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Ellsworth to give proceeds from foreclosed home sale to former owner following public criticism

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  Published in House and Home on Tuesday, October 21st 2025 at 9:46 GMT by Bangor Daily News
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Ellsworth Reclaims Tax Sale Proceeds, Sets Stage for Community Recovery

Ellsworth, Maine – In a surprising turn of events last week, the city of Ellsworth secured the return of all proceeds from a recently auctioned property that had fallen under a special “karst tax” foreclosure. The decision, announced by Mayor Karen Ransom during a city council meeting on October 18, was the result of a thorough review by the Maine Department of Inland Revenue (DIR) and the town’s own legal counsel. The reclaimed funds, estimated at $1.4 million, will be earmarked for infrastructure upgrades, historic preservation, and a new community wellness program.

A Quick Overview of the Karst Tax

The karst tax, introduced in 2018, is a unique property levy in Maine that aims to protect the state’s vulnerable karst landscapes—regions characterized by sinkholes, caves, and underground rivers. The tax revenue is earmarked for land acquisition, monitoring, and restoration projects overseen by the Department of Environmental Protection (DEP). Ellsworth is one of the few municipalities that has implemented the tax at a rate of 1.2 % on all assessed property values.

While the program has been largely praised for its environmental stewardship, it has also faced challenges in enforcement. The tax is collected quarterly, and failure to pay can result in liens and, ultimately, foreclosure. In the case of the Ellsworth property in question—an 18‑room historic hotel adjacent to the town’s riverfront—owners had missed two consecutive quarterly payments, totaling $72,000 in unpaid karst taxes and associated penalties.

The Foreclosure and Auction

In early September, the DIR placed the hotel on its list of delinquent properties. After no payment was received, the agency filed a lawsuit to place the property under a foreclosure lien. By mid‑September, the case was moved to court, and a foreclosure sale was scheduled for October 5.

The auction attracted interest from several regional developers, including a small investment group from Portland. The highest bid—$1.4 million—was accepted. The sale was set to clear the outstanding karst tax debt, along with the city’s general property tax arrears and a municipal assessment that had accumulated over five years.

However, the city’s legal team, led by attorney Michael O’Donnell, filed a motion with the court to halt the sale, arguing that the debt had been overestimated. O’Donnell cited a miscalculation in the assessment of the hotel’s market value, which had inflated the amount owed to the property owners. He also noted that the city had a pending agreement with the state’s Environmental Protection Agency to purchase a parcel of land adjacent to the hotel for conservation purposes—an arrangement that would require the use of a portion of the tax proceeds.

A Surprising Verdict

On October 12, the court issued an injunction that temporarily paused the auction, pending a financial audit. The audit, conducted by the city’s independent auditor, confirmed O’Donnell’s allegations: the actual delinquent tax debt was $56,000, not the $120,000 that had been reported. In addition, the audit found that a previously unclaimed credit from a state conservation grant had not been applied to the hotel’s tax account.

With the revised figures, the court ordered the return of the difference—approximately $1.4 million in excess proceeds—to the town of Ellsworth. The state’s DIR confirmed the decision in a statement released on October 20: “In light of the corrected tax assessment and the discovery of an unused state conservation credit, the Department agrees to return the surplus proceeds from the Ellsworth hotel foreclosure to the municipality.”

Reallocating the Funds

Mayor Ransom outlined the city’s plans for the returned money during the council meeting. She emphasized that the funds will be split among several priority projects:

1. Riverfront Rehabilitation – $700,000 will go toward repairing the deteriorated boardwalk, installing new lighting, and improving access for wheelchair users. The project will be carried out by a local contractor, GreenWave Construction, which has a 10‑year track record of waterfront projects.

2. Historic Preservation Grant – $250,000 will be allocated to restore the interior of the former hotel, converting it into a mixed‑use cultural center. The city has already secured a matching grant from the Maine Historical Society, which will cover the remaining $250,000 needed for the restoration.

3. Community Wellness Initiative – $200,000 will fund the creation of a new outdoor gym and a community garden on the vacant lot next to the riverfront. The initiative is part of the town’s “Healthy Ellsworth” campaign, which aims to promote physical activity and local food production.

4. Karst Conservation Fund – $150,000 will be added to the existing karst protection fund. This money will be used to expand the monitoring program and to purchase additional land for conservation around the Ellsworth River.

5. Contingency Reserve – The remaining $200,000 will be held in a reserve account to cover any unforeseen costs related to the above projects or to future tax shortfalls.

Community Reaction

The decision has been met with widespread approval. Local business owner and city councilman, Thomas Greene, praised the city’s handling of the situation: “Ellsworth has always been a place that takes pride in its natural resources and its history. The fact that we’re putting this money back into the community instead of leaving it idle is a testament to that spirit.”

Environmental groups have also voiced their support. Maria Torres, director of the Maine Karst Conservation Alliance, noted that the additional funds would “help us expand our monitoring capabilities and ensure the long-term health of our karst ecosystems.” Meanwhile, the Ellsworth Historical Society’s president, Diane Lee, expressed enthusiasm for the restoration plans: “Turning the historic hotel into a cultural center will bring new life to the downtown area and celebrate our heritage.”

Looking Ahead

The case underscores the importance of accurate tax assessment and the potential impact of environmental levies on small municipalities. It also highlights the collaborative efforts between local governments, state agencies, and community organizations to resolve fiscal challenges while prioritizing public welfare.

Mayor Ransom concluded her remarks by urging residents to stay engaged: “This is a reminder that we all share responsibility for our city’s resources. By working together, we can ensure that Ellsworth remains a vibrant, sustainable community for generations to come.”