ELLSWORTH — Governor Paul LePage has repeatedly cited tax-exempt organizations as a burden on the taxpayer and a possible source of revenue for municipalities, arguing in his 2018 State of the State address that “Everyone must pay their fair share.”
Many tax-exempt organizations have countered, noting payments they make in lieu of taxes and other community benefits and support they provide.
According to an evaluation by City Assessor Larry Gardner, the value of all tax-exempt property in Ellsworth is $154.9 million, $96 million of which is in government-owned land and buildings.
So what would be the benefits, or consequences, if all tax-exempt property in Ellsworth were added to the rolls?
Leaving out government property (“We wouldn’t tax ourselves,” said Gardner), property tax bills would be 5 percent lower if taxes were levied on all $58.9 million of tax-exempt (non-government) property in the city. But he cautioned that it wouldn’t be that simple.
His department does not spend much time assessing tax-exempt property, Gardner said in an email, because “they don’t pay taxes, so we don’t entrust the time and taxpayer’s money making sure an exempt property paying nothing in tax has a fair and equitable appraised value.”
But Gardner estimated that tacking the $58.9 million worth of non-government property onto the city’s assessed value of $1.08 billion would lower the 2017 mill rate, or property tax rate, from 17.97 to 17.04. A mill rate of 17.04 would mean a taxpayer with property worth $200,000 would pay $3,408 in taxes this year, rather than $3,594. Some believe this 5-percent reduction “could eventually grow to a much higher percentage,” said Gardner.
If Ellsworth’s tax-exempt organizations (excluding government-owned property) paid full property taxes at the 17.04 mill rate, $1,004,407 would be added to the city’s tax revenue.
Many tax-exempt organizations make payments in lieu of taxes, often referred to by the acronym “PILOT,” to the municipalities in which the have property. Such payments are voluntary. There is no set rate for the amount an organization should or could pay.
In Ellsworth, Gardner cited three “important properties” that have historically made a PILOT to the city. The Ellsworth Housing Authority pays $11,774, the Maine Community Foundation pays $10,000 and the Fish Hatchery at the U.S. Department of the Interior pays $371. The total paid by all three each year is around $22,000.
The Jackson Laboratory will be one of the largest tax-exempt organizations in Ellsworth when it opens later this year. It did not seek tax-exempt status on the property in 2017, instead paying $142,500 in property taxes on the space, which was valued at $7.9 million (full taxes at last year’s rate).
In Bar Harbor, the lab has around $230.1 million worth of property on which it makes PILOT donations, according to reporting in the Mount Desert Islander.
While it is not required to pay property taxes, the organization makes what leadership refers to as a “voluntary contribution to the municipal budget,” similar to a payment in lieu of taxes. This payment to Bar Harbor totaled $91,165 in 2017, around 3.6 percent of the $2.5 million it would have paid if taxes had been levied in full (at a mill rate of 10.96 per $1,000 of property valuation).
LuAnn Ballesteros, vice president of external and government affairs at the lab, said the lab pays full property taxes on several of its holdings that are not tax-exempt (such as rental housing, for which it paid $9,524 in taxes to Bar Harbor in 2017), but that it had not yet determined what contribution it would make in Ellsworth.
Ballesteros also pointed to the nearly $293,000 in permits and water and sewer district payments the organization made to Ellsworth in 2017, as well as other “community projects” such as a $1.85-million child care facility on Beechland Road managed by the Down East Family YMCA and $499,000 in modifications to the High Street electrical booster station.
Doing away with tax-exemptions, Gardner warned, could have unintended consequences and “would not be of great significance to Ellsworth,” at least not at the moment.
Some organizations would “inevitably fail to pay” property taxes, said Gardner. He said the value of many properties would likely decrease because organizations might not be able to afford to maintain them. These properties might eventually be sold for a forced “dark” value that might not reflect the land’s “highest and best use.”
Gardner also questioned whether taxpayers would want their city to “foreclose on a church” or other similar civic organizations.
“And if not foreclosing on a church, what would we foreclose on?” Gardner asked.