Originally published in Island Ad-Vantages, April 1, 2021
Island Workforce Housing: To tax or not to tax?
Nonprofit seeks property tax exemption from Deer Isle
by Leslie Landrigan
Island Workforce Housing (IWFH) on March 25 asked the Deer Isle Select Board to consider a property tax exemption for the five duplexes it’s building on Sunset Crossroad.
In a select board meeting that 35 visitors attended, both on Zoom and in the town offices, IWFH chair Mike Wood said he felt the development was due the exemption because it’s run by a nonprofit.
“This is for the community good,” said Wood. “We’re not making any money. We’ll be lucky to break even.”
Instead of property taxes, IWFH would like to make a voluntary payment in lieu of taxes, or PILOT, said Wood.
Selectmen questioned why the 10 apartment units shouldn’t pay property taxes when they will add to the town’s burden to maintain roads, dispose of trash and educate children.
“I never heard a person yet say, ‘I think this is a good idea’,” said Select Board Chair Ronnie Eaton.
Wood replied everyone in his circle does think it’s a good idea.
“Maybe in your circle, Mike, not mine,” Eaton said.
Deer Isle and Stonington are considered among the least affordable towns in Maine because housing prices are so much higher than salaries, said Henry Teverow, IWFH board member. IWFH wants attract workers to the island—or to keep them here—with affordable rents 12 months a year, he said.
“It’s so we can preserve all the reasons we love living here rather than Bar Harbor,” Teverow told the select board.
Linda Campbell, IWFH vice chair, said Deer Isle’s pricey housing makes hiring difficult for the schools, the nursing home and Billings Diesel & Marine.
IWFH has cleared a site and built roads for the development, called Oliver’s Ridge. The group has raised enough money, $975,000, to build eight of the 10 units planned, according to their website. They expect to start foundation work in the spring.
As a 501(c)(3), IWFH plans to offer affordable rents for people who earn between 70 percent and 120 percent of Hancock County’s median income. For a one-person household, that means $34,510 to $59,160, IWFH said in a press release. For a three-person household, that’s an income range of $44,310 to $75,690.
The select board has concerns
Eaton questioned whether renters would move out of Deer Isle rental units that are paying property taxes into Oliver’s Ridge, once it’s built. He also asked about fairness. “If other people are paying $1,000 a month, and you rent to them for $750, how come this guy is paying $1,000 and the guy next to him working side-by-side pays $750? I just can’t get around that.”
Eaton also said one reason Deer Isle property owners don’t rent year round is because tenants “tear the place down.”
IWFH supporters said young workers would shop locally, volunteer for the ambulance and fire department and pay excise taxes.
Teverow said IWFH estimated that 10 more car registrations would more than pay for the added cost of trash disposal.
“They’d better have nice cars,” Eaton said.
Brown pointed out that excise taxes pay for more than the transfer station. He also said shifting the tax burden to other property owners might end up driving them off the island.
“One reason people are working here when they can’t live here is because taxes are so high,” Brown said. “Are we driving the taxes higher?”
How much IWFH would pay in property taxes or in payment in lieu of taxes is still up in the air. Wood said they had a number in mind, but it wasn’t cast in stone.
Town Manager Jim Fisher asked how much Oliver’s Ridge’s market value would be once it’s built. Campbell said they didn’t know yet.
“If these were not nonprofit, the taxes would be significant,” he said, adding that the market value of 10 apartments would be well over $1 million.
“And we as a for-profit organization could make a lot of money,” Campbell said. “This is really a nonprofit with a shoestring budget and we’re all volunteering.”
Other nonprofits in Deer Isle, like Haystack and Island Heritage Trust, pay PILOT to the town. Deer Run Apartments paid $7,018 in 2020, the highest in town, according to the town report. Selectman Peter Perez said Deer Run pays $300 per tenant.
How they left it
Campbell said if IWFH is besieged by rental applicants, it will give top priority to people who work on the island and live off island.
Selectman Joe Brown questioned how IWFH can avoid appearing discriminatory. He asked if there’s a legal basis for preferring a schoolteacher in Deer Isle versus a schoolteacher in Sedgwick.
IWFH has since answered the selectmen’s questions in an 18-page response, Fisher said in a phone interview. Fisher will distribute the written responses to the selectmen and the two sides will continue the discussion at a future select board meeting, he said.