Changing times change assessing tools
Courtesy John E. O'Donnell
John O'Donnell, owner of John E. O'Donnell Associates in New Gloucester.
Professional assessor John O'Donnell, owner of John E. O'Donnell Associates in New Gloucester, points with pride to a contract he just inked with Gilead, a town of just 175 residents, bisected by Route 2 along the New Hampshire border. The contract is special for O'Donnell because 34 years ago, when he was still in school, Gilead was the first town he did for the 51-year-old firm.
He concedes, though, that for most municipalities, reassessments should take place more frequently. "It's all about the quality of the data," he says. "Over time, things shift, values change, and they can get seriously out of whack."
Given the gyration of housing values since the start of the recession, O'Donnell finds himself and his eight employees very busy as municipalities tap his firm's expertise in justifying housing valuations used to assess property taxes.
Assessing — establishing the relative value of all the residential, commercial and industrial properties in a town or city — is vital to municipalities, which must comply with state law in levying taxes. It's almost equally important to real estate sales, where the prospective property tax bill is one of the first items buyers ask about.
Maine has relatively few full-time municipal assessors, reflecting the small size of most of its 492 incorporated cities, towns and plantations. Selectmen, the assessors in most smaller towns, rarely have the expertise to do the job themselves. Most of them, over 200 towns, hire a commercial firm to do periodic reassessments and annual updates.
O'Donnell & Associates provides services for 40 Maine municipalities and assessment reviews for 34, mostly in Androscoggin, Oxford and Cumberland counties. It also has municipal clients, many of them decades old, in New Hampshire and eastern Massachusetts.
Most municipal officials are familiar with the ratio between a town's assessments and the state's calculation of fair market value, the "just value" required for assessments under the Maine Constitution. Under state law, assessments must be no less that 70% of market value and no more than 110%. Several communities that reassessed just before the 2008 financial crash have found themselves pushing the upper limit, while under-valuation was more prevalent during real estate booms of the 1980s and '90s.
But O'Donnell says that what's probably more important in gauging the need for reassessment is the "quality ratio," the spread between assessments and sale prices of similar properties. This is where most of the complaints come from when property owners seek abatements, a potentially expensive process most municipal officials would rather avoid.
The rule of thumb here is that the variance between high to low in a particular category shouldn't exceed 20%. If it's getting close to that spread, it's time to reassess.
"One of our jobs is to make that point to town officials, and have them be able to explain it to taxpayers," O'Donnell says. "A full reassessment can be expensive for small towns, so it's important for them to understand what they're paying for."
Eric Conrad, communications director for the Maine Municipal Association, says there's been no noticeable increase in abatement petitions since the onset of the economic downturn in 2008, despite thousands of foreclosures and severe homeowner distress.
Conrad says there are two reasons for this.
"First, people seem to appreciate that municipal officials are doing everything they can to keep property taxes down," he says. "Even if there's a reassessment, and their values are higher, they seem to understand this."
The second cause, he says, is that assessing is becoming more accurate.
"Municipal assessors, and the private firms that do assessing, have better software programs and other tools to improve their work," he says.
O'Donnell was an early pioneer in the use of mapping technology. In the hallway of his office is an 8-by-10, black-and-white photograph depicting his father, also named John, by a small aircraft, with a cylindrical object in the foreground. It's an aerial camera, and represents the first generation of the business, the then-new technique of creating municipal tax maps using overflight photography. The technology, which the elder O'Donnell learned at Wright-Pierce before leaving to start his own business in 1961, led to far greater accuracy in the maps used to calculate Maine's property tax assessments. Since then, computers have enabled further increases in map accuracy.
In the last couple of decades, the company has shifted from doing primarily mapping work to assessing, but it still invests in technology. The company has long since converted to computer software as the basis for its work, but when O'Donnell couldn't find national or regional models suitable for his work in Maine, he developed his own.
"Maine and the other New England states aren't like the rest of the country, where counties do the assessing," he says. O'Donnell recently attended a national conference where a new software program was being touted.
"They said you needed 100,000 parcels to use it well," he says. "In a lot of our towns, you're talking about 1,000 to 3,000 [parcels]."
A recent software upgrade provides a way of identifying and documenting Tree Growth parcels – a current-use program designed for commercial forestry that is available to landowners with as few as 10 acres.
"No one really understands the program," O'Donnell says, leading to frequent tension between town officials, who must approve each application, and the landowners making the requests.
The program tries to bridge that gap by providing timely and accurate information – flagging all the Tree Growth properties in town in a single database, which includes everything down to a scanned copy of the initial application. It's all available for public viewing, though the landowner's management plan remains private, under state law.
The software program was ready to go in 2008, but after the financial sector crash, there weren't many takers.
"We took a hit on that one," O'Donnell says, although with a real estate recovery now taking hold, it's back in demand.
Douglas Rooks is a writer based in West Gardiner. He can be reached at editorial@mainebiz.biz.
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