Seasons, the sprawling restaurant and sports bar on Bangor’s Main Street, was once packed with patrons, especially on the days of concerts on the city’s waterfront and during the high school basketball tournament every February.
But with those events halted, and with its customer capacity limited because of COVID-19 restrictions, Seasons’ business has taken a sizable hit since the pandemic arrived last March. Even relative success has its limits: Customers often encounter long waits because of the reduced capacity.
“You hate anytime in a restaurant to say no to someone,” General Manager John Hafford said. “COVID’s made us say no a lot, unfortunately.”
Seasons is one of many Bangor-area hospitality businesses that has seen revenues decline because of COVID-19 as part of a phenomenon that could shake up Bangor’s tax base for years to come.
A year of slumping sales at those and other businesses that pay large property tax bills will catch up with Bangor city councilors as they craft a new city budget later this year. One potential result is that homeowners could find themselves shouldering a larger share of the cost of city services.
Cities and towns across Maine that rely heavily on service-industry businesses to fund their budgets could find themselves in the same situation as Bangor this year, and well into the future, as they face the uncertainty that goes with the COVID-19 pandemic.
Almost a year since Maine’s first coronavirus case, it’s still far from certain when life could return to some semblance of pre-pandemic normalcy amid the slow pace of vaccinations, steady numbers of new infections and the threat of new, more contagious coronavirus strains. And some businesses that took a pandemic-related hit may never see a return to pre-pandemic volumes of business.
In Bangor, businesses have traditionally paid a majority of the city’s property taxes, but that balance could start to shift after nearly a year of the pandemic has depressed sales at precisely the businesses Bangor has long relied on to help fund city services. Those include retailers, restaurants, hotels and Hollywood Casino, which have been hurt as the pandemic has hastened a long-running shift to online sales, curtailed travel and forced many to shut their doors to customers for weeks or months and reduce their capacity.
Struggling businesses will likely see their assessed values drop, potentially translating into lower property tax bills. Meanwhile, many homeowners can expect to see their property values rise — and property tax bills, as a result — in a hot real estate market.
Businesses’ sales and their property values could bounce back following the pandemic, but that’s far from a guarantee for all of them, as the pandemic has changed consumers’ habits.
“The Bangor Mall and places like that — they are fighting online sales,” said Josephine LaPlante, an associate professor of policy, planning, and management at the University of Southern Maine in Portland. “It was a trend that was in play that’s been escalated” since COVID-19 arrived.
A shifting tax base
The Bangor area’s restaurants and hotels have seen substantial declines in business since the start of the pandemic, though the hit to the Portland area has been larger.
Bangor-area lodging sales were more than 60 percent lower from March to November 2020 than in the same period a year earlier, according to data from Maine Revenue Services. Restaurant sales were more than a quarter lower.
At Hollywood Casino, which didn’t reopen until July following the March start of the pandemic, revenue for March through December last year was 53 percent lower than it was during that same period in 2019.
The city is expecting that those businesses’ financial troubles will translate into them losing about 10 percent of their aggregate property value when new property assessments take effect later this year, Bangor Finance Director Debbie Laurie said.
However, Laurie said, increasing home values could offset that loss in property tax revenue from businesses.
Out-of-state home buyers have been drawn to Maine during the pandemic, attracted by its rural, spread-out nature and comparatively low COVID-19 case counts. The result was an 11 percent rise in Penobscot County’s median home sale price last year compared with 2019, according to the Maine Association of Realtors, with higher sale prices translating into more valuable properties.
Other homeowners have used the pandemic to renovate their homes, adding taxable value to their properties, Laurie said. The city issued 48 percent more residential building permits in 2020 than it did in 2019 — 40 permits, compared with 27 a year earlier, according to Bangor’s code enforcement office.
However, shifting the tax burden from businesses to residents brings its own set of challenges, especially during a coronavirus-fueled economic downturn.
“If you don’t have a job, increasing the value of your home, which increases your property tax bill, isn’t necessarily a good thing,” Laurie said.
Whether Bangor’s property tax base permanently comes to rely more heavily on homeowners is unknown, and largely dependent on factors largely out of the city’s control, including the rollout of vaccines and the trajectory of the national economy.
“Are we going to be in this cycle for three to four or five years?” Laurie said. “What does the new normal look like?”
Miguel’s Mexican Restaurant on Hogan Road wouldn’t have been able to stay open without a federal Paycheck Protection Program loan of about $149,000 last May that it used to make payroll, Owner Chris Jones said.
“We were down over a half million dollars last year,” he said. “So without that, I don’t think we would have made it.”
Jones and Hafford, the general manager of Seasons, said a devaluation that translates into lower property tax bills would help their businesses. But such a shift might not be the best for the Bangor area overall, Jones said. Both were skeptical that smaller property tax bills would materialize.
Lower property taxes “may be a big boon,” Hafford said. “There’s a lot of businesses right now that are really kind of struggling.”
While property taxes are the dominant source of revenue for Bangor, they’re not the only revenue source that’s taken a hit since the pandemic.
One example is the sum Bangor collects each year from Hollywood Casino, which pays 2 percent of table game revenue and 1 percent of slot revenue directly to the city. The city uses that money to pay debt service on the city-owned Cross Insurance Center.
The casino collected about $20.5 million in revenue from March to December last year, a 53 percent drop from the same period a year earlier. Aside from depressed revenue potentially lowering the property value of the casino — long one of Bangor’s top property tax payers — it has already translated directly into hundreds of thousands in lost revenue for the city. Bangor collected $296,000 from casino revenues last year, down from $554,000 in 2019.
Table game activity has become far more limited since the beginning of the pandemic: While visitors could play at 18 tables in January 2020, they’ve only been able to play at six for most of the pandemic.
The casino was also closed throughout April, May and June — longer than most other businesses. It laid off a number of employees in September, though it didn’t say how many.
The city and casino are in regular contact and would discuss any property value change before it occurs, Hollywood Casino General Manager Austin Muchemore said. He declined to say whether he expects a devaluation.
“Like everyone, we will be much happier when we are on the other side of this and more people can gather safely with fewer restrictions once again,” Muchemore said.
Budgeting amid uncertainty
Work on the next city budget will start in earnest this spring before the budget takes effect July 1.
City Council Chair Dan Tremble said he doesn’t expect large cuts because of lower business property values, agreeing that growing home values could come “pretty close” to offsetting the drop on the business side.
Long-term, he said, he’s optimistic about business property values bouncing back.
“Once businesses rebound, [their values] would be readjusted,” Tremble said.
But the hit to retail, lodging and entertainment property values might not be the only one Bangor has to contend with down the line. The pandemic also may drive companies to scale back or abandon their investments in physical office space, as workers have adjusted to working from home during the pandemic, said LaPlante, the USM professor.
That change would have significant effects on Bangor’s budgeting, as businesses that scale back their office space would be required to pay less in property taxes, or no property taxes at all.
“You’re going to see some people go back to offices, but they may not go back five days a week,” LaPlante said. “And if people don’t return to them and you have a lot of vacancies, you are going to see some really serious impacts over the next few years.”
Tremble said he had not seen that phenomenon in Bangor yet, but said long-term changes to office space occupancy were possible after the pandemic.
Uncertainty is one theme that will dominate budgeting this year, Tremble said.
“Budgeting-wise, it’s probably going to be one of the most difficult years we’ve had, just because of the uncertainty,” Tremble said.