Petrin v. Town of Scarborough

STATE OF MAINE SUPERIOR COURT

Cumberland, ss.

DONALD PETRIN et als.,

Plaintiffs/Appellants

v. Docket No. PORSC-AP-17-021

TOWN OF SCARBOROUGH,

OF MAINE

Defendant/Appellee STATE ,. Clerk's office

Cumberland, 5,,.

D~~}~i·O!.

KENYON BOLTON, III et als.,

RECE\VED

Plaintiffs/Appellants

v. Docket No. PORSC-AP-11-022

TOWN OF SCARBOROUGH,

Defendant/Appellee

ANGELL FAMILY 2012 PROUTS NECK TRUST et als.,

Plaintiffs/Appellants

v. Docket No. PORSC-AP-17-023

TOWN OF SCARBOROUGH,

Defendant/Appellee

ORDER AND JUDGMENT

These three cases present appeals by Plaintiff property taxpayers ["the

Taxpayers"] pursuant to M.R. Civ. P. SOB and 36 M.R.S. § 843(1) from decisions of

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the Town of Scarborough Board of Assessment Review ["the Board"] on the

Taxpayers' applications to the Town of Scarborough for property tax abatements.

Background

This is the second time the Taxpayers have appealed from the Board's

decisions on their abatement requests. Their first appeals were heard in the Business

and Consumer Court initially and then in the Supreme Judicial Court of Maine,

sitting as the Law Court. See Petrin v. Town ofScarborough, 2015 Me. Super. LEXIS

37 (Docket No. BCD-AP-14-03), vacated and remanded in part, 2016 ME 136, 147

A.3d 842; Angell Family 2012 Prouts Neck Trust v. Town ef Scarborough, Me. Bus. &

Consumer Ct., Docket No. CV-14-59, vacated and remanded in part, 2016 ME 152, 149

A.3d 271.

The Law Court rejected the Taxpayers' appeals on most of the grounds they

advanced, but upheld the appeals as they related to the program of the Town of

Scarborough ["the Town"] for assessing separate but abutting parcels held in

common ownership. The program is described as follows :

"The abutting property program allows a taxpayer who owns multiple

abutting lots to elect to have the separate lots assessed as a single unit. The

abutting property program results in a lower valuation of the two lots than if they

were assessed independently of each other." Angell Family 2012 Prouts Neck Trust v.

Town ef Scarborough, 2016 ME 152, ~16, 149 A.3d 271 (internal ellipses omitted).

"This necessarily means that those who do not own abutting lots are subjected to

taxes that are not imposed on owners of lots that happen to be abutting." Petrin v.

Town of Scarborough, 2016 ME 136, ,31, 147 A.3d 842.

The Law Court concluded that the Town's abutting property program

"necessarily results in an unequal apportionment of the tax burden," Angell, 2016 ME

152 at ,21, and violates the Taxpayers' right to equal protection. Petrin, 2016 ME

136 at , , 31-32. Accordingly, the Law Court remanded the Taxpayers' appeals to

the Business and Consumer Court, with directions that the appeals be remanded to

the Board for "further proceedings to address the inequality in tax treatment

affecting the Taxpayers because of the abutting property program." Petrin v. Town

of Scarborough, 2016 ME 136 at ,32, 147 A.3d 842. The Business and Consumer

Court remanded the appeals to the Board without retaining jurisdiction.

The Board convened a further hearing on the appeals on three days in March

and April 2017, taking evidence and argument. See AR 386-711 (transcripts of

hearings). 1

Prior to the first hearing date, counsel for the Taxpayers and the Town

submitted position statements to the Board. AR 121-26, 300-09.

The Taxpayers in their statement asked for a 99% reduction in the assessed

value of their land (but not assessed value of the improvements on their land), based

on what they claimed to be the extent of the improper assessment of undeveloped

abutting lots under the abutting property program. AR 126. The Town's statement

advised that Maine law calls for the Board to award for "such reasonable abatement

as the board thinks proper," AR 301, quoting36 M.R.S. § 843(1), and suggested that

1 Citations to the stipulated Administrative Record herein are in AR [page number] format.

.'3

"the maximum remedy is to return the entire program's benefit-dollar for dollar­

to the complaining Taxpayers." AR 309.

With the agreement of both the Taxpayers and the Town, the Board decided

to expand the scope of the hearing beyond the 2012-13 property tax year that was

addressed in the Business and Consumer Court and Law Court decisions. Some but

not all of the Taxpayers applied for abatements during the next three tax years as

well. See Board Decision at 1 & n. l, AR 742. Accordingly, the Board took evidence

on what property tax abatements the Taxpayers should be granted for the 2013-14,

2014-15 and 2015-16 tax years as well as for the 2012-13 tax year. Id. The abutting

property program was discontinued in 2016 after the Law Court decisions had

issued. See id.

The Administrative Record includes numerous exhibits and data concerning

the effects of the abutting property program on the tax base as a whole, on the

abutting lot owners who benefited from the program, and on the Taxpayers:

• The number of the abutting lot owners who benefited from the abutting

property program varied by tax year. The Town calculates that there

were 37 abutting lots assessed at below-market rates during the 2012­

13 tax year, but 18 of those were assessed at full value as of 2014,

leaving only 19 abutting lots still under-assessed as of 2016. 'AR 300.

• After the Law Court decision issued in 2016, the Town revalued all of

the unimproved abutting lots, with most increasing in assessed value.

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AR 408-10. Those that did not see a significant increase in assessed

value were unbuildable or lacking in access. AR 406-08.

• According to the Town's calculations, the unimproved abutting lots in

the program were assessed in the 2012-1.'3 tax year at more than 82%

below their market value. 2 See table at Tab 8, AR 29.3-94.

• However, the total land portion of the assessment for those the

Taxpayers (meaning the assessment for both abutting lots owned by

each taxpayer) reflected a much lower discount off market value-the

total land assessment for those the Taxpayers was at a discount

averaging 31.48% off market value for the 2012-1.'3 tax year. See table

at Tab 9, AR 295-99. The difference in the size of the discount is due to

the fact that the improved lots abutting the under-assessed lots were

assessed at market value, bringing the combined assessed value much

closer to market value. See id.

• The discount off market value for the total assessment (for all land and

improvements) for the Taxpayers in the abutting property program

averagedl9.64% over the four-year period. See table at Tab 7, AR 289­

2 It is interesting to note that the biggest discount given under the abutting property program went to

one of the Taxpayers in the initial Angell case-the 26 Jocelyn Rd. Nominee Trust. See 2016 ME 152,

,2, 149 A.sd 271. According to the Town, the unimproved abutting lot owned by the Trust was

assessed at just O.S 1 % of its market value, or a 99.69% discount off market value. See table at Tab 8, AR

294. This discount is the justification for the Taxpayers' request in their Position Statement submitted

to the Board for a 99% discount in their land assessments. See Position Statement at 6, AR 126. The

Trust is not a party in the present cases, presumably because it would not be entitled to any property

tax abatement due to the program.

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92. This is because the structures and other improvements were

assessed at market value.

• During the four tax years in question, the Taxpayers who participated

in the abutting property program were assessed $395,397.90 less than

they would have been had their unimproved abutting lots been assessed

at market value. See table at Tab 25, AR 385 (Town Ex. 15). See also

AR 420-21.

• The Taxpayers paid a total of $13,591.42 more in property tax as a

result of the abutting property program during the tax years for which

they requested abatements. See tables at Tab 12, AR 311-12; see also

AR431.

After the evidence, the Board heard closing argument from counsel for the

Taxpayers and for the Town. See AR 641-51 (Town closing argument); AR 651-661

(Taxpayer closing argument).

During their closing argument, the Taxpayers proposed two alternative

formulae for the appropriate abatement, based on the Town's calculations regarding

the average discounts off market value granted during 2012-13 through the abutting

property program. The Taxpayers proposed that the Board award them abatements

measured by either a 31.48% reduction in the land only portion of the Taxpayers'

assessment or a 19.64% reduction in the Taxpayers' total assessment for land and

improvements. AR 655-56, 659. These percentage discounts correspond to the

average percentage discounts in the combined land assessments and the land and

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improvement assessments respectively of the lot owners who participated m the

abutting property program in 2012-13.

In its closing argument, the Town proposed abatements calculated by

allocating each Taxpayer a share of the $395,398 that the Taxpayers in the abutting

property program had saved in taxes, for those tax years between 2012 and 2016 in

which that particular Taxpayer had applied for an abatement. AR 648-49; see table

at Tab 25, AR 385. Specifically, the total amount saved for each tax year would be

distributed to the Taxpayers who had filed for abatements for that year, in

proportion to each Taxpayer's assessed land value for that year. See AR 648-49.

Thus, for example, the $116,836.32 that the abutting property program had saved

the participating property owners for the 2012-1.3 tax year, see table at Tab 25, AR

.385, would be distributed among the Taxpayers who filed for abatements for that

tax year, in proportion to their assessed land values that year.

According to the Town's calculations, this allocation would result in each

Plaintiff receiving an eight percent reduction in the value of the land portion of the

assessment for each tax year in which that Plaintiff had applied for an abatement.

See AR 650. The Town argued that the Taxpayers would realize a greater benefit

by being granted a percentage abatement rather than a dollar share of the amount

saved by the abutting lot owners, because the average value of the Taxpayers'

properties was greater than the average value of the abutting lot owners' properties.

AR 648-49.

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The Board convened for deliberations and its decision May 10, 2017. See AR

712-41 (transcript of deliberations and vote). As a result, the Board issued a

written decision titled Findings of Fact, Conclusions, and Decision. AR 742-46

[hereinafter "Board Decision"]. The Board voted to adopt the Town's proposal for

calculating the abatement, and voted to grant each of the Taxpayers a property tax

abatement amounting to "8 percent of the total value of the Taxpayers' land

valuation, exclusive of improvements, plus 7 percent interest." Board Decision at 5,

AR 746. As noted above, the abatement applied during each of the four tax years at

issue for which that Plaintiff had applied for an abatement.

In their appeal, the Taxpayers contend that the Board failed to comply with

the Law Court mandate and failed to grant an abatement that reasonably addresses

the discrimination and violation of the Taxpayers' right to equal protection that the

remand was intended to cure. The Town contends that the Board granted the

abatement that it thought reasonable and proper, in compliance with the Law Court

mandate and applicable law.

Analysis

1. Standard efReview

Under the statute defining the authority of a board of assessment review to

award a property tax abatement, the Board is to award "such reasonable abatement

as the board thinks proper." 36 M.R.S. § 843( 1). The statute thus vests the Board

with broad, but not unconstrained, discretion-the abatement may be what the

board thinks proper, but it still must be reasonable. When a board's award of an

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abatement is challenged in court, the court's task is to determine whether the board's

determination of what constitutes a "reasonable abatement" is supported in the

evidentiary record.

In Town ef Southwest Harbor v. Harwood, the Law Court framed the standard

of review as follows:

[I]n an appeal from a Board's grant of tax abatement, we review the

record to determine, first, whether the taxpayer presented credible,

affirmative evidence to meet his or her burden of persuading the Board

that the assessor's valuation was manifestly wrong. If the record

confirms that the taxpayer did present such evidence, we review the

Board's independent determination of the just value of the property for

findings unsupported by the record, error oflaw; or abuse of discretion

2000 ME 213, ~ 8, 763 A.2d 115 (internal quotes and citations omitted).

See also Town ef Vienna v. Kokernak, 612 A.2d 870, 873 (Me. 1992)

(commissioners' abatement decision upheld based on substantial

evidence in the record).

In this case, the Taxpayers have already met their burden to show that the

valuation of their properties was manifestly wrong, so only the second step is in

question. Ultimately, the question before the court is whether the Board's abatement

decision, was reasonable in light of the purpose of the remand, the evidence before

the Board, the applicable law, and the findings made by the Board.

2. The Board's Abatement Decision

As noted above, the purpose of the remand was for the Board to conduct

"further proceedings to address the inequality in tax treatment affecting the

Taxpayers because of the abutting property program." Petrin v. Town efScarborough,

2016 ME 136 at ~31, 147 A.3d 842. The abutting property program "deprive[d]

the Taxpayers of a rough equality in tax treatment of similarly situated property

g

owners." Id. ~45, quoted in Angell Famiry 2012 Prouts Neck Trust v. Town of

Scarborough, 2016 ME 152 at ~36, 149 A.3d 271.

The Board's decision to grant the Taxpayers a property tax abatement was

the appropriate response to the remand-"an abatement is the proper remedy for

unjust discrimination." Rams Head Partners, LLC v. Town of Cape Elizabeth, 2003

ME 131, ~15, 834 A.2d 916, citing Shawmut Mfg. Co. v. Town ofBenton, 123 Me. 121,

128, 122 A. 49, 52 (1923).

It is the Board's methodology in determining the amount of the abatement

that the Taxpayers challenge. The Taxpayers asked the Board to grant them

abatements in the form of percentage discounts off market value comparable to the

percentage discounts given to abutting lot owners through the Town's

discriminatory abutting property program.

However, the Board used a different methodology. It took the total dollar

amount saved by the abutting lot owners during each tax year as a result of the

discriminatory program and divided that dollar amount among all of the Taxpayers

who had applied for an abatement for that year, in the form of a percentage

abatement of the Taxpayers' land assessment. Thus, the abatement granted by the

Board is a function of two variables: the dollar amount saved by the under-assessed

abutting lot owners and the total number of Taxpayers who requested abatements in

that same year.

The first variable--the total dollar amount saved by the under-assessed

taxpayers-is relevant to determining a reasonable abatement, because it measures

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the extent of the discriminatory practice. Basing an abatement to remedy

discrimination upon the extent of the benefit conferred by the discriminatory

practice is certainly reasonable.

However, it is the second variable in the Board's abatement equation-the

total number of Taxpayers-that renders the Board's decision indefensible as a

reasonable abatement. The size of the group that has been wrongfully

discriminated against has little, if anything, to do with what remedy each member of

the group is entitled to receive. As the Taxpayers point out, the way the Board has

structured the abatement means that, had there been five in their group instead of

more than 50, the abatement for each would be ten times greater. Had there been

500 in the Taxpayer group, the abatement for each would be one-tenth of what it is.

The Board's abatement formula means that the more widespread the

discriminatory practice, the less those affected by it are entitled to receive as a

remedy. This inverse relationship between the number of people who were

discriminated against and the value of the abatement each is entitled to receive

illustrates, as much as any other point, the unreasonableness of the Board's

abatement decision. A reasonable tax abatement to rectify unjust discrimination

does not depend on how many people are entitled to receive the abatement. The

Board's abatement formula does not achieve the "rough equality" of treatment that

the constitution requires.

. '

Arguably, on the other hand, whether a board of assessment reviews

abatement decision is reasonable can-and perhaps should-be determined without

11

consideration of the method by which the board reached its decision. If the

abatement itself-the bottom line-is a rational one, should it matter how the board

reached it? In this case, even if the court reviews the abatements granted to the

Taxpayers without considering the flawed methodology by which they were derived,

the abatements do not withstand scrutiny. Because there are so many more Plaintiff

Taxpayers than there were favored abutting lot owners, especially in the later of the

four tax years in question, the abatement amount granted to the Taxpayers­

considered either as a percentage reduction in assessment or as a dollar reduction in

property tax-does not render the tax treatment of the Taxpayers roughly equal to

the favored tax treatment granted to the abutting lot owners.

Accordingly, the court is compelled to vacate the Board decision and to

remand these appeals to the Board for a redetermination. The Taxpayers want the

Board decision vacated, but they want the court to substitute its own judgment for

that of the Board, a step the court is unwilling to take. In the alternative, they ask

that the court issue "detailed instructions on how the remedy is to be calculated."

Plaintiffs' Rule BOB Brief at 27.

The remainder of this decision attempts to respond, to the extent appropriate,

to both the Taxpayers' request that the court give detailed instructions and the

Board's effort to frame a reasonable abatement without much guidance in how to do

so. See AR 678-80, 684-85, 687, 689. The Board has substantial discretion, keeping

in mind that the Plaintiffs are entitled to "rough equality" in treatment with the

favored abutting lot owners. See Petrin v. Town ef Scarborough, 2016 ME 136,

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1124, 38, 147 A.sd 842. Thus, were the Board to grant the PlaintiffTaxpayers the

same average benefit that the favored group received, that clearly would be a

reasonable response.

At oral argument, the court asked whether "rough equality" could be

measured in terms of a dollar reduction in property tax instead of in terms of a

plainly defined the abatement granted to Plaintiffs in terms of the dollars saved in

taxes by the abutting lot owners as a result of the abutting property program, and

might decide to do so again on remand. 3

As noted above, using the benefit conferred by virtue of the discriminatory

program as the basis for the abatement is a reasonable means-arguably the best

means-of achieving the constitutionally required "rough equality" in treatment.

Where the Board went wrong, in the court's view, is in dividing the total value of the

benefit conferred by the total number of Taxpayers. Because there are significantly

more Taxpayers than there were favored abutting lot owners, the result of that

division was to grant the Taxpayers, as a group and, at least in some cases,

individually as well, an abatement significantly less valuable than the average benefit

realized through the abutting property program by the abutting lot owners.

The parties have filed post-argument memoranda addressing the question

whether the abatement for each of the Plaintiff Taxpayers could be reasonably

s The Taxpayers' November 30, 2017 Joint Rule SOB Post-Argument Reply Brief to the court refers at

page 4 to "the court's proposed flat average abatement." The court is not "proposing" any particular

level or method of abatement. The Board's prior abatement decision plainly sought to measure the

abatement in terms of the dollar benefit conferred by the favored program, and the court's question was

intended to explore the Board's discretion to do so, in case the Board on this second remand decides to

use the same starting point for its abatement decision.

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structured in terms of a reduction in land assessment for each year in which that

Plaintiff Taxpayer applied for an abatement that results in the same dollar reduction

in property tax (instead of a percentage reduction in assessed value) that the favored

abutting lot owners received, on average, during that year.

The discriminatory abutting property program was structured in terms of a

dollar reduction in the assessed value of the abutting lot rather than an across-the­

board percentage reduction in assessed value. Moreover, the percentage reductions

in the value of abutting lots varied widely. Those facts suggest that an abatement

that measures "rough equality" in terms of dollars saved in taxes rather than in

terms of a percentage reduction would be a reasonable one.

The Taxpayer Plaintiffs are vehemently opposed to an abatement

methodology that grants them the equivalent dollar value of the benefit granted to

the favored abutting lot owners. They say that they are entitled to the same

average percent reduction in assessed combined land value that the favored group

received.

The Taxpayers' properties, on average, are assessed at 'several times more

than the properties of the abutting lot owners who benefited from the program, so

granting the Taxpayers the same average percentage reduction in overall land

assessment would mean the Taxpayers as a group save many more dollars in

property taxes than did the group benefited by the abutting property program.

However, the Taxpayers point out that the abutting property program's benefit in

terms of tax dollars saved rose in value in proportion to the value of the abutting

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lots, and they contend that "rough equality" reqmres that their abatements be

structured similarly. See Plaintiffs' Joint Rule 80B Post-Argument Reply Brief at 4

(Nov. so, 201 7).

The court's research has not revealed any dispositive authority one way or the

other on the question of whether the "rough equality" needed to redress unjust

discrimination can only be measured in terms of a percentage reduction in

assessment as the Plaintiff Taxpayers contend, or whether it could be measured by

reducing the land assessments of the Taxpayers' property to confer the same dollar

reduction in property tax as the average reduction obtained during that tax year by

the favored lot owners. The question may be academic if the calculation would be too

difficult, as the Town's post-argument memorandum suggests.

In any event, the Board's task is to grant an abatement will place each of

Plaintiff Taxpayers in a position roughly equal to the favored abutting lot owners

for each tax year in which that Taxpayer applied for an abatement.

3. Interest

The Board appropriately voted to award interest on the abatement at 7%

running "from the date of the overpayment." AR 739. Accordingly, interest on the

amounts to be refunded to each Taxpayer due to abatements should be calculated

from the date on which the Town received any overpayment of property tax

attributable to the abutting property program.

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Conclusion

For the foregoing reasons, it is hereby ORDERED, ADJUDGED AND

DECREED as follows :

1. The appeals of the Plaintiffs in all of these consolidated cases are hereby

granted.

2. The May 10, 2017 abatement decisions of the Town of Scarborough Board

of Assessment Review on the abatement applications of the Plaintiffs in

these consolidated cases are hereby vacated.

3. The Plaintiffs' abatement applications are hereby remanded to the Town of

Scarborough Board of Assessment Review for further proceedings

consistent with this decision.

4. The court does not retain jurisdiction of these appeals.

Pursuant to M.R. Civ. P. 79(a), the Clerk is directed to incorporate this Order

and Judgment by reference in the docket.

Dated 1 December 2017

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Consolidated cases AP-17-21, AP-17-22, AP-17-23

Donald Petrin, et al.

Kenyon Bolton, Ill, et al.

Angell Family 2012 Prouts Neck Trust, et al.

VS.

Town of Scarborough

Attorney for Petrin Appellants:

John Shumadine, Esq .

PO Box 9785

Portland, ME 04104

Attorney for Bolton Appellants:

William Dale, Esq.

PO Box 4510

Portland, ME 04112-4510

Attorneys for Angell Family Appellants:

Kris J. Eimicke, Esq.

Jonathan Block, Esq.

Merrill's Wharf

254 Commercial St.

Portland, ME 04101

Attorney for Appellee:

Michael A. Hodgins, Esq.

PO Box 5057

Augusta, ME 04332-5057