For those of you who are puzzled by the stories in yesterday's Boston Herald and Globe
[below] about property taxes: you are not alone.
The Globe story was accurate as far as it went; the cities
and towns are worried about cuts in local aid. No one pointed out that most communities let spending get out of control
during the '90s just as the state did, and now they too have to tighten up. We taxpayers
took the hit last year; now it's the spending side's turn.
The most important item the Globe story contained was the
discussion about "local option taxes"; Governor Romney's communication director Eric Fernstrom said they have not
decided if such things would be a violation of the "no new taxes" pledge.
Here is the answer to that. If the local option taxes are
voted upon by the people who will be paying them, then they do not violate the pledge. If they are imposed upon others who
do not get to vote, and are not part of a package that lowers other taxes, then they do
violate the pledge. Eg. Prop 2½ overrides and the Community Preservation Act taxes
are, in CLT's opinion, a bad idea, but do not violate the pledge. Taxes on restaurant sales,
theater and sports tickets, and parking, are a violation unless they are offset dollar for
dollar by, say, a reduction in the income tax rate or the removal of the
tax on prescription drugs.
And in case anyone was wondering, yes, Jane Swift did
violate her pledge when she did not veto the tax on prescription drugs and nursing home beds. The change in the
estate tax is a violation too.
Now to the Herald story, "Ouch time." The reporter didn't
call us or, apparently, anyone who understands how Prop 2½ works: or maybe I should say "is supposed to work." If
she is right, then something is very wrong. Revaluation isn't supposed to increase the
property tax take in any community; it simply shifts the taxes from some homes or
businesses to others that have increased in value more. Eg. If the community's value
doubles, the rate is supposed to be cut in half, then the allowed 2½ percent increase
kicks in, then you add the tax rate times the value of NEW construction or improvements,
then you add the override and debt exclusions. How that widow in Needham with the four
room house had her quarterly bill raised from $580 to $1,028 (if the reporter got this
right) I can't imagine, but I am going to find out.
Part of the problem in communities like Needham, which tax
commercial/industrial at a higher rate than residential, is that during a recession when business values drop, the
residential sector must pick up more of the total levy. This is why CLT originally opposed
classification when it was on the 1978 ballot as a constitutional amendment: some people
may tolerate high taxes or even vote for overrides when they think business will pick up
much of the burden, but this backfires hard and fast when the economy slows down, and
the switch can be a shock.
The Boston Herald
Sunday, January 5, 2003
Property owners feel pinch:
Home values send tax bills through roof
by Kay Lazar
A collective shriek is echoing across Massachusetts as
homeowners in many communities open their latest property tax bills and see their assessed home
values soaring 30, 40 and in some cases more than 100 percent, sending their
tax bills skyrocketing by hundreds of dollars.
Recession-weary residents are startled by the monster bills
that seem out of whack with the tightest fiscal times in more than a decade.
But the 2003 fiscal year tax bills that hit mailboxes in
late December reflect the sizzling housing market of 2001 because tax assessors traditionally use
housing-market prices from the previous year to measure home values.
Now, lagging tax assessments are finally catching up to the
housing boom of the late 1990s, but they are slamming many who are already going bust.
"Many (seniors) are saying they are going to have to sell
their homes and move," said Pat Carty Larkin, executive director of the Council on Aging in
Westwood, where anxious seniors on fixed incomes have been calling about
their new sky-high tax bills.
"Others are deciding whether to buy their medicines or pay
their taxes. They can't afford both," Larkin said.
The upper-middle-income community in Boston's southwest
suburbs just completed its triennial property revaluation - the state requires each
community to update property values every three years - and Westwood found the average home increased by
40 percent in value during that stretch. Average tax bills shot up by 15 percent.
For Larkin, 58, the latest tax bills hit hard on several
fronts.
As a homeowner in the blue-collar MetroWest town of Milford,
Larkin just opened a property tax bill that jumped 8 percent.
But it was the tax bill for the summer cottage she and her
husband own near Buzzards Bay in Mattapoisett that knocked her off her chair.
"It's a shack, a four-room little house that's not even
winterized," Larkin said. "When we purchased it 18 months ago it was assessed at $68,000. Now, it's
gone up to $177,000."
The Larkins' annual tax bill in Mattapoisett nearly doubled,
from $1,400 to $2,600.
For the past several years, the state's Department of
Revenue has been encouraging local tax assessors to update their property values annually so that
a community's residents don't suffer sticker shock from tax bills that haven't
been regularly adjusted to reflect real market prices. State figures show an
increasing number of local assessors followed that advice as house values and
tax bills climbed steadily during the 1990s.
The state's numbers show that the average single-family home
jumped 14 percent in value, with a tax bill that increased nearly 7 percent in the last fiscal
year. While the state hasn't calculated the average increases for this year,
reports coming in from across the commonwealth suggest that the new property values and taxes will leave last year's in the dust.
Consider Somerville. Residents are opening bills that show a
nearly 30 percent increase in the value of the average single-family home, and a whopping 25
percent hike in the tax bill. That translates to about $476 more a year.
"I expect a lot of calls because of sticker shock," said
Richard Brescia, Somerville's chief assessor. "We have an overlay account of $1.2 million, enough
to fund some exemptions for seniors, so they won't have to eat cat food."
Somerville's property taxes, at $2,335 on the average
single-family home, are well below the state's $3,000-plus average. That's because Somerville is one of
just 11 communities that offers a sizable "residential exemption" discount,
knocking $1,339 off the bill for each taxpayer who owns and occupies a house.
Somerville's hefty increases in home values pale in
comparison to those in the Cape Cod community of Bourne, which hadn't updated its values in three years.
"Waterfront property, or those with water influences, such
as those across the street from the water or a quick walk to the beach, went up over 80 to 110
percent, on average," said Donna Barakauskas, the town's new assessor who
inherited the unpopular updating task.
"Water properties have been so underassessed for so long, it
was catch-up for them," Barakauskas said.
Catch-up for those properties, she said, averaged about
$1,000 more a year in taxes. Some shot up $2,500.
The latest property tax misery in Massachusetts is similar
to woes ricocheting across the country as assessments catch up in all corners.
"There was some shrieking a year ago, but it's a lot louder
now," said David Brunori, editor of State Tax Notes, a Virginia-based weekly that tracks tax
trends.
"Now, with the economy down, the increased property tax
burden hurts much more," Brunori said. "People weren't complaining so much in 1999 and 2000
when the economy was roaring, incomes were up and consumer confidence was
high."
Added to the misery in Massachusetts is a lot of confusion,
because many homeowners mistakenly believe the state law, known as Proposition
2½, is supposed to limit a community's total tax increase each year to
2½ percent - unless voters agree to override that.
But the state law also says so-called "new growth" - new
home construction, additions and renovations - can be exempt from that Proposition
2½ cap.
An explosion of new growth and pricey homes in Needham
through 2001 sent tax bills soaring.
"We have two-bedroom, one-bathroom Capes selling for
$385,000 to $400,000, and many are being torn down and four- and five-bedroom colonials
are built on them," said Jim Weidenfeller, Needham's chief assessor. "It was
nothing to see
60,000 to $100,000 kitchen upgrades."
While Needham's superhot housing market has slowed down a
bit, it wasn't in time to save many residents from superinflated tax bills.
"I have a tiny four-room house, one bath, no garage and they
raised my quarterly bill from $580 to $1,028. I just can't do it. I have been retired for 20
years and a widow for 30," said one Needham senior who asked that her name
not be used.
The Needham native said her house value jumped in the latest
assessment from $217,000 to $350,000. "How can a four-room house be worth that
much?" she said. "Everything has gone through the roof."
Return to top
The Boston Globe
Sunday, January 5, 2003
Mass. cities, towns weigh tax hikes
Reduction in local aid deepens budget woes
By Scott S. Greenberger
Globe Staff
Governor Mitt Romney has pledged not to raise state taxes,
but as cash-strapped Massachusetts plans cuts of 10 percent or more in local aid,
many cities and towns are being forced to consider tax hikes of their own.
Boston Mayor Thomas M. Menino has already asked the
Legislature to allow cities to tax restaurant meals, movie tickets, and parking garages - a move
applauded by many other local officials as a way to deal with their budget
problems. The handful of communities that are collecting less in property
taxes than is permitted under Proposition 2½ - a state law limiting local tax
increases to 2.5 percent - may opt for property tax hikes. Some others that are
bumping against the ceiling may hold special elections seeking voter permission
to override the law.
State Senator Mark C. Montigny, a New Bedford Democrat who
heads the Ways and Means Committee, described Romney's approach as "saying you
won't cut, saying you won't raise taxes, and then dumping the burden elsewhere."
"It's a political strategy that Mitt Romney is trying to
employ, just as George W. Bush has employed: Let someone else pay for it," Montigny said.
Eric Fehrnstrom, a Romney spokesman, said the governor
hasn't determined whether his "no new taxes" pledge would prompt him to veto local option taxes
such as the ones Menino has proposed.
"Generally, Mitt Romney is not in favor of higher taxes, but
we have not addressed the issue of local option taxes," Fehrnstrom said. "Of course,
communities now have the option of raising taxes through Proposition 2½
overrides - that option is available to them as we speak."
On average, cities and towns depend on state dollars for 28
percent of their budgets, though in some cities the figure is as high as 70 percent. Leaders in
many communities across the state say a deep cut in local aid would force them
to lay off teachers, firefighters, and police officers, and slash popular
programs.
Some cities and towns have raised their property taxes in
the last several years as the state has scaled back the local aid increases that were customary during
the boom years of the 1990s, according to Geoff Beckwith of the Massachusetts
Municipal Association.
"The property tax burden has increased over the last several
years, as the state's finances have deteriorated," Beckwith said. "If local aid cuts are
forthcoming, then the property tax burden in the state will undoubtedly
increase, and our tax structure will get more regressive."
But Louis DePasquale, Cambridge's assistant city manager in
charge of financial affairs, said his city will opt for a property tax hike before it fires teachers or
police officers or scraps programs. Cambridge, which would lose about $4
million with a 10 percent cut in local aid, is $36 million under the levy limit
imposed by Proposition 2½.
"Even separate from a state aid loss, we'd be going up. The
question is how much," DePasquale said of the city's property taxes, adding that Cambridge,
like many cities, is struggling to pay for rising health care and pension costs.
In contrast, Worcester will try to hold the line on property
taxes, according to budget director John Pranckevicius. Worcester stands to lose $22 million in
local aid with a 10 percent cut, and it is more than $11 million under the levy
limit. But Pranckevicius said Worcester officials fear raising property taxes
would be counterproductive, since it might push residents and businesses out
of the city and diminish the tax base. Like Boston, Worcester is pinning its
hopes on local option taxes.
As for cities that have already reached the Proposition
2½ limit, persuading voters to approve overrides won't be easy, said Michael Widmer of the
Massachusetts Taxpayers Foundation.
"In the middle of a recession, it's very difficult to get
voter support - it's never been easy under the best of circumstances," Widmer said. "Most of the western
suburbs have had overrides at one time or another, but not easily. And many
others have been defeated."
Mayor Michael Albano of Springfield, where voters approved
an override in 1991, said he has no doubt another attempt would fail. Even if it were politically
possible to persuade residents in one of the Commonwealth's poorest cities to
pony up more money, Albano said, the tax hike would hardly make a dent in
the roughly $26 million or more Springfield stands to lose in local aid. About 65
percent of Springfield's budget comes from the state.
"It would help mitigate some of the cuts if it passed - but
I don't think it would pass," Albano said. "And you're talking about $4 million in one-time revenue. It
would just delay the inevitable."
Albano said "the inevitable" includes substantial city
budget cuts.
"There's simply no way around layoffs, and there's no way
around reductions in essential services," Albano said. "And the biggest hit will be the school
department."
Boston always taxes up to the limit imposed by Proposition
2½, and it has never attempted an override. The Hub plans to push hard on Beacon Hill for
local option taxes. Boston would lose about $50 million if local aid is cut 10
percent.
"At a certain point, state government has to give the local
communities that may suffer massive cuts some additional options for raising revenue," said
Howard Leibowitz, the city's chief lobbyist. "We want to put forward constructive
alternatives so we can maintain services."
In Boston, increasing the 5 percent restaurant sales tax by
one percentage point and funneling the extra money to the city would generate $17 million; a
50-cent surcharge on tickets for movies, plays, concerts, and sporting events
would produce $4 million; and a 10 percent excise tax on parking fees at
garages and lots would bring in $18 million. Removing some of telecommunications companies' decades-old exemptions would
raise $20 million for the city, and a new tax on billboards could bring in $8 million.
There is some indication that given the projected cuts in
local aid, Beacon Hill might be receptive to the idea of local option taxes, especially if Boston - often
described as the state's "economic engine" - is hurting. When Menino unveiled
his proposals last month, House Speaker Thomas M. Finneran said the Legislature should recognize "the different challenges
Boston faces and the importance of giving it the ability to succeed."
State Representative John H. Rogers, a Norwood Democrat who
chairs the House Ways and Means Committee, acknowledged that a local aid cut "will
likely spur a demand for more local revenue-raising authority." But Rogers said
local option taxes will have to overcome strong antitax sentiment on Beacon
Hill.
"I still think that the members of the Legislature will look
askance at any local tax proposal that is not limited in size, scope, and duration, and is ultimately
approved by local voters," Rogers said.
