The parking lot of The Maine Mall in South Portland was nearly empty on April 22. The impact on South Portland from the loss of tax revenue due to the pandemic is uncertain, but sure to be felt, city officials say. Gregory Rec/Portland Press Herald
SOUTH PORTLAND — When the South Portland City Council met April 28, city officials not only presented the 2021 budget, they also delivered a dire prediction that included the potential loss of $50 million over the next year to the valuation of business properties citywide.
That alone, City Manager Scott Morelli said at the time, could push the potential tax rate increase for fiscal year 2021 from 2.29% to 3.77%. At the same meeting, city officials made it clear the $50 million figure was an arbitrary estimate.
Despite the certainty that businesses will be taking a hit due to the economic impact of the coronavirus – and that the city should be prepared to absorb it through devalued property – officials don’t know if the estimate will turn out to be right.
And no one is able to offer a more accurate number, including the potential loss of revenue from the Maine Mall, the city’s largest taxpayer.
“We really don’t have the complete answer as to what the pandemic really means,” said City Assessor Jim Thomas.
Put in context, the city valuation is more than $3.5 billion, making the $50 million estimate approximately 1.4% of the total. Morelli told The Forecaster this week that in the current fiscal year, citywide valuations went up by just over 7%, and by at least 10% in 2019-20.
“Usually tax revenue from new growth helps to mitigate the need for a tax increase because the new revenues either partially or wholly offset the increases in spending from year to year,” Morelli said.
The Maine Mall, which is also the largest single retail property in the city, paid more than $4.6 million in taxes in fiscal year 2020, according to Finance Director Gregory L’Heureux. Based on a valuation of more than $243 million. L’Heureux said that put the mall alone at approximately 6.6% of the city’s tax base.
As to the exact impact that coronavirus will have on the mall going forward, L’Heureux said he couldn’t be sure, but said, “Clearly the mall is going to be stressed.”
The mall is managed by Brookfield Properties Retail, a company that manages 170 properties nationwide. A spokesman reached at the company’s office in Chicago declined to discuss the potential economic impacts of the coronavirus on the shopping center.
According to the mall’s website, only businesses deemed “essential” by the governor have remained open since March. This includes a Spectrum office and Maine Mall Eyecare, which the website said is open “by appointment only.”
There is no indication when other businesses will open, but the site indicates “The Mall is currently operating in a manner that is consistent with the (Gov. Janet Mills’) Order.”
Thomas said the tax bills that go out in July are calculated in part by business assessments based on data collected as of April 1 each year. That’s not all assessors use, Thomas said. If, for example, a business collapses in May based on events happening prior to April 1, that makes the collapse in May a factor — but the assessor’s work is based largely upon the data collected as of April 1.
As such, Thomas said it will be hard to know the coronavirus impacts on business valuations for fiscal year 2021 until at least April 1 of next year. Until then, he said, it’s anybody’s guess.
“It’s certainly going to be a challenge,” he said.
In South Portland, Thomas said retail properties account for roughly 15% of taxable property citywide, making the retail outlook particularly important, and some announcements are hinting at ongoing problems. In February, before the pandemic even began in the U.S., Freeport-based giant L.L. Bean announced layoffs in order to be more competitive, and on Monday, national clothing retailer J. Crew announced it was filing for bankruptcy.
“Just with changes in technology in recent years, it’s become a different environment for retailers,” said Quincy Hentzel, CEO of the Greater Portland Chamber of Commerce.
Hentzel said she believed consumers would rally to retailers, especially local businesses, once they reopen next month, but even then, she said, it’s going to be a tough year economically.
“Post-pandemic, a lot are going to struggle,” she said.
Sean Murphy 780-9094
Email: seanmurphy@theforecaster.net
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