The City of Bath and one of the state’s largest employers reached an agreement last week that could result in a 3% hike for Bath taxpayers, though city officials won’t know for certain for a few months.

The city reduced Bath Iron Works’ valuation — a number defining what a property is worth and how much it will be taxed — from $640 million to about $509 million to reflect the shipyard’s fair market value. However, that multi-million-dollar reduction causes ripple effects because “the city’s overall valuation has been reduced, which is what makes the tax rate go up,” said Bath Assessor Brenda Cummings.

With a three-year, interest free payment plan approved and the negotiated application of the valuation adjustments, the impact on all taxpayers in 2021 should be less than $60 per $100,000 of value, according to a statement from the city. This means a home valued at $200,000 could see a less than $120 increase.

However, Cummings said the city won’t know the real impact until late August when valuations are finalized and tax bills are prepared using updated city, school and county budgets.

The city’s current property tax rate is $20 per 1,000 of valuation, meaning a home valued at $200,000 has a $4,000 tax bill.

According to a statement from BIW, the company felt it had been “substantially over-assessed” and filed two property tax abatement requests in hopes of reducing its tax burden for the 2019 and 2020 tax year.

“Once BIW raised the question of just value, we studied it for over a year and I concluded that an adjustment was warranted,” said Cummings. “The issue then was how to implement it. BIW is 40% of our valuation base, so changes in their valuation have a potentially significant impact.”

In 1998, BIW paid $2.2 million in property taxes to the city, according to the company. Since then, the shipyard has paid over $10 million in property taxes from 2015 through 2019, according to city tax data. Last year, BIW paid $10.86 million last year in property taxes to the city.

Cummings said the city agreed to reduce the shipyard’s valuation after reviewing the value of BIW’s real estate and business personal property such as cranes, machines and other equipment for over a year. That reduction in BIW’s valuation reduces the city’s total taxable valuation by just under 3%, subsequently increasing taxes slightly for city taxpayers.

In a statement last week, the shipyard called the state’s appeal system for property tax disputes “broken” and wrote it agreed to a settlement with the city to avoid a lengthy and expensive litigious process.

“BIW agreed to a settlement that was structured to minimize the impact on all taxpayers and did so to avoid the uncertainty associated with an unreasonably lengthy dispute,” the company wrote last week. “Cases can take longer than five years to litigate. The current structure of the State Board of Property Tax Review deprives taxpayers and municipalities of a vehicle to resolve these disputes in a timely and efficient manner.”

“The appeal process would have left the city with a great deal of uncertainty with our largest and most significant taxpayer,” Bath City Manager Peter Owen wrote in a statement. “If the decision were placed in the hands of a third party, we would have been unable to negotiate with BIW over the methods of applying an abatement or how best to reduce the burden to other taxpayers.”