We had an elderly fellow who died — he had a small parcel of land which sold for a huge amount of money. They came in with a bulldozer and tore down his nice little cottage that he had there for years, and I have no idea what’s going up there now. That’s the way it happens. And it’s scary. It’s absolutely frightening.”

Hill — along with Eaton, Councilor Damon, and pretty much everybody else who’s advocating for property-tax reform in Maine right now — worries that the exodus of long-time residents who can’t pay their taxes will bring an influx of people from away, who will, in turn, change the character of insular communities like Chebeague and perpetuate the upward trend in property values. Eventually, only the ultra-wealthy will be able to afford pieces of land where simple camps and cottages once stood.

“And when they get here,” Damon says, of rich out-of-staters, “they want to turn it into the place they came from.”

Lest people call Damon an alarmist, she says she’s already seen this trend unfolding elsewhere in New England.

“I had a call today from somebody in New Hampshire,” she says. “They just bought a house, and they were calling me up because they were concerned about a trail that comes out in their yard. And I know what that means — they want to close that trail off. They want to know what kind of legal rights they have, to close the trail off. That trail’s been used by people in my family for 150 years. And this is what happens.”

The Portland Press Herald has been reporting for the past several weeks that Chebeague is ripe for a tax revolt. Damon shies away from such loaded language, claiming that islanders are currently too busy poring over their property cards looking for abatement possibilities to organize any sort of coordinated assault on the state’s tax codes.

But the situation has certainly reached a fever pitch, on Chebeague and elsewhere across the state. Even people like Bill Healey admit, when pressed, that Maine’s property-tax system is less than ideal.

“Would I approve of some type of property tax reform?” he asks. “If the state came up with another way to raise the funds without creating a new tax — definitely. That’s the central issue: Right now the system we have in place works. If they came up with a new system that did not create a new tax, I would certainly be in support of it. But the problem that keeps coming up is, if we make an adjustment to the system to lower the property tax, where is the money going to come from to fund the services that we require?”

“If we reduce the property tax,” he adds, “then maybe the income tax will go up. Maybe the sales tax will go up. So people will be impacted somehow, because the state does not have a lot of money, obviously, at this point.”

Indeed, with a $180-million deficit already a reality for the remainder of this biennium’s state budget cycle, and a predicted shortfall of nearly a billion dollars for the two years after that, the state has a decided lack of money — probably a tax-increase-inducing lack of money.

But this hasn’t stopped reform advocates from suggesting that, perhaps, a little shifting around of the state tax structure might not be a bad thing. Broaden the sales-tax base, revive the local-option sales-tax idea, increase the sales-tax rate — everything has been suggested at one point or another, even modified versions of Carol Palesky’s dreaded tax cap (which people fear would cripple a town’s ability to collect crucial revenues, as has happened in towns hamstrung by Massachusetts’s Proposition 2 1/2.)

There are also proposals that focus exclusively on reforming the property tax, such as Damon’s suggestion that the state institute a sheltering mechanism similar to Maine’s Tree Growth program — which grants qualifying land owners a lower tax rate if they agree to certain forestry-friendly conditions.

Under Damon’s proposal, property owners would received a similar tax break if they agreed to keep their land in the family, rather than sell it for a profit, for a determined number of years. Those exiting the program early would get whopped with a huge fine.

Damon says such a program would go a long way toward mitigating the gentrification of communities like Chebeague.

“For people who are just coming in and out of a town — they’re transferred from a company, whatever — nobody would want to get into this kind of thing,” she says. “People who are really looking to upgrade their house and be able to sell it for more money to buy a better house, it wouldn’t be for them, either.

“But it would be for people who are committed to a community for the long haul,” she maintains, “who aren’t worried about leaving a lot of money to somebody else. It would give people the opportunity to hold their heads up and stay in a community, and keep diversity in communities. Because if we don’t, we’re going to end up just like Nantucket and Martha’s Vineyard and every place else.”

Damon’s already pitched her idea in the pages of Working Waterfront, and she’s passed along copies of the article to her fellow town councilors.

“They didn’t say anything — they said ‘Thanks for the article,’ ” she reports.

The consensus among those in the trenches is that it’s going to take a little from column A and a little from column B to get the job done on state-wide tax reform. Unfortunately, there’s little conviction that the Legislature will be so bold.

“I’m afraid they don’t have enough guts,” Damon says. “And there’s so many special interests and so many lobbyists — it’s easier to just sit there and not take any action.”

Hill is a little more hopeful.

“I have a feeling that the Legislature is going to get pushed into a corner on this,” he says, “because . . . I think they realize that one of these years, Carol Palesky is going to get a group of signature collectors who do it right, and [the tax-cap proposal] is going to get on the ballot. And I think that’s going to motivate the Legislature to do something. Whether they’re successful or not, is another question.”

Hill says he has his eye on Speaker of the House Mike Saxl’s newly-formed tax-reform committee; he also hopes the Maine Municipal Association’s similar committee will come up with a workable solution.

Saxl’s 10-member committee — comprised of such political and economic heavyweights as former-Governor Kenneth Curtis, former-Chief Justice Daniel Wathen, and Bowdoin professor of economics David Vail — is still in its “nascent” stages, according to Saxl. He says the committee’s goal is to study the state’s entire tax structure, not just the property tax, and look at ways to stabilize state revenues.

“We keep going from feast to famine to feast to famine again,” he says, “where you go from hundreds of millions of dollars in surplus to hundreds of millions of dollars in deficit.”

Saxl says the committee also wants to find a way to make taxes more fair. He says he understands where embattled Chebeaguers are coming from.

“They’re right. The frustration they’re feeling is an indication of the challenges that face the entire tax structure.

“I think they’ve been more vocal as of late,” he adds, “but they are not alone in their concerns about trying to maintain their quality of life, and live in Maine. And we take what they say very, very seriously.”

The committee also aims to hammer out a definitive plan for lowering taxes, despite the state’s looming deficit. (“It’s the best time to do it,” Saxl contends. “People don’t understand unless they’re looking down the gauntlet.”)

And Saxl says the committee may just take their work straight to the people.

“I’m hopeful that the climate has sufficiently changed [in the Legislature],” he says, “but even if the climate hasn’t sufficiently changed inside the State House, I think the climate has changed outside the State House.

“So one of options we’re thinking about — and I know the Maine Municipal Association and the Maine Education Association, and the Maine Chamber [of Commerce] independently are all thinking about — is bringing it out as a citizen initiative. And we’re willing to do it.”

Saxl points out that such a move would force the Legislature to vote on tax reform “one way or another,” since lawmakers get a chance to vote on citizen initiatives before they go to ballot.

The MMA is following a similar logic in its pursuit of a consensus plan to put to voters, though communications director Michael Starn says addressing the divergent priorities of MMA members is a daunting challenge.

“We’re finding, even within our own narrow group of municipal interests, that large communities, small communities, industrial communities — all of those have different views of tax reform,” he notes.

Starn says the only thing everybody agrees on is that property taxes make up too much of the state revenue (“Right now it’s at about 40 percent of the pie,” he says. “We’d like to see it be more like a third.”) and that school funding places an exorbitant demand on property taxes.

“That’s basically as far as we’ve gotten,” he says, “because there’s a lot of ramifications to that.”

Starn says the MMA also faces the challenge of distilling a reform initiative into something concise enough to succeed on a ballot.

“I think there’s a large part of the community who feels that, for citizens to get on board with something like this, it has to be fairly simple in concept,” he says. “Legislation can have a lot of complicating issues and nuances,” he adds, “but something that goes before the voters, the more things you put into it, the more open it becomes to attack.”

And yet . . .

“We understand that, but, at the same time, tax reform really isn’t that simple. So that’s the quandary we’re in.”

Jess Kilby can be reached at jkilby@phx.com.