ELLSWORTH — More than $30.5 million in new construction has been permitted in the city of Ellsworth since January, according to figures compiled by staff at City Hall.
“It’s been a good year,” said City Manager David Cole. “Signs for next year look good but you can’t count your chickens, as they say.”
But will the development lower property taxes for residents? That question is a bit more complicated.
City Assessor Larry Gardner explained in an email that he couldn’t be certain whether all of this new construction will lower property taxes.
Some of the new investment fell under renovations to already existing structures, Gardner said, and staff will not know how much value such changes add to a property’s valuation until appraisals next summer.
In other words, if a company spends $4 million renovating an existing building, this does not necessarily mean the value of the property will increase by $4 million.
“Value and cost [of renovations] are two different things,” Gardner said.
Six of the projects — Oriole Way workforce housing, renovations at Walmart and Hannaford, a new branch of First National Bank, Washington LUXE apartments and a new retail complex on the site of the former Town Auto — account for over half of the $30,520,525 figure, or $16,930,000.
The numbers do not include nonprofit construction permits, such as those issued to Jackson Lab, or equipment or fixtures (which are often tax-exempt through business tax exemptions).
If the city had added $30 million in taxable value last year it would have resulted in a mill rate of 17.74 rather than 18.24, Gardner said. At that rate, a taxpayer with a property worth $200,000 would have paid $3,548 in property taxes, rather than $3,648, a difference of $100.
Adding value to the tax base does help keep property taxes down, Gardner said, but it is only “one side of the equation.”
In order for taxes to decrease or stay the same, the city’s budget would also have to be kept in check “to really take full advantage of any extra value.”
Budget increases have slowed in recent years, amounting to just under 2 percent this year, compared to increases hovering between 2 and 9 percent between 2009 and 2016.
There are state-level changes that also affect property taxes. Largely because of these, Gardner said, the city lost taxable value for two of the past three years: $2.5 million in 2017 and $3.3 million in 2018 (this year was a bit better, with the city adding $3.7 million in taxable value for 2019).
The 2017 and 2018 decreases were largely due to legislative changes at the state level that increased exemptions for homeowners and businesses, Gardner said. The Homestead Exemption, which is available to certain homeowners who are permanent residents of Maine, was $20,000 this tax year — double what it was in 2016.
The state also expanded the number of businesses that qualify for the Business Equipment Tax Exemption (BETE) program, said Gardner, which affected the amount of taxable property around the state.
This means that even if there was new construction and added value to the tax base, total taxable value decreased because more of that property was exempt.
“Without these legislative changes,” Gardner said, “we probably would have increased, on average, about $8 million in taxable value per year.”
Looking over the past decade, the picture is a bit rosier. The city has added an average of $8.5 million in taxable value each year since 2009, Gardner said.
“If we do hit the $30 million this year, it will be significant … actually more than a $20 million increase over what we typically get per year,” Gardner said.
The last time the city added that amount of taxable value was in 2009, he said.
Staff in the planning and code enforcement offices arrived at the $30 million figure by taking the total square footage permitted and multiplying that number by an average building cost of $85 per square foot.
Many of the projects will take months or years, so the figure is “not necessarily the amount of construction that actually occurred in that time period,” according to the report.
Cole said he credits the team at City Hall for promoting development and working with developers to meet standards “in a timely way.”
“Everybody has to meet the standards,” said Cole, “but I think we go the extra yard to work with developers, to get to a yes, if you will.”
Ellsworth is a product, Cole said, and the first step in selling is to understand the product and how it can be improved.
“The first step was to know our community and have good data,” said Cole, including information on “traffic patterns, population growth, commercial sales activity and economic trends.”
“If you’re going to try and persuade or influence someone to invest you’ve got to have good data.”
“There was an apparent pent-up demand particularly for rental housing, across the board, from affordable to luxury townhouses,” Cole said.
Cole said he would like to see more housing as well as “entertainment, restaurants, the whole mix. We’ve got a good base to work off from, but there are certainly needs and services that could be enhanced.”
Cole said the next step will also include bringing in small and medium size companies in the life sciences sector, such as those involved in aquaculture and biomedicine.
According to the numbers, July was the busiest month for permits issued, with an estimated $7.82 million in new construction permitted. Permits were issued for the $3.9 million Hannaford renovations that month, as well as several homes over $200,000.