Market Update Information

Background

Property values in the City of Biddeford have been climbing at a fast rate over the past several years as transformation in the community has led to properties selling at overall higher prices. This trend has been seen all across Southern Maine over the past few years because the region has become an increasingly desirable place to own homes or rent. You may have noticed that many properties that are exposed to the market are under contract within days to the highest bidder, in many cases above asking price. These are the current market conditions that we are living in.

The Maine Constitution requires property taxes to be "assessed equally according to the just value thereof". In other words, it is the responsibility of the Municipal Assessor to adjust property values to meet this constitutional requirement. Maine law requires the ratio between overall municipal assessed values and sale prices to be within 70%-110% of "just value", and if we are unable to meet those standards, the State requires Municipal Assessors to adjust properties accordingly to maintain acceptable ratio standards. 

Eight years ago in 2014 Biddeford did a city-wide revaluation where overall valuations decreased as a result of a depressed housing market. In 2016 Biddeford started to see valuation appreciation and as a result the Assessing Department performed market updates in 2017 and 2018. This trend would continue as Biddeford became in high demand for housing and property, leading to valuation increases nobody could anticipate.  To keep our assessed values within state ratio standards, the Assessing Department performed a market adjustment in 2021 and our most recent market adjustment in 2022, where on average, assessed values across the City increased over 16.5%.                   

What happens during a market update?

The question that the Assessor seeks to answer during a market update is what the market value of your property was on a given date (or, what a willing buyer would reasonably pay a willing seller for the property). In this process, the Municipal Assessor looks at the recent sales in a community and analyzes this market activity to develop formulas that predict what each property in the city is worth, or its "just value". These formulas take into account ample amounts of data, not just one or two sales, to determine adjusting hundreds of properties to a fair and equitable value.

Why is it important to adjust property valuations?

Equity

A market update makes sure that all property owners are contributing their fair share of property taxes. Property values are used to calculate the amount of property taxes that a household pays. Property values change over time, but not all types of properties change at the same rate. If your home value has decreased while another resident’s property value has increased, we want those changes to be reflected in your tax bill.

Let’s look at these two houses for a moment as an example. Home A has an assessed value of $100,000 but just sold for $200,000 at "just value". Home B has an assessed value of $100,000 and just sold for $300,000 at "just value". 

Now, let’s say that the Assessor, using a large sample size of sales, has concluded through sales analysis formulas that comparable properties to Home A and Home B should be adjusted to create more equitable assessments. Home A's new property value remains $100,000, but Home B's property value is adjusted to $150,000. Now both properties are at 50% assessed value to "just value". This creates more equity and ensures that the owner of Home A does not have to subsidize the property tax bill of Home B.

Two example homes assessed at $100K in value. Home A recently sold for $200K and Home B for $300K.
Home B is now assessed at $150K. Home A and Home B are now both assessed at 50% of just value.

Impact on State Reimbursements

A market update will ensure that all residents receive statewide property tax exemptions, such as the Homestead Exemption, in full. The State of Maine reimburses municipalities for revenue lost due to property tax exemptions. The State has set certain standards for exemption amounts in order to ensure that the exemptions are being applied fairly throughout the state. In order for our residents to get exemptions applied in full, the City needed to increase property values at a minimum of 14% on average across the city. If we did not make any valuation adjustments this year, Biddeford would only qualify for 81% of full state reimbursements.

What will happen to my tax bill this year?

One thing to keep in mind is that a market update doesn’t mean that the city is collecting more revenue, so it won’t change the total amount of taxes that need to be collected to fund the budget. Before the market update, we would have expected that the tax rate would have been $18.88, but this rate decreased to $16.41 to take into account the higher property values after the market adjustments. The market update is simply a tax shift so the balance of who pays what portion is more fair and equitable as it relates to the current market conditions, not a way to generate new revenue.

Reimbursements for exemptions like the Homestead Exemption are based on the tax rate. With higher property values, the tax rate is lower, and the amount of reimbursement from the State decreases. Factoring this in along with 3.57% in budget increases, the impact on the average tax bill for this year is 4.24%.

Any property in the community that experienced the average change in property values (16.67%) would see a net change in their tax bill of 4.24%. If an individual property's increase in value was greater than 16.67%, the FY23 tax bill would see more than a 4.24% increase. If the increase in value is less than 16.67%, the individual bill would see less than the 4.24% increase.

Future Planning on Valuation Adjustments

The COVID-19 global pandemic has led to societal changes, like remote work capabilities, that have changed the needs we have for the places we live and work. Residential properties have consistently experienced overall greater demand citywide, which in turn has led to property value increases for residential properties. On the other hand, the uncertainty of the pandemic has created different levels of supply and demand for the various types of commercial properties. In turn, commercial property values have been more inconsistent.

In an effort to create a fair and more equitable tax base, funds have been set aside to hire a revaluation firm to complete an in-depth analysis of commercial property values for Fiscal Year 2024.