An overhead view of the 138-acre Piper Shores retirement facility, located at 15 Piper Shore Road, in Scarborough. Contributed

SCARBOROUGH — The town will enter mediation next week to try to settle a lawsuit that could cost it $1.4 million in annual property tax revenue.

The owners of Piper Shores filed the lawsuit about 10 months ago in Maine Superior Court. The retirement community, Scarborough’s largest taxpayer, claims its assisted living and skilled nursing units at 15 Piper Shore Road are tax exempt under Maine law.

Town Manager Tom Hall said Piper Shore’s claims are unfounded and that town officials have found well-developed case law that he believes will provide a rational, legal basis for denying the request.

“We’re still in the discovery phase of the lawsuit and trading legal theories at this point,” he said.

If the lawsuit is successful, Hall said, it would be significant loss for the town. But he said it’s too soon to know what it could do to the town’s finances.

“We want to make sure what we’re doing is the appropriate thing to do,” he said. 

Maine Life Care Retirement Community, doing business as Piper Shores, owns and operates the property as a retirement community offering assisted living and skilled nursing care for people 62 and older.

Piper Shores has an assessed value of $84.9 million and an annual property tax bill of more than $1.4 million.

In the complaint, Piper Shores states the town tax assessor wrongfully denied an exemption request and treated the exempt property as taxable.

At the center of the dispute is a contract zone agreement reached by the town and the retirement community in 1997.

In exchange for rezoning to accommodate 160 independent living units and 40 cottage units, Piper Shores agreed to pay annual property taxes on the otherwise exempt nonprofit nursing homes and assisted living facilities.

The Town Council approved the agreement in November 1997.

Piper Shores made several changes over the years, including the addition of 40 independent living units in cottages, four assisted living units and eight skilled nursing units added in 2004. The community now has 350 residents in four areas of care: independent living, assisted living, memory care and nursing, with 190 people on a waiting list for independent living.

In the fall of 2017, Piper Shores completed an expansion that added 30 assisted living/memory care units, to increase the number of licensed assisted living units to 50. The number of licensed skilled nursing units remained at 40.

The new additions came with an increase in Piper Shore’s property taxes.

Piper Shores applied for tax-exempt status Jan. 23, 2018, for the April 2018 assessment deadline. The request was neither denied or granted, according to the complaint.

Rather, Piper Shores received two tax bills from the town last September for $1.4 million and $28,000, without follow-up on their request. Piper shores filed its lawsuit on Oct. 25, 2018.

Piper Shores claims that, despite the 1997 agreement, all of its property was being assessed and taxed by the town, including the property originally thought to be exempt under the agreement.

Piper Shores also believes that the assisted living and skilled nursing care units qualify for further tax exceptions as a charitable, nonprofit institution.

Hall, however, said “We don’t believe the document says what (Piper Shores believes) it says.”

In a brief phone interview Aug. 22, Piper Shores representative Andrea Killiard declined to discuss the lawsuit. She said talks with the town will be taking place soon.

Hall said the town and officials from Piper Shores plan to meet Sept. 4, in an attempt to resolve the dispute without going to court. 

 “This process allows us to hit the pause button and shortcut the litigation route,” he said. “They are our largest taxpayer. … We value them as a good community member and want to maintain good positive relations through all of this.”