PORTLAND — Ahead of any formal budget discussions, City Manager Jon Jennings had a message Monday night for city councilors.
“When we are looking at (new) spending, I will be asking you ‘what do you want to cut?’” he said in a workshop where details of a proposed revaluation of city properties were presented.
The current property tax rate is $21.65 per $1,000 of assessed value, revenue that covers the municipal budget, education and the city’s share of Cumberland County operations. The municipal share of the tax burden is $11.04, according to budget documents.
On Monday, city Finance Director Brendan O’Connell said anticipated financial demands that include full-time operations at the Oxford Street Shelter, the new property tax relief program for residents age 62 and older, contractual salary increases and debt service on the pension obligation note would now require a 3.5 percent increase in the municipal property tax.
O’Connell generally limited his comments to the municipal side, but cautioned that the state’s increasing valuation of city properties could affect the bottom line on school subsidies by as much as $4 million.
O’Connell and School Department Finance Director Alicia Gardiner said debt service on a $64 million bond to rebuild four schools, passed by voters last November, will not be a factor in the fiscal year 2019 education budget because borrowing will not begin next year.
The workshop preceded council goal-setting for the year and came two weeks before Mayor Ethan Strimling’s annual State of the City address. Councilors have successfully met the goal of limiting property tax increases to 2.5 percent in the last two years, but Jennings said financial demands mean councilors need to think about setting priorities.
“We need to increase the value of the city instead of just raising property taxes,” Jennings said as he talked about selling city land to return it to the tax rolls and creating a payment-in-lieu-of-taxes program, where nonprofits would voluntarily contribute to help fund city services.
At the same time, city Assessor Chris Huff is ready to move forward on a revaluation of city properties he said is about equalizing the tax burden.
The current city budget is based on a total valuation of city properties of $7.8 billion. Huff noted the state assessment is currently $8.5 billion, based on sales data from July 1, 2015, through June 30, 2016. The state valuation is expected to increase to $9.05 billion this year.
If the city matched that amount, the current tax rate would be $18.66, and Huff said the city should expect the disparity to continue into the next decade.
Legally, the state requires valuations every 10 years, or if the ratio between state and local valuations drops below 70 percent, or if the assessment quality rating used goes beyond 20.
Right now, the city has declared its ratio to be 94 percent, and the quality rating is 14 (where lower numbers are better scores). The last full revaluation was completed in 2006.
The timeline set out by Huff would not have an immediate effect on tax rates, but could require as much as $1.5 million in upfront costs. A tax rate reflecting the full revaluation would not be seen until 2020, but its leveling effect could also restore some lost reimbursements from the state for homestead exemptions, personal property and for veterans or the blind.
Huff and Jennings promised any revaluation process would also be widely publicized, including community meetings. While tax rates are set by city councilors, Huff said no one should expect a revaluation will automatically increase one’s tax burden.
“The assessor’s job is to ensure the pie is cut up fairly,” he said.