>>Fishermen's Voice Monthly Newspaper, Gouldsboro Maine

Since Mainers voted overwhelmingly last November to allow working waterfront property that supports commercial fishing to be taxed at a rate more in line with its “current use” rather than its “just value” (a/k/a highest and best use) the Maine Legislature has been wrestling with two bills designed to preserve our working waterfront. LD 1930 “An Act Regarding Working Waterfront Covenants” and LD 1972 “An Act To Preserve Maine’s Working Waterfront” are the two key pieces of legislation that are the basis of this important sea change in Maine’s property tax laws.

LD 1930 was enacted by the Legislature on April 10, 2006 and signed into public law by Governor Baldacci on April 12, 2006. LD 1972 has been voted out of committee with a strong “Ought-to-Pass” report and is currently before the full Legislature awaiting enactment. I was proud to be the lead sponsor of both bills.

The covenants bill (LD 1930) allows a working waterfront business to sell some of its development rights (a covenant) to a third party (perhaps a charitable trust or some level of government). The covenant would keep the property as working waterfront. It would also ensure that the property would be taxed at a reduced rate. Two million dollars was made available for these covenant purchases as part the Land for Maine’s Future bond, approved by voters in November. If a working waterfront business does encumber itself by selling a covenant it will receive an even greater property tax break than LD 1972 would, by itself, allow.

The so-called Working Waterfront bill (LD 1972) allows waterfront property, as defined in the bill, which supports the commercial fishing industry, to be taxed at its current use. Prior to this bill all waterfront property had to be taxed at its just value. That is to say that if the town had mansions on the water or condominiums or any other structures that were subject to exorbitant market prices, then fishing docks and other businesses engaged in support of commercial fishing would, of necessity, be valued as though they could be mansions, condos or hotels too.

After the passage of LD 1972, communities must value working waterfront properties as they would other similar commercial properties that are not located on the water. The assessors must disregard factors that ordinarily influence value such as location and view. In cases where a community has no comparable landlocked businesses with which to compare the working waterfront they can simply reduce the amount of tax to be paid by 20 percent if the business is “predominately” (90 percent or more) supporting commercial fishing. In cases where a business “primarily” (more than 50 percent - less than 90 percent) supports commercial fishing, a 10 percent reduction will apply. If the business, such as a boat yard, has less than 50 percent of its effort supporting commercial fishing it may describe a portion of its property that does meet the “primarily” standard and have that portion benefit from the tax reduction. Finally, if the above percentage reductions are implemented the business can receive an additional 30 percent reduction, on top of any previous reductions, if the land has restrictive covenants as provided by LD 1930. Thus, the total tax reduction may amount to as much as 50 percent of what it would have been without the legislation.

LD 1972 goes on to provide penalties if the property is taken out of the working waterfront program. The penalty is the same as that found in the Tree Growth Tax Law. During the first five years the penalty will be an amount equal to the taxes that would have been assessed had the property not been in the working waterfront program plus interest minus any taxes that have been paid. Or the penalty may be computed by multiplying the amount by which the fair market rate of the property exceeds the more favorable tax rate provided by the working waterfront law by 30 percent if the property has been in the program for 10 years or less, and then reducing the multiplier by 1 for each year the property has been in the program beyond 10 years until the multiplier reaches 20 percent, where it will remain.

Lastly, LD 1972 contains “unallocated language” which provides for a periodic review and assessment of the working waterfront tax law. After that analysis the State Tax Assessor shall submit a report to the Taxation Committee. The report may include recommendations to help local assessors calculate the current use value of enrolled properties, and it may include recommendations to amend the law for the purposes of improving it and ensuring its accuracy and benefits.

These two laws, presuming that LD 1972 will clear the Legislature and be signed by the Governor, are monumental and historic in changing the property tax landscape and protecting and preserving Maine’s working waterfront. While I was primarily concerned with saving our rapidly diminishing working waterfront, I now realize these two bills actually have the potential of increasing our working waterfront by making it fiscally reasonable to convert existing waterfront land which may not be supporting commercial fishing to land that does. What a great result . to stop the decline and actually increase our working waterfront!

Senator Dennis S. Damon (D) Hancock, is finishing his second term in the Legislature and represents the coastal communities and islands of southern Hancock County and the Knox County town of Isle au Haute. He is the Senate Chair of two Committees — Marine Resources and Transportation. He sponsored LD 1930 and LD 1972. He can be reached at 207-667-9629 or dsdamon@panax.com.