Bangor’s top taxpayer thinks the properties it runs are worth 37 percent less than the city of Bangor says they are. Hollywood Casino, Hotel and Raceway’s property tax bill should be cut accordingly, the company argues.

Depending on how Hollywood Casino’s request for a property tax abatement unfolds, it could come down to a battle of approaches one can use to determine a property’s market value. The fairness of the property tax system that’s required by the Maine Constitution is what’s at stake.

Hollywood Casino’s Pennsylvania-based corporate parent filed an abatement application in January challenging the market value Bangor attached to its properties for tax purposes. The casino argues the $98.2 million value of the casino, hotel and race track properties — the land and the buildings — actually should be $61.4 million.

The casino’s general manager, Jose Flores, told the BDN that lower revenues because of competition from Oxford Casino in western Maine, “general softness” in the economy and a 3.6 percent year-over-year bump in the city’s assessment drove the request — the second from the casino since 2009.

Indeed, slot and table game revenues at Hollywood Casino have slipped in recent years. But that’s not unique to Hollywood Casino. Casino revenues were off and casinos closed last year in some of the country’s top gambling markets. Though Oxford Casino, which opened in 2012, has diverted some business away from Hollywood Casino, revenue at both casinos virtually was flat from 2013 to 2014.

But at what point does declining revenue detract from the value of a business’ property? That’s likely part of the argument that could unfold if the city denies the casino’s abatement request — it has until Saturday to issue that decision — and the casino files an appeal.

There are three main approaches an assessor can take to determining a property’s market value, according to John E. O’Donnell III, president of John E. O’Donnell and Associates in New Gloucester, which performs property assessments for a number of southern and western Maine towns. “The responsibility is really to consider the three approaches, then pick one you think is the best indicator of value,” he said.

Under a market approach, an assessor bases a property’s valuation on recent sales of comparable, nearby properties. But because Bangor only has one casino, an assessor would have a difficult time finding comparable properties to use to judge Hollywood Casino’s value.

Using the cost approach, the assessor determines the cost to replace a property, accounting for the property’s condition, including recent improvements or depreciation for an aging building.

Under the income approach, which assessors might use for apartment buildings or commercial properties, an assessor judges value based on the income the property brings in less expenses. The assessor would have to determine what portion of the income is attributable to the property itself and not specifically to the business inside it, O’Donnell said. An assessor might base the value on the market rate to rent it out.

Assessment staff in Bangor use the replacement cost approach to value commercial properties. Hollywood Casino has yet to lay out its full appeal, but it appears the casino will rely on the income approach based on its argument that gambling revenues have slumped.

At the heart of the matter is the fairness of the property tax system. While cities such as Bangor regularly update valuations with an eye toward equity, the abatement is one more tool property owners have to ensure fairness.

But that’s not always how property owners use the abatement. A number of businesses with operations across the country regularly request abatements as a matter of course. Wal-Mart has applied for abatements on a number of the stores it operates across Maine. Though most towns have said no, any property value reduction means a lower tax bill, which adds to a business’ bottom line. Wal-Mart is in the midst of challenging the assessed value of its former property in Rockland.

Elsewhere in the U.S., CVS and Walgreens drugstores constantly contest the assessed value of their stores in an attempt to lower property tax bills.

If the casino’s property taxes ultimately are reduced, other Bangor taxpayers will have to absorb the burden, meaning a fair decision on the value of the casino’s properties is critical.

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The BDN Editorial Board

The Bangor Daily News editorial board members are Publisher Richard J. Warren, Editorial Page Editor Susan Young, Assistant Editorial Page Editor Matt Junker and BDN President Todd Benoit. Young has worked...