The Legislature’s Taxation Committee has started work on a proposed law that would give commercial fishing businesses on the water a tax break – as mandated by voters last November – but prevent owners from using the provision as a tax dodge at the expense of their neighbors.

Sen. Dennis Damon, D-Hancock, who sponsored the so-called working waterfront bill, likened the committee task’s to building a boat.

“The people of Maine ordered a boat to be built. You are the boat building committee,” he said, charged with “fleshing out the real design.”

“It has to be crafted in such a way as to encourage property to get into working waterfront or remain in working waterfront,” he said.

Everyone at a public hearing Monday agreed the task will not be simple, but the need is clear.

Of the thousands of miles of Maine coastline, only 25 miles currently are being used to support commercial fishing. Those properties are being taxed at what’s called the “highest and best use,” meaning what the land would be worth if developed into waterfront housing. Under those tax pressures, commercial fishing operations are selling out to private owners, and fishermen are losing their access to the sea.

“When I was in college, there were 25 wharves in town,” said David Cousens, head of the Maine Lobstermen’s Association and a resident of South Thomaston. “This last year there were three left in town. We’ve lost 23 wharves; they’ve all gone private.”

Cousens, whose family owns one of those remaining wharves, said fishermen are “forced to compete” with rich out-of-staters who want a house with a dock on the water and can afford it.

He used his own wharf as an example, saying it used to be assessed at $8,500 and is now valued at $96,000. “It’s just oak and hemlock. I could rebuild the whole thing for under $10,000.”

The Taxation Committee is charged with writing a bill that would allow waterfront land used for commercial fishing to be taxed at its current use. The program could be modeled after other tax breaks now offered for farmland, open space and forestland.

The trick will be determining who is eligible for the tax break; what rate they should pay; and how they will pay back the town for lost taxes when and if they sell their land for private development.

Geoff Herman of the Maine Municipal Association said he saw eligibility breaking down into four categories: land that is primarily used for commercial fishing operations; mixed-use property where a certain percentage of the land is always used for commercial fishing; volatile use where the operation on the land changes with the marketplace; and non-commercial land that provides fishermen access to the water.

The idea is the amount of the tax break would be based on the percentage of the property used for commercial fishing.

Questions also were raised about whether cities and towns should have an option to opt out of the tax-relief program since there currently is no provision in the concept draft of the bill to provide state reimbursement for lost taxes.

Rep. Thomas Watson, D-Bath, a member of the Taxation Committee, said he was against requiring the state to reimburse for lost taxes because the price tag could scare the Legislature or stall the bill in the Appropriations Committee. “It’s too important to be threatened by a fiscal note,” he said.

The Maine Revenue Service said it can’t yet determine how much property tax revenue would be lost until further details are decided by the committee.

Bruce McDonald, a selectman in Boothbay, suggested properties that were a “slam dunk” in terms of their use as commercial fishing operations should get the tax break without a town vote, but properties where the use was mixed would have to get approval from their city or town.

Mixes-used properties like wharves, which support fishermen and tourist businesses, were used as an example of where local control could come into play.

“I don’t think you should put this whole program in local option because the voters have spoken on it,” McDonald said.

In last year’s November election, the ballot question calling for a change in the constitution to allow tax breaks for working waterfront passed with more than 71 percent of the vote.

Dana Rice, a selectman in Gouldsboro, said he did not support a town veto of the tax break even though his community could be looking at a huge tax exemption on the last surviving sardine factory on the East Coast.

“This is so important to the future of the economy of Maine,” he said of the working waterfront exemption.

Another issue the committee must decide is what penalty to impose on property owners who get the tax break, but eventually sell to people not involved in commercial fishing.

The Working Waterfront Coalition said it would like to see rules that “make it difficult to get out of, but not too difficult.” If it’s overly restrictive, people who eventually will have to sell to pay for their retirement won’t get into the program.

Sen. Ethan Strimling, D-Cumberland County, countered that the bill was about “preservation for waterfront not preservation for your retirement.”

Malcolm “Laddie” Whidden of Harpswell proposed a 10 percent capital gains tax be paid to the town on the difference between what the property was valued at as working waterfront and what it sells for. He said that based on numbers run for him by the Maine Revenue Service on Harpswell property, the return is “double what it would cost the town.”

Another suggestion was to collect five years of back taxes – a proposal that didn’t sit well with Strimling.

“It just becomes a tax shelter after five years,” Strimling said.

Matt Chipman, a lobsterman from East Freeport, said his family owns a house on a 50-by-150-foot lot on the ocean, where he stores his gear and launches his boat. “We pay $5,800 a year in taxes,” he said, and “my income is less than $40,000 a year and I also have two kids.”

“The tax break should be for the families and fisherman that own shorefront property,” he said, not the boatyards, fish factories, lobster pounds or big wharves that rent out space.

The Taxation Committee will continue its work on the bill through next week.

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