Hard times affect property tax payments

Posted March 01, 2011, at 8:21 p.m.
Last modified March 01, 2011, at 8:40 p.m.

PENOBSCOT, Maine — With prices rising and the economy stagnant, people are finding it hard to make ends meet. One side effect is that more homeowners around the state are putting off paying their local property taxes.

For example, at the end of the fiscal year on Dec. 31, the unpaid property taxes for 2010 in this small Hancock County community totaled $153,870. That’s about $100,000 more than the total a decade ago and accounts for more than 11 percent of the total tax commitment of $1,388,322 for 2010.

“That’s a significant number,” said Paul Bowen, chairman of the town’s board of selectmen.

And though many residents in arrears on Dec. 31 will pay their taxes before the town places a lien on their property in April, some won’t and will be in danger of losing their homes when those liens mature in three years.

The high amount of unpaid taxes is a reflection of the economic situation in Maine and of the increased demands being placed on local taxpayers, according to Bowen. While the local budget in Penobscot has remained relatively stable, he said, steady decreases in local and state revenues have shifted more of the burden of paying for services to the local property tax.

One local revenue source, the local excise tax, which residents pay to register vehicles, boats, snowmobiles and other items, has declined from a high in 2007 of $233,069 to $184,000 last year, a direct result of the current recession, according to Bowen.

Meanwhile, state funding to the town also has decreased by almost $500,000 in the past eight years. The bulk of that loss is from dwindling education funding which declined from $449,954 in 2002 to just $10,797 last year.

That loss of revenues has forced the town to raise more through local property taxes, which, in 10 years, have risen by almost $600,000; from $793,938 in 2000 to $1,388,322 in 2010, an overall increase of almost 75 percent.

“The problem is that we’re getting an increased demand from property taxes at a time when people really have had a hard time paying taxes,” Bowen said.  “In 20 years, I’ve never seen this degree of difficulty. It’s an indication of what some people are going through.”

In the annual town report this year, the selectmen urged residents to “examine all budget requests to find ways of keeping property taxes as low as possible.”

The town of Penobscot is not alone. Although the Maine Municipal Association does not specifically track tax liens in its member towns, anecdotal information from the towns indicates that the number of tax liens for unpaid or overdue property taxes started to increase about two years ago and that trend is continuing, according to MMA spokesman Eric Conrad.

David Little, vice president of the Maine Municipal Tax Collectors’ and Treasurers’ Association, said the association does not track property tax payments statewide. But he added that in conversations with association members, there seems to be a general increase in the amount of unpaid property taxes in towns around the state.

Larger cities, with more businesses and a broader tax base are able to hold fairly steady in the face of statewide and national economic pressures, according to Little, who is also the tax collector and deputy treasurer for the city of Bangor. It’s the smaller town’s, he said, where the tax base is primarily, if not totally, residential, where they feel that kind of impact more.

Even so, Bangor saw a 1 percent decrease in the amount of taxes collected last year, according to Little. At the end of the 2010 fiscal year, the total taxes collected dropped to about 96 percent, he said. That amounted to about a $1.9 million shortfall out of a total assessment of about $48 million. That’s the lowest percentage in 10 years, Little said.

Little pointed out that Bangor taxes are due in two installments. The second installment is due in March.

“That’s usually the payment that people have trouble making,” he said. “They’ve come through the winter with heating and fuel costs, and that’s typically when we see people come in and ask for an extension.”

He added, however, that this year, he also has spoken with more taxpayers who have lost their jobs and are having trouble finding a new one where they can earn a sustainable wage.

Although the towns get the tax money eventually, either when the bank

forecloses on a property or when the town sells the property, Bowen, the Penobscot selectman, said the missing tax payments can create a cash flow problem for the town. Last year, the town was forced to borrow money through a tax anticipation note because of a shortfall before enough property tax could be collected.

Despite that, towns, both large and small, are generally lenient with delinquent taxpayers. Most towns will work with homeowners who owe back taxes to find ways to avoid attaching liens or foreclosing on their homes. Many municipalities also have a process by which residents who have lost their property because of nonpayment of taxes can repurchase those tax-acquired properties.

In Penobscot, Bowen said the selectmen have been working with several people this year who were facing foreclosure as the 2008 tax liens on their properties matured.

“We try to work with anyone who comes to us,” he said. “We don’t want to take anybody’s home away from them.”

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