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Monday, November 26, 2012

Worcester's property valuation drops by $400M

By Nick Kotsopoulos TELEGRAM & GAZETTE STAFF

WORCESTER —  The total assessed value of all taxable property in the city has lost most of its gains from the previous year, having dropped by nearly $400 million.

City Assessor William J. Ford said his office has determined total valuation for this fiscal year is $10.9 billion. That is based on the assessor's opinion of value for all individual taxable properties as of Jan. 1, 2012.

In comparison, the total valuation for the previous fiscal year was $11.3 billion.

With the drop in Worcester's total valuation, there is a corresponding increase to its combined single tax rate; it has gone up by $1.70, to $22.03, according to Mr. Ford.

Since 1984, the City Council has set separate tax rates for residential and commercial-industrial properties, using tax classification to shift more of the tax burden from residential to business property owners. The combined single rate is what the city's tax rate would be without classification.

The council is to hold its annual tax classification hearing on Dec. 4 and set the tax rates for this fiscal year.

Under tax classification, the City Council this year can set the residential tax rate as low as $17.72 per $1,000 in valuation; that would translate into a commercial-industrial tax rate of $33.05, according to Mr. Ford.

The tax rates for last fiscal year were $16.98 for residential and $29.07 for commercial-industrial properties.

It is the fourth time in the last five years that the city's total valuation has either dropped or held steady.

The only time it increased during that time was last fiscal year when a comprehensive revaluation of all taxable properties was undertaken.

That year, Worcester's total assessed valuation increased by roughly $420 million, but with this year's drop in property values the total valuation is now only about $22 million more than what it was two years ago.

The high water mark for the city's total valuation came in 2008, when it reached $12.7 billion; the city is now $1.8 billion below that figure.

Worcester's tax base is now made up of 48,518 pieces of taxable property, compared to 48,349 a year ago. It includes, in part: 24,931 single-family homes; 4,953 condominiums; 3,602 two-family; 4,884 three-family; 1,227apartment buildings (four units and more); 2,232 commercial and 593 industrial properties.

Residential property accounts for 72 percent of the tax base, while business properties make up the other 28 percent, according to the assessor.

Thursday, October 11, 2012

Worcester Mag - Boxed out

by Walter Bird Jr.,  Oct 10, 2012

Larry Worrick was one of more than 2,000 homeowners or businesses filing a tax abatement request this year. He took the step believing he had been overcharged on his property taxes, figuring he would either get approved or denied. What he didn’t count on was getting both.

Worrick says he was initially notified his abatement had been denied. He was later told it had been approved. In between being denied and approved, Worrick says he had to battle the assessor’s office to get to the bottom of the snafu. It wasn’t until last week, he says, that he was told a check for $601 would be in the mail. Assessor Bill Ford says the whole thing was an honest mistake—that the person who assessed Worrick’s property checked the wrong box on his form.

Mistake or no, Worrick is irate and says he believes there is “something rotten in the assessor’s office.” He believes, had he not checked for himself, he would not have learned he was owed money. He says he is just as upset at how he claims officials have treated him as he fought to determine why he was denied abatement in the first place.

“I’d like an investigation of the whole department,” says Worrick, who claims he sent letters to all city councilors and the city manager. “I think it’s corrupt.”

That, says Ford, is ridiculous.

“Where is the corruption? Mistakes can occur, but that’s not corruption,” says Ford.

It all started, according to Worrick, when his property taxes increased by $601. He says he requested an assessment of his house, which was done near the end of June. He filed an abatement request on the basis of that assessment, believing his house had been overvalued. On Aug. 10, Worrick says, he was notified his request had been denied. At that point, he asked for a copy of the assessor’s report and was given what is called a field card. The card listed the current value of the house as $139,800—a decrease from the 2011 assessed value of $149,400. Worrick says he could not understand why the property value would go down, but he would be denied abatement.

“I spoke to Mr. Ford,” says Worrick, explaining that he was helped during the process by real estate agent Joan Crowell. She has sent out emails under the heading “AWARE,” or Accurate Worcester Assessments on Real Estate, detailing Worrick’s situation, but never naming him. Crowell says she helped other applicants file abatement requests.

“He was just sugar-coating everything,” Worrick says of Ford. “I pulled out the field report. He got extremely upset.”

A short while later, on Thursday, Aug. 23, Worrick says he went to see Ford at his office. The assessor was on the phone for over an hour and Worrick eventually left. He says he sent a letter to Chief Financial Officer Tom Zidelis and City Manager Mike O’Brien. Zidelis called him on Aug. 30 right before the Labor Day weekend, Worrick says, telling him he would call again the following Tuesday.

“He didn’t call,” Worrick says. “I called his office several times, and he never called back. Mr. O’Brien didn’t even have the decency to reply.”

In the meantime, Worrick says he mailed a letter on Oct. 1 to all city councilors. He says Councilor Rick Rushton called him and said he would speak with Zidelis. On Wednesday, Oct. 3, according to Worrick, Zidelis called him and said the city owed him an apology and that his abatement had been approved.

“Of 11 members of the council, [Rushton] is the only one who came through,” Worrick says.

Ford acknowledges a denial notice was sent to Worrick. That form informed Worrick his request had been denied by a vote of assessors. Ford says there was no vote because there is no three-person board—most large cities, he says, do not have them. The denial notice is a standard state form, Ford says, and was only sent because of an error made on the original application for abatement. At the bottom of the application, under the section for assessor’s use only, there are three boxes: Granted, Denied and Deemed Denied. A checkmark was inadvertently placed in the Denied box, Ford says, adding Worrick’s is the only case where that happened this year.

“It was a mistake,” he says, noting there are nearly 48,000 properties in the city.

“When you’re dealing with properties at the numbers we were doing, mistakes happen. We have a staff of nine people. Understand that accidents will happen.”

Ford’s office received 2,395 qualified abatement applications this year. Of them 1,112 were approved. When a denial is made, a crosscheck is performed to ensure it was accurate, he says. Ford disputes Worrick’s contention that no one would have noticed the error, saying: “We would have found it when we did the cross-check. We did the first two batches of denials before we did a cross-check, so he was sent a denial notice.”

Ford says Worrick should get his abatement check within four to six weeks. The checks are sent out of the treasurer’s office.

Wednesday, October 10, 2012

GoLocalWorcester.com - City Bracing For Flood Of Tax Appeals

Adam Joseph Drici, GoLocalWorcester Contributor

The City Council approved the addition of a part-time Assistant City Solicitor last week to deal exclusively with the increased number of Appellate Tax Board cases expected after Worcester's real estate revaluation this year.

Nearly 2,400 tax abatements were filed this year, almost half of which were approved by City Assessor William Ford and his staff.

Ford said that his office did receive additional abatement applications, but they were all late filings received after the late June deadline. The City had 90 days, plus an additional 10 days under state law, to review and decide on the applications.
Filing With The Appellate Tax Board

Now that the City has worked through all the abatement filings and issued its approvals or denials, said Ford, property owners have 90 days to file with the state's Appellate Tax Board (ATB) if they still have issues with their final assessments.

The ATB is authorized by the Commonwealth to hold hearings and issue decisions on appeals for all state and local taxes, from property and real estate taxes to the sales taxes.

Filing with the board carries a fee that ranges from $10.00 for all property assessed at $20,000 or less to $100.00 for property with an assessed value between $100,000 and $1,000,00. Properties with assessed valuations in excess of $1,000,000 face a filing fee of $0.10 per $1,000 of assessed value with a minimum fee of $65.00 but not to exceed $5,000.

"I hate to see those people move forward with what they got assessed at," said Bill Breault, who sits on the Board of Directors at the Main South Community Development Corporation.

"I believe a lot of the businesses lawyered up, and they'll go to the state appellate board with theirs."

Some Worcester property owners have already begun the process.

George Valeri owns a commercial building at 26 Cambridge Street, which is home to a window company, an automotive repair company and a towing company. Valeri said the property's assessed value increased from $423,000 to $756,000 this year. An abatement later reduced the valuation by $30,000, but that was still too high for the property owner.

"It wasn't what I was looking for," said Valeri, the secretary of the Worcester Property Owners Association.

"If you do an income and expense analysis, it shows a value of about $300,000, and that's done by a third-party."

Valeri, who said he would be happy if his property was just returned to its old valuation, will not be hiring a lawyer and will instead represent himself for the ATB proceedings.

"This is nothing personal," he said. "It's survival."

Small Businesses Hit Hardest

Bill Vernon, the state director in Massachusetts for the National Federation of Independent Business, said the Commonwealth's dual tax rates for commercial and residential properties, first instituted through a ballot measure in the 1970s, already place an added burden on commercial property owners.

"When the valuation is off, that exacerbates the problem."

Worcester's fiscal year 2012 residential tax rate is $16.98 per $1,000 of assessed value. The city's commercial tax rate is $29.07 per $1,000 assessed valuation.

"Compared to some of their counterparts, it is lower," said Vernon.

In cities such as Lawrence and Holyoke, the commercial property tax rate is more than double the rate for residential properties.

Even though Worcester's commercial tax rate is on the low end of the spectrum, it still can take a toll on small businesses, especially if they see their property's valuation nearly double.

"What they're trying to do, frankly, is turn the property tax into an income tax," Vernon said.

But that plan can end up backfiring when the income generated by the commercial property cannot keep pace with its rising tax bill.

"What you get is less commercial property and less jobs and less economic activity."

Monday, October 8, 2012

T&G - Half of tax-cut requests granted

By Nick Kotsopoulos TELEGRAM & GAZETTE STAFF

WORCESTER —  Roughly 46 percent of the real estate abatement applications filed for last fiscal year ended up being approved by city assessors.

According to City Assessor William J. Ford, 1,112 of the 2,395 abatement applications were granted and processed. That is the most since 2009, when 844 abatement requests, or roughly 47 percent of the applications filed, were approved.

He said the abatements totaled a little more than $3 million, which is about what the city had set aside to fund abatements and exemptions.

In comparison, 1,283 abatement applications were denied, he said.

Mr. Ford said city assessors were able to review within the three-month deadline set by state law all the abatement applications it received. In addition, the majorities of those properties were inspected, unless the homeowners refused the inspection or did not respond to the request.

He said his office had received additional abatement applications after the filing deadline in June, but state law prohibits review of those properties.

But the completion of the city’s review process does not mean the end of the appeal process.

Mr. Ford said property owners who are dissatisfied with the valuation determinations of the city’s Assessing Division have 90 days to file with the state Appellate Tax Board.

He said those commercial property owners who did not respond to the Section 38D Income and Expense requests as part of their abatement application with the city are not entitled to receive a review by the Appellate Tax Board.

The Massachusetts Appellate Tax Board is a quasi-judicial state agency designed to conduct hearings and render decisions on appeals of all types of state and local taxes, including property tax (both real estate and personal property), corporate excise, individual income tax, sale and use tax, and automobile and other excise taxes.

The most frequent type of appeal filed with the Appellate Tax Board is real estate tax appeals.

The filing fee to have a case heard by the Appellate Tax Board is based on the assessed valuation of the property.

If the assessed value is $20,000 or less, the filing fee is $10. If the assessed value is more than $20,000 and not in excess of $100,000, the filing fee is $50.

If the assessed value is more than $100,000 and not in excess of $999,999, the filing fee is $100.

Meanwhile, if the assessed valuation is $1 million or more, the filing fee is 10 cents per $1,000 of the assessed value, with a maximum filing fee of $5,000.

According to the Appellate Tax Board, taxpayers who claim their assessed property valuation is too high should be prepared to show that the fair market value of their property for last fiscal year is lower than the assessed value.

Because the assessed value of properties assigned by assessors is presumed by law to be valid, taxpayers bear the burden of proving that their property is overvalued.

In anticipation of increases in Appellate Tax Board cases, the City Council recently authorized the city manager to bolster the staffing in the city’s Law Department by adding a part-time assistant city solicitor position.

City Solicitor David M. Moore said the new position will be restricted to Appellate Tax Board cases.

He said given the expected volume of those cases, covering both commercial and residential property valuations, he felt it was best to obtain in-house expertise to reduce the potential expense of outside counsel.

Monday, September 3, 2012

T&G - Assessors confident of closing requests

By Nick Kotsopoulos TELEGRAM & GAZETTE STAFF

WORCESTER —  City assessors have acted on more than half of the 2,395 real estate abatement applications that were filed for last fiscal year, and have already inspected the properties of roughly 86 percent of the total applications.

They remain confident they will be able to complete their inspections and reviews of each property in the time required by law.

City Assessor William J. Ford said assessors had inspected 2,065 properties through Wednesday, and another 100 inspections have been scheduled.

Of the inspected properties, 1,334 have been reviewed. About half of those abatement applications have been approved, and the assessments for those properties were lowered.

Mr. Ford said 654 abatements were granted and processed, totaling about $1.4 million, while 670 requests have been denied. He said the remaining 10 are still being reviewed by staff for final determination.

The percentage of abatement applications that have been approved compared to those that have been denied has been pretty consistent since assessors began reviewing the abatement applications in June.

Historically, abatement approval rates don’t often run more than 50 percent.

State law requires the assessor to act on abatement applications within 90 days — the filing deadline was June 25 — and then notify each property owner of the determination within 10 days.

Mr. Ford said 190 commercial properties and 140 residential properties have yet to be inspected. He said those properties will be inspected and reviewed with current in-house staff in the time required by law.

The city has set aside $3 million to fund abatements and exemptions and has gone through slightly less than half of that amount.

There was a spike in abatement applications last fiscal year, because many business properties were hit with major increases in their assessments, which, in turn, caused their tax bills to skyrocket.

In comparison, residential property assessments dropped 3.8 percent, on average, compared with the previous year.

The assessed valuations for many of Worcester’s 2,278 commercial parcels went up by as much as 40 percent to 100 percent, while assessments for 174 commercial properties increased by more than 100 percent.

Meanwhile, of the 598 industrial properties in the city, 101 properties shot up 40 percent to 100 percent, while valuations of 60 more than doubled.

While assessors have until Sept. 25 to act on all abatement applications, the process will not end then. Those taxpayers whose abatement requests were denied by the assessor will then have until Dec. 25 to file an appeal with the state Appellate Tax Board.

As a result, the number of those appeals may not be known until early January, and then the process before the Appellate Tax Board could be a long, drawn-out one.

Thursday, August 2, 2012

Womag - City Assessor: Palladium owners should know its value

The way Worcester assessor Bill Ford sees it, if you own property, you should know what it is worth. He believes that philosophy should apply to the owners of the beleaguered Palladium – home to a thriving heavy metal music scene, but in danger of being silenced permanently.

The city this year valued the property at 255-261 Main St. – which in addition to the Palladium includes office and retail space – at $2.3 million. That was slightly more than triple its assessed value of $688,700 in 2011. The tax bill more than doubled, from $23,863.46 in fiscal 2011 to $65,887.16 in fiscal 2012. Local attorneys John Fischer and John Sousa bought the building in 1990 for $1.3 million. Three years later, it was assessed at just $391,600. Until this year, it had been assessed two straight years at $688,700.

“In my opinion, they should know the value of their property,” Ford says. “If you bought something for $1.3 million, and it is assessed at $600,000, wouldn’t you think that was strange?”

Fischer doesn’t think so. He and Sousa have appealed their assessment, filing for an abatement of $494,904. No decision has been made yet on that request. At the same time, Fischer has made it clear he thinks the price tag is too steep. He and Sousa have openly questioned the future of the Palladium, going so far as to threaten demolition. Just last week, Fischer brought forward a request for a waiver from the city’s demolition delay ordinance. That measure requires a 12-month wait before historical property can be razed. The Historical Commission unanimously denied the waiver, ensuring the building will remain in place – for now.

As for why he never took issue with earlier, much lower assessments of his property, Fischer says, “It’s not uncommon for properties to be valued less than what they were purchased for.” Some have questioned how much the owners did to increase the value of the building, which Fischer admits is in need of “repairs and upgrades.” Ford raised that issue directly, saying, “The fact is the property owners did not properly maintain that building. (They) allowed the building to deteriorate, but now they say, ‘Wait. I have to tear the building down because you’re taxing me.’”

Worcester officials have made no secret of their opposition to any attempt to destroy the building and the Palladium. The Historical Commission’s vote provided added emphasis and followed a strong recommendation from Joel Fontane, director of the city’s Planning and Regulatory Services Division. He advised members to deny the waiver, saying, “Demolition of this historically significant structure would be detrimental to the architectural and historical resources of the city … and because the applicant has not demonstrated undue economic hardship.”

Mayor Joseph Petty has also taken a stance on the issue, telling Worcester Mag in a statement: “The Palladium is a unique destination and cultural venue in our city and it is our desire that this structure not be demolished.” He declined further comment “until the city assessor makes his final decision” on the abatement request.

The abatement, according to Chris Besaw, is “the key.” Besaw is general manager for Mass Concerts, which has booked shows at the Palladium since 1990. John Peters owns Mass Concerts, a major promoter of shows in arenas throughout New England. How big? In November 2000, under Peters’ guidance, Mass Concerts booked Prince at the Palladium, when the pop icon was performing mostly in theaters and small arenas. Fischer admits the Palladium would be a barren place without the promoter.

“Mass Concerts has been there for 12 years,” says Fischer. “He’s the person who has been keeping the place alive all that time.”

The next big show scheduled at the Palladium is Summer Slaughter Tour North America 2012 on Aug. 10. It will no doubt be music to the ears of heavy metal fans and supporters who do not want to see the building torn down. Among them is Jonathan Noble, a Worcesterite known for his participation in the grassroots movement, Occupy Worcester.

“We don’t have the most vibrant reputation outside Worcester,” Noble says. “What we are known for is pretty much being a nexus of the heavy metal scene.”

Noble and others can take some comfort in knowing the Palladium won’t be going anywhere in the immediate future. Fischer himself isn’t quite ready to write the building’s epitaph. “There’s more than a 50-50 chance it will be there next year at this time,” he says. “We’re going to keep it alive for the next year. Hopefully, word will get out and someone will see there’s a hell of an opportunity there.”

Monday, July 30, 2012

Telegram: Dust yet to settle on abatements

By Nick Kotsopoulos Politics and the City

The way things are trending, those Worcester property owners waiting to hear from city assessors about their real estate abatement applications may have more than a puncher’s chance of getting their property assessment knocked down a bit.

That’s because 55 percent of the abatement applications reviewed and acted on by city assessors through last Monday have been approved.

According to City Assessor William J. Ford, 383 abatements have been granted and processed, returning $483,927 to taxpayers. Another 14 abatement applications have been approved and are being processed, he said.

In comparison, 323 abatement applications have been denied.

Mind you, 2,395 property owners have challenged their fiscal 2012 assessments by filing for abatements and city assessors have only acted on roughly 30 percent of those applications. But the fact that 55 percent have been approved so far has to provide some hope to those still waiting to hear back on their challenge.

That’s not to say that the odds are in their favor but, hey, while a puncher’s chance may not be much, it is certainly better than no chance at all, as has been the case in other years.

Historically, abatement approval rates don’t often run more than 50 percent.

In 2010, for instance, only 34 percent (483) of the 1,432 abatement applications filed were approved, while in 2009 roughly 47 percent (844) of the 1,784 applications were granted, and in 2008 nearly 43 percent (406) of the 952 applications were approved, according to the assessor’s office.

Perhaps a better apples-to-apples comparison would be other triennial revaluation years such as this — those years when the city conducts full field reviews in updating the valuations of all properties.

In 2007, the city’s last triennial revaluation, 58 percent (342) of the 587 abatement applications were approved. In other triennial revaluation years, the approval rate was close to 50 percent; in 2004, 47 percent (196) of the 414 applications were approved, while in 2001, 49 percent (330) of the 679 applications were granted.

Of the 720 abatement applications that have been reviewed and acted on, a majority of them have dealt with residential properties (559), while far fewer commercial, industrial or apartment properties (148) and mixed-use properties (13) have been taken up

Wait until assessors act on the bulk of the 780 abatement applications that were filed for the latter two classes of properties; that is when things should really get interesting.

Why?

Because many of those properties were hit with major increases in their assessments, which, in turn, have caused their tax bills to skyrocket. In comparison, residential property assessments dropped 3.8 percent, on average, compared with the previous year.

Of Worcester’s 2,278 commercial parcels, the assessed valuations of 540 of them went up by 40 percent to 100 percent, while the assessment for 174 commercial properties increased by more than 100 percent.

Meanwhile, of the 598 industrial properties in the city, 101 properties shot up 40 percent to 100 percent, while 60 had their valuations more than doubled.

Just along the business corridor on the Southwest Cutoff, no fewer than 28 business property owners have filed for abatements, and in many instances their property assessments nearly doubled or more.

A business property at 37-69 Southwest Cutoff, for instance, saw its assessment jacked up from $2.1 million to $4 million, for an increase of 92 percent.

Another property at 126 Southwest Cutoff saw its assessed valuation skyrocket from $196,200 to $1 million, for a whopping 433 percent increase, while another business at 182 Southwest Cutoff saw its assessed valuation jump 106 percent, from $347,600 to $717,500.

The Southwest Cutoff isn’t the only major commercial corridor in which a number of business owners have filed abatement applications. The same is true along Main Street, Park Avenue, Shrewsbury Street, Southbridge Street, Grafton Street and Chandler Street.

In the downtown, many owners of office buildings have also filed for abatements, as have eight of the 11 major property owners on Front Street.

Many of the abatement applications for those properties have yet to be taken up by the assessors because they were submitted just before the June 25 filing deadline. It will be interesting, though, to see the outcome of all those abatement applications, because some pretty significant bucks will be at stake

The fact that the city has set aside $3 million to fund abatements and exemptions is an indication that city officials are well aware of what is involved. That is underscored by the fact that in the past 11 years the most the city ever paid out on abatements and exemptions was $917,004 in fiscal 2007, followed by $708,649 in fiscal 2009 and $702,389 in fiscal 2011.

Most other years, the city spent less than $500,000 on abatements and exemptions.

City assessors have until Sept. 25 to act on all abatement applications, but that doesn’t mean the process will end then.

Those taxpayers whose abatement requests were denied by the assessor will then have until Dec. 25 to file an appeal with the state Appellate Tax Board.

As a result, the city won’t really know the full impact of those appeals until sometime in January, and then the process before the Appellate Tax Board could be a long, drawn-out one.

In other words, it could be months, even years, before the dust settles on all the challenges to last fiscal year’s new property assessments.

Friday, June 29, 2012

T&G: Letter to the Editor - Housing assessments don’t make sense

The Telegram & Gazette has been writing about what the city manager and the tax assessor’s office have been saying, that the single-family home valuation has dropped on average 3 percent. Does the T&G want to hear the real story?

I received my parcel information from the assessor’s office, and to my surprise (shock) the value of my single-family home went up 23 percent. When I called the assessor’s office the person I talked to told me he would look into it. He called me back a week later and told me he had a little room to work with, and then told me upfront not to expect the value to be less than last year, because that was not going to happen. They did drop the value down, but it’s still at 10 percent higher. I think they are just picking numbers out of the air and hope most people won’t say anything.

I have talked to a number of people, and they say their property values have all gone up. The house next door to mine sold for $225,000 in 2005. That house is now on the market for $135,000. And my property value has gone up?

When you file for your abatement, who is going to do the review, the assessor’s office?

I don’t trust them, and I can’t see how they can be trusted to be fair. They should prove to us where they got these numbers, not us having to prove they are wrong.

RONALD ROY

Worcester

Sunday, June 24, 2012

Telegram: Tomorrow is deadline to contest Worcester real estate assessments

It’s last call for property owners wishing to contest their new real estate and personal property assessments.

Tomorrow is the deadline for property owners to file an abatement application with the assessor’s office and the way things are trending the city could see its biggest number of applications in years.
As of Friday, the city had received 1,217 real estate abatement applications, according to City Assessor William J. Ford.

While that number is consistent with previous year application numbers, Mr. Ford said, his office expects to receive “a large volume” of applications by tomorrow’s filing deadline, especially from commercial and industrial property owners.

The assessor said it is difficult to determine just how many applications have been requested or obtained because there are multiple ways in which a property owner can obtain an abatement application, including printing one off the city’s website at www.worcesterma.gov.

Of the 1,217 real estate abatement applications to date, Mr. Ford said the breakdown of the filings is as follows: 822, residential; 371 commercial, industrial and apartments; 24, mixed-used.

In addition, the city has received 79 abatement applications for personal property values, the assessor said.

Mr. Ford said about 40 abatements have been granted so far, and all have been for residential properties.

“Of the total applications received, we have reviewed and inspected 238 properties (212 residential and 26 commercial/industrial/apartments),” Mr. Ford wrote in a report that goes before the City Council Tuesday night. “An additional 24 inspections have been scheduled.”

Last fiscal year, the city received 1,257 abatement applications, while 1,432 were received in fiscal 2010 and 1,784 in fiscal 2009.

In 2009, 844 abatements were granted, totaling $708,648, according to the assessor. Meanwhile, 483 abatements, totaling $457,117, were approved in 2010 and 277, totaling $702,389, were approved last year.

The city assessor must act on an abatement application within three months of the date of its filing, unless the applicant agrees in writing before the three-month period expires to extend it. If the assessor does not act on the abatement application within 90 days, it is deemed denied.

Mr. Ford said when an application is received by his office, it is time stamped and logged. He said the information on the application is then entered into the Vision assessment system for tracking and approval, and scanned into the city’s electronic record database.

Each application is assigned to an assessor for further review and inspection.

Because city officials anticipate there will be an increase in the number of applications, the city has hired KRT Appraisals to assist with the review and interior inspection of residential properties.

Mr. Ford said that frees up in-house staff to focus on the review and interior inspections of commercial and industrial properties.

City officials are bracing for an influx of abatement applications from commercial and industrial property owners because of dramatic increases in their assessed valuations.

Of the city’s 2,278 commercial parcels, the assessed valuations for 317 have gone up 10 percent to 20 percent; 498 went up 20 percent to 40 percent; and 540 went up 40 percent to 100 percent.

Meanwhile, the valuations of 174 commercial properties have increased by more than 100 percent.
Of the 598 industrial properties in the city, the assessed valuations of 58 of those properties have increased by 10 percent to 20 percent; 98 properties went up by 20 percent to 40 percent and 101 properties shot up 40 percent to 100 percent.

In addition the assessed valuations of 60 industrial properties have more than doubled.

In comparison, residential property assessments decreased by 3.8 percent on average compared with the previous year.

Property owners are encouraged to pay the tax as assessed to avoid any loss of rights or additional charges. If the tax due is more than $3,000 for the entire year, the full tax must be paid without incurring interest, otherwise, the right to appeal to the state Appellate Tax Board is forfeited.

The assessor is required to provide written notification of the disposition of all abatement applications. Those who wish to appeal the decision of the assessor have 90 days to file an appeal with the state Appellate Tax Board.

Monday, June 4, 2012

Telegram: Questions remain over Worcester's commercial property valuations


By Thomas Caywood TELEGRAM & GAZETTE STAFF

WORCESTER —  In the 2008 property tax revaluation, city assessors rated a four-story office building near Lincoln Square to be largely obsolete by the construction standards of the day, a decision that contributed to reducing the value of the building for tax purposes by millions of dollars.

It was a curious move, however, given that construction on the building, the Life Sciences and Bioengineering Center at Gateway Park, had only been completed the year before.

City officials said this past week they could find no explanation or justification on file as to why assessors would judge a new, state-of-the-art office building to be so outdated that it qualified for a significantly reduced property tax assessment.

The situation also has produced some head scratching at Worcester Polytechnic Institute, which owns the building through a subsidiary corporation.

“I have no idea how that transpired, frankly,” said WPI Chief Financial Officer Jeffrey S. Solomon, who added that he wasn't aware that the city had rated the building largely obsolete until he was contacted for this report.

The life sciences center is just one of hundreds of commercial structures across the city for which obsolescence ratings were set unusually high, which has the result of reducing the taxable values of those buildings, according to city records and independent assessing experts.

Most of the questionably high obsolescence ratings have been dialed back in this year's revaluation, but serious questions remain about how so many commercial buildings in productive use came to be assessed as mostly obsolete and whether the cash-strapped city lost untold millions in commercial property taxes as a result.

The functional and economic obsolescence ratings for WPI's life sciences center were reset to zero in this year's revaluation, which contributed to more than doubling the building's assessed value from just under $8 million last year to $17.1 million this year.

That was one of many jaw-dropping jumps in commercial property valuations unveiled as City Assessor William J. Ford combed through the property tax rolls slashing or eliminating high functional obsolescence rates set under his predecessor, Robert J. Allard Jr.

In one method of placing a value on a commercial building for tax purposes, known as the “cost approach,” assessors start with the replacement cost of a building. That amount is then reduced based on several factors, including the condition of the building and how well it suits the needs of modern business tenants. In assessing terms, that is, the value of the building is depreciated based in part on the degree to which it is functionally obsolete.

A moderately outmoded building might be judged to be 5 percent functionally obsolete. A completely outdated structure, such as a brick mill building from the 19th century, typically would be capped at 25 percent functionally obsolete, according to Mr. Ford and other assessing experts.

But hundreds of commercial and industrial buildings in Worcester were rated far more than 25 percent functionally obsolete as of the previous revaluation four years ago.

The functional obsolescence of 552 buildings was judged to be between 25 percent and 40 percent, while another 135 buildings were rated at between 41 percent and 70 percent, and 27 buildings were rated between 71 percent and 100 percent, according to a Telegram & Gazette review of city assessing records. All told, a quarter of the city's inventory of 2,900 commercial and industrial buildings was judged to be 25 percent or more functionally obsolete.

Massachusetts Association of Assessing Officers President Ronald Keohan said he couldn't recall ever having seen a functional obsolescence percentage higher than 25 percent in his work as the deputy assessor in Saugus. Larry Clark, the director of professional development for the International Association of Assessing Officers based in St. Louis, said he occasionally has seen them as high as 50 percent but only for long-disused industrial plants in the Midwest.

Mr. Ford, the city assessor who inherited the high commercial obsolescence figures when he took over the office three years ago, said he couldn't speak to how things were done before his appointment because the old software didn't provide a space for comments explaining unusual depreciation calculations and he couldn't find any written records justifying the high percentages. He has since overseen the installation of a new assessment software package.

“If my guys put something down as 15 percent obsolete, I'm not going to question that, but if it's 80 percent, you better have an explanation why,” Mr. Ford said.

After he took over, with the city manager's backing, Mr. Ford set about hacking away at what he considered to be questionably high obsolescence rates applied to commercial and industrial properties throughout the city.

The resulting spike in commercial property valuations incited an uproar among building owners fearful that the new assessed values would send their tax bills skyrocketing. Under intense pressure from the business community, the City Council last month approved a lower commercial tax rate, negating the financial impact of the higher valuations for some properties, and thus, quieting the tumult.

In defending the new higher values from strong business community pushback, City Manager Michael V. O'Brien initially seemed to cast doubt on the propriety of the former valuations. But Mr. O'Brien later backpedaled, assuring councilors that the previous values had been calculated in accordance with state regulations.

That puts Mr. O'Brien in the contorted position of publicly accepting the validity of the previous valuations, which were set on his watch, while at the same time systematically undoing them. He did not respond to several interview requests over the last two weeks.

The previous assessor, Mr. Allard, now retired and living in California, again defended the appropriateness of his valuations in a recent telephone interview. His position is backed up by the state Department of Revenue, which certified Mr. Allard's valuations in 2008 and continues to stand by that certification today.

Mr. Allard maintained that the high obsolescence percentages under his tenure had no impact on commercial property taxes because his assessors analyzed the rents earned by comparable buildings to arrive at an initial valuation, known as the “income approach” to assessments. The resulting valuations are then depreciated based on factors such vacancy rates and expenses.

The Department of Revenue requires assessors to calculate commercial valuations using at least two assessment approaches and further mandates that the resulting values must be within 15 percent of each other.

“The assessors were essentially matching the cost approach to the income approach by adjusting the obsolescence percentages. But it's meaningless,” Mr. Allard said. “We used the income approach. That's really the only way to value these commercial properties.”

But Mr. Ford said he also found many unusually high depreciation percentages in the income approach assessments calculated by his predecessor.

Late last month, the Department of Revenue certified the new, sharply higher commercial property values calculated under Mr. Ford's supervision.

Department spokesman Robert Bliss said he sees no inconsistency in signing off on a set of valuations that all but wipes out an important factor in arriving at the previously certified values.

“All I can say is that in our sampling of the values the city proposed, we looked at them, conducted a sort of audit. We felt it passed muster, and we approved it,” Mr. Bliss said. “I think what we've seen four years later is a conversion to a new data system, and the new assessor having the ability to exercise his own judgment.”

Wednesday, May 23, 2012

Thank You City Councilors

T&G: Worcester councilors narrow tax gap

By Nick Kotsopoulos and Steven H. Foskett Jr.

WORCESTER —  For the second fiscal year in a row, the City Council has narrowed the gap between the city's residential and commercial-industrial tax rates.

The council last night set this fiscal year's residential tax rate at $16.98 per $1,000 valuation and the commercial-industrial rate at $29.08. The vote was 6-5.

The residential rate is 92 cents higher than last fiscal year's rate, while the new commercial-industrial tax rate is $5.57 less than last fiscal year.

But because commercial and industrial property valuations have dramatically increased in many instances, the tax bills for business property owners will still be going up.

Under the new set of tax rates, the average annual tax bill for single-family homeowners will go up by $56 (1.7 percent), based on the average assessment of a single-family home at $198,061. A home assessed at that figure will have an annual tax bill of $3,363.

Meanwhile, the average annual tax bill for commercial property owners will go up by $755 (4.72 percent). The average assessment for commercial properties is $821,138 and those tax bills with the new tax rate will be $16,754.

It is also the first time since 2003 that the commercial-industrial tax rate will not be more than double the residential rate. The new commercial-industrial rate is roughly 1.7 percent greater than the residential rate.

More than 125 people packed the council chamber, with 21 residents and business owners arguing their position on the tax rate. The attendees spilled into the hallway, where a television monitor was set up outside the council chambers.

For more than an hour, business owners told the council that keeping the commercial tax rate high will end up hurting residents, who will have to pay more taxes to fill the void left by businesses that move to towns with more favorable rates.

“There is no doubt that a more equitable commercial tax rate would enable businesses to stay, grow, hire, and compete,” said Roberta Schaefer, executive director of The Research Bureau, which has long advocated for a single tax rate in the city.

Under the new rates, commercial and industrial properties will carry 39.56 percent of the city's tax burden even though they make up just 27.6 percent of the tax base. Residential properties, meanwhile, will foot the bill for 60.4 percent of the tax levy even though they make up 72.3 percent of the tax base, according to city assessors.

Mayor Joseph M. Petty proposed the set of tax rates as a compromise between what was being sought by the Worcester Regional Chamber of Commerce and those who favored a set of rates intended to hold the line on tax increases for homeowners.

Mr. Petty said his proposed tax rates recognized that many business owners will be hurting because of much higher than anticipated increases in their assessed valuations.

“This City Council gets it,” the mayor said. “The council recognizes the (tax) burden being placed on the business community. The dual tax system does hurt attracting businesses to Worcester and it is something we have to address.”

Those who supported Mr. Petty's proposed tax rates were: District 1 Councilor Tony Economou, Councilor-at-Large Michael J. Germain, Councilor-at-Large Joseph C. O'Brien, Councilor-at-Large Frederick C. Rushton and Councilor-at-Large Kathleen M. Toomey.

Mr. Economou supported the mayor's motion even though he proposed a set of tax rates that would have narrowed the gap between the residential and commercial-industrial rates even further. He called for a residential rate of $17.08 and a commercial-industrial rate of $28.82, but his motion never came up for a vote because the mayor's had already passed.

Those who favored other sets of tax rates were: District 5 Councilor William J. Eddy, Councilor-at-Large Konstantina B. Lukes, District 2 Councilor Philip P. Palmieri, District 4 Councilor Sarai Rivera and District 3 Councilor George J. Russell.

Mrs. Lukes and Mr. Russell both favored a set of tax rates that would have increased homeowner tax bills by $1, on average, while increasing tax bills for business property owners by $1,181 on average, while Mr. Palmieri favored the lowest possible residential tax rate.

Mr. Eddy and Ms. Rivera, meanwhile, favored tax rates that were somewhere between what Mrs. Lukes and Mr. Russell had supported and what Mr. Petty had called for.

Most business owners told councilors they supported the recommendation of the Chamber of Commerce, which proposed setting the rates at $17.18 per $1,000 assessed valuation for residents, and $28.56 per $1,000 for commercial and industrial properties. William Kelleher of Kelleher & Sadowsky commercial real estate firm said favorable tax rates in surrounding towns illustrate the competitive disadvantage the city puts businesses at with its current tax structure. He gave the example of the Jamesbury property on the Worcester/Shrewsbury line. The Worcester side of the building is taxed at $1.80 per square foot, while the Shrewsbury side is taxed at $.52 per square foot, he said.

While it's a separate issue, several business owners who spoke mentioned the recent revaluation of city properties that resulted in steep valuation hikes for many local commercial and industrial properties. Combining the valuation spikes without giving business owners some relief on the tax rate could spell economic disaster for the city, they said.

Leonard Zalauskas, a city resident and head of the school teachers union, favored the chamber's recommendation. He said increased economic development would support schools.

Resident John Reed admitted his support for the lowest residential tax rate made his voice a lonely one last night. But he said that while businesses might be popping the cork on champagne at having to pay lower taxes, they were shifting the tax burden back to residents, many of whom have no way to absorb the hit. He called the business community's argument one of false choices, relying on trickle-down economic theories he said have been disproved the world over.

Instead, Mr. Reed proposed, the council should focus more on attracting the gaming industry.

City Manager Michael V. O'Brien said the fiscal fourth-quarter tax bills, which will include the new tax rates and new property assessments, will be issued by June 1 and they will be due

GoLocal: Worcester’s Contentious Tax Debate

Walter Bird Jr., GoLocalWorcester Reporter

Whether they liked it or not, Worcester taxpayers finally found out what their tax rate is this year. On Tuesday, just weeks before the end of the fiscal year, city councilors set the residential rate for fiscal 2012 at $16.84 per $1,000 assessed value. The commercial-industrial rate was set at $29.46 per $1,000.

The vote was hardly unanimous – a 6-5 decision in favor of Chairman and Mayor Joseph Petty’s motion. Three other proposals motioned or supported by four councilors never came to a vote. The decision – made during a tax classification hearing that was held months after it should have been – increases the residential tax rate by 78 cents, from $16.06 in fiscal 2011, while reducing the commercial-industrial rate by $15.15. It didn’t satisfy everyone and it wasn’t what the Worcester Regional Chamber of Commerce had hoped for (its member businesses had backed a proposal that would have bumped the residential tax rate up to $17.18 and lowered the commercial-industrial rate to $28.56).

In the end, some saw it as a move toward what many councilors agreed should be the end game – a single-payer tax rate that was shelved in 1984 when the city adopted a dual tax system. It just won’t happen overnight.

“It’s a move in the right direction,” said Chamber President and CEO Richard Kennedy. “I think it represents positive movement.”
'Fair, Competitive'

In proposing the new rates, Petty called them “fair” and “competitive for the city of Worcester.”

At-Large Councilor and former Mayor Joseph O’Brien, one of those voting in favor of the new rates, said he used to be committed to voting for the lowest possible tax rate for residents.

“That was a mistake,” he said, adding, “When you try to find the middle ground, you run the risk of making both sides unhappy.”

At-Large Councilor and 15th Worcester District state representative candidate Kate Toomey also voted in favor, calling for “some form of compromise.”

“We need to find a fair mix between homeowners and the business community,” said Toomey. “This is the most difficult vote during my time in office. But the mayor’s compromise is the best compromise.”

In Support

Also supporting the mayor were At-Large Councilors Frederick Rushton and Michael Germain, along with a reluctant District 1 Councilor Tony Economou, who had suggested residential and commercial-industrial rates of $17.08 and $28.82, respectively. His was the closest to the chamber’s proposal.

“This is an opportunity to seize the moment, to keep people in their homes and in their jobs,” Economou said. “It’s not residents. It’s not commercial. It’s all of us. We’re all in this together.”
The Opposition

District 5 Councilor William Eddy, At-Large Councilor Konstantina Lukes, District 2 Councilor Philip Palmieri, District 4 Councilor Sarai Rivera and District 3 Councilor George Russell all voted against Petty’s motion, with Eddy looking at the sheets of paper listing the different rate proposals and saying: “I can't find in here justification to look voters in the eye and tell them why I’m raising their taxes this year.”

Russell turned to the mayor when he spoke and said, “I hate to say I told you so, Mr. Mayor, but I told you so.”

The councilor has been a fierce critic of a property valuation process that saw the average residential property value decrease by 3.8 percent over last year. In contrast, some commercial properties saw their valuations skyrocket – in the most severe cases by as much as 400 percent.

“I told you this assessing process was not correct,” Russell said. “I’m not going to turn my back on voters to make good on the mistakes of past assessors or the current assessor.”
'A Challenge'

Among the businesses suffering sticker shock when commercial valuations came out was Saint-Gobain, formerly Norton Company. The average valuation for its properties went up 191 percent, and one of company's properties was on the 400 percent list.  Bob Smith, a vice president with the company, sounded a warning that Saint-Gobain could someday exit Worcester.

“We support a $70 million local payroll and spend $80 million in local community businesses,” Smith said. “We’ve donated $15 million in this city since 1990. Over the past two years, we’ve spent over $10 million to address infrastructure issues. The current valuation puts Saint-Gobain in Worcester among the highest-cost plants globally. It is going to be a challenge to make additional investments going forward.”

Some councilors and speakers at Tuesday’s hearing talked about the “us versus them” mentality when it comes to setting residential and commercial-industrial tax rates, among them Roberta Schaefer, president and CEO of The Worcester Regional Research Bureau.

“The only way to avoid this perennial battle,” said Schaefer, “is to phase in a single tax rate. The council should seize the opportunity to end a policy that has pitted us against one another.”

Her suggestion that a single tax rate could be ushered in within three years, however, was widely dismissed as impossible.

Bills to be Mailed

With the tax rate set, tax bills will soon be sent out. And unless the council decides otherwise, the first quarter bills for fiscal 2013 will arrive in the mail sometime in July. Then the council will meet in either November or December to set next year’s tax rate.

It all makes for a “recipe for disaster,” according to Palmieri, acknowledging no matter what councilors decided Tuesday night, tax bills would be enormous for many residents and business owners. That is likely to lead to a flood of abatement requests, which Lukes fears will be followed by even more after next year’s tax rate is set. Taxpayers have 30 days after receiving their bills to file an appeal.

Like some of her colleagues, Lukes referenced the valuation process. She went a step further, however, in calling for an all-out investigation into why the property values for some businesses went higher than ever before.

“Some have suggested it was criminal,” said Lukes. “Some said it was incompetence. We need an investigation. This council cannot solve those problems tonight. We can deal with the issue of the tax rate amid the controversy over the assessor.”
'An Investment' Made

While council chambers was packed when the hearing started at 7 p.m. – and the heat sweltering – the crowd thinned out considerably as the night wore on. There were noticeable departures when it became clear as councilors talked that the chamber’s proposed tax rate had not gained traction.

Among those walking out were Steve Vaillancourt and his wife, Lisa, of Millbury. They own Advanced Cleaning on Washburn Street, a business they moved to Worcester in 2005.

“We made an investment in ourselves by buying that property,” Steve Vaillancourt said before the hearing. “Do we have something that’s saleable when we retire?”

He said the couple’s first tax bill in 2005 was “just north of $3,000.” The last bill was just under $10,000, he said.

“We don’t think residents should take on everything here,” Lisa Vaillancourt said. “We’d like to see a middle ground.”

Stopped as they left the hearing almost two hours later, Steve Vaillancourt said he hadn’t heard what he’d hoped, saying: “I felt positive going into it. As soon as (Lukes) spoke, I knew where it was going. It’s too pro-constituent. You can see they’re playing right to their constituents. I can understand that, but there’s got to be some balance.”

Monday, May 21, 2012

Message to City Councilors

GoLocalWorcester: Worcester Not Tracking Business Growth

Walter Bird Jr., GoLocalWorcester Reporter

 A GoLocalWorcester investigation uncovered Worcester does not know exactly how many new businesses have popped up in the last year or in the last five years in the city, for that matter. The reason: the city doesn't track new businesses through the clerk's office.

Since Jan. 1, there have been 299 business certificates obtained through City Hall. Finding out how many of these businesses are new, however, isn’t as easy as you might think. Currently the city doesn not track how many new businesses open up each month or even each year in the city.

Under the city’s current system, there is no way of knowing which are new companies. To find out, you’d have to cross check the lists from each year – a time-consuming task an already busy city hall staff doesn’t perform.

GoLocalWorcester looked at the business certificates purchased through City Clerk David Rushford from Jan. 1 through May 15, going back two years. The number has risen steadily each year: from 181 in 2010, to 267 in 2011 to 299 this year. But as Rushford pointed out, his department issues the certificates and keeps a public record of them; neither he nor his staff is responsible for determining which were issued to new businesses and which are being renewed.
No one’s responsibility

“We can’t do that,” said Rushford. “It isn’t our function. Our role is confined to the filing of certificates. They’re filed in a public database and anyone who may want to look at that information, or who wants to help small businesses, the information is there.”

It’s there, in a dropdown menu under “Search Public Records” on the city’s Web site. The problem is city officials don’t appear to be searching it.

“We don’t look at business certificates,” Chief Development Officer Timothy McGourthy said. “There are over 6,000 businesses in Worcester, 10,000 according to some counts. Business certificates don’t indicate much in terms of what businesses are in Worcester. It isn’t in any way reflective of the amount of business in the city.”
Starting out

Tell that to Maureen Carroll, a 2011 Worcester State University grad who has been unable to find a job despite sending out 37 resumes since January. Having no luck, Carroll decided to take matters into her own hands and start a cleaning business.

“I have the time and I have the experience of marketing and outreach,” said Carroll, a double major in urban studies and geography who graduated magna cum laude. “It’s not my career goal, but something I can do on my own. It’s a rough world for graduates.”

So Carroll paid for a business certificate to start Heritage Cleaning Solutions, something with low overhead and start-up costs, since it costs just $50 for a business certificate and materials and equipment can be bought relatively inexpensively. As of Tuesday, Carroll was the latest to obtain a certificate from city hall.

“If no one else will hire me, I’ll hire me,” Carroll told GoLocalWorcester. “I’m not going to lie down and die and wet my pants because I can’t find a job.”
Certificates required

Business certificates are filed every four years, as required by state law, for individuals Doing Business As a particular name. They are commonly referred to as DBA’s. Incorporated businesses do not file business certificates with the city. Their records are kept on a state level and some publications list them by city and town. Multiple businesses setting up shop in the same building would also not be reflected on the list of business certificates. The city, McGourthy said, collects data on a piece of property and would have information on a particular building. But corporations operating inside that building would be filed with the state.Not every business filing a certificate would qualify as “small.” One of the filers, for example, was National Grid.

Also worth noting is there is no requirement for a filer to note whether the business is new or simply filing a renewal.

According to Philip Niddrie, the city's Business Retention Manager, the Economic Development Office has been trying to change that, and had asked the city clerk's office to make a notation on each certificate for which businesses were new or refiling. It was, he said, an informal process.

"I haven't gotten any this month," Niddrie said.

There's a reason for that. According to Rushford, state law does not allow him to make any entries on business certificates other than what is allowed. The law currently has no requirement for noting whether a business is new or refiling.

"It was requested, but we don't do that," said Rushford. "I think we did it for two weeks. I'm all about having data available that will be useful. But the law states exactly what is to be placed on the certificate. I cannot add anything to it."
‘Word of mouth’

How, McGourthy was asked, does the city keep track of all new businesses?

“A lot of it is word of mouth,” McGourthy said. “We look at new stores, new activity on the development scene, and try to highlight it as an example of Worcester business activity.”

The Economic Development office publishes a yearly review. The most recent, entitled “Economic Development: 2011 Year in Review,” includes a section that highlights many of the new businesses that emerged last year. The report was authored by McGourthy, City Manager Michael O’Brien and Director of Business Assistance Paul Morano. In the introduction of the report, it reads, in part: “Worcester also welcomed a mix of exciting new commercial establishments, including Nuovo Restaurant, Zorba’s Taverna, Woo Berry, Still and Stir, Anytime Fitness, and Aldi Food Market.”

The report features a list of 35 new food, retail, commercial and entertainment venues, such as New Chef Ho Restaurant, Fried Chicken, Webster Square Vision Center and California Nail.

Who will be on next year’s list is yet to be determined. It probably won’t feature Heritage Cleaning Solutions, because that business isn’t being run out of a storefront. Staying afloat and rising above other new businesses will no doubt be challenging for Carroll. Even McGourthy acknowledges part of the reason the business certificate, or DBA, list isn’t referenced is because most of the companies are “a small percentage of the businesses out there.”

The city does, McGourthy added, try to incorporate all information when analyzing the overall success of businesses in Worcester. One such tool to help do so is Worcester Business Research Alliance, which includes the city and nine other area organizations. That group is holding a seminar for new, start-up businesses on May 23 at Worcester Polytechnic Institute as part of National Small Business Week. The free event runs from 7:30-9:30 a.m. in Alden Memorial Hall and will offer advice and assistance to small business owners and entrepreneurs.
Keeping track

The issue of tracking new businesses is an interesting one, according to Stephen Eide, senior research associate with the Worcester Regional Research Bureau. That organization does not keep statistics on new businesses, he said. He acknowledged that some businesses, such as the one Carroll has started, may not receive as much attention.

“These are interesting questions because not all businesses are equal,” he said, noting the city also does not keep track of businesses that close.

With the tools it has, the city does its best, according to McGourthy.

“We’re constantly interacting with businesses at all levels. It’s not that we don’t use every bit of data,” McGourthy said. “But we’re trying to stay on top of all these businesses while recognizing our limited resources.”

That said, McGourthy acknowledged his department might be able to make better use of business certificates when it comes to analyzing new businesses in the city.

“It’s something we can look at and see if we can use them more,” McGourthy said. “We have better experience connecting with companies through word of mouth, outreach and various business groups.”

There is a use for business certificates, according to Richard Kennedy, president and CEO of the Worcester Regional Chamber of Commerce. There is also a need.

“I believe there could be a better way (of tracking new business),” Kennedy said. “That’s probably not a bad idea. You have to have a pretty good reach into the community. But a business certificate could be used, whether it reflects the lion’s share of business in the city or not. Maybe they could call another community and say, ‘How do you track this?’”

T&G: Worcester residential values down. Real estate tax bill $11.3B

By Nick Kotsopoulos TELEGRAM & GAZETTE STAFF

WORCESTER —  The total assessed value for all taxable property in the city has reached $11.3 billion.

The figure, which is based on the city assessor’s opinion of value for all taxable properties as of Jan. 1, 2011, is 6 percent higher than the city’s total valuation for the previous fiscal year, according to city assessors.

The city’s total valuation for fiscal 2011, which ended June 30, was $10.85 billion. The high water mark for the city’s valuation came in 2008, when it reached $12.7 billion.

The increase is fueled in large part by a 25 percent average increase in the assessed valuations of commercial properties, and a nearly 28 percent average increase in industrial properties.

Meanwhile, the average valuations for residential properties, with the exception of apartment buildings, all dropped.

Since 1984, the city has set separate tax rates for residential and commercial-industrial properties, with the latter tax rate often more than double the residential rate.

The City Council will hold its annual tax classification hearing at 7 p.m. tomorrow night in the Esther Howland Chamber. At that time, it will also set the fiscal 2012 tax rates.

Through tax classification, which shifts the tax burden between the two classes of property, the lowest possible residential tax rate that could be adopted by the council is $14.50.

That would translate into an annual tax savings of $435, on average, for homeowners, according to city assessors.

Meanwhile, adoption of the lowest residential tax rate would also translate into a tax rate of $35.57 for commercial and industrial properties and an average tax increase of nearly $4,500.

According to assessors, residential properties now account for 72.3 percent of the city’s overall tax base, while commercial-industrial properties account for 27.7 percent.

That is in contrast to the previous fiscal year, when the breakdown was 78 percent residential properties and 22 percent commercial-industrial.

Significant increases in the valuation of commercial and industrial properties are a major reason why business properties now account for a greater percentage of Worcester’s overall tax base.

According to the assessor, the average assessed valuation of single-family homes has dropped 3.5 percent, to $198,061.

Meanwhile, the average assessed values for condominiums has dropped 7.2 percent ($118,884); two-family homes have dropped 7.6 percent ($186,579); and three-family homes have fallen 4.3 percent ($187,413).

There were 24,811 single-family homes in Worcester, 4,960 condominiums, 3,607 two-family homes and 4,874 three-family homes.

Apartment buildings, which went up 1.26 percent, for an average valuation of $618,162, were the only residential component to have an increase in assessed valuation.

In comparison, assessed valuations for commercial properties rose by 25.1 percent, on average. The 2,332 commercial properties in Worcester have an average assessed valuation of $821,138.

Industrial properties, meanwhile, had assessed valuations that increased by 27.9 percent on average. The 611 industrial properties in the city have an average assessed valuation of $947,499, according to assessors.

T&G: Council tax battle looming

Nick Kotsopoulos Politics and the City

The adage “better late than never” is certainly apropos when it comes to setting Worcester’s fiscal 2012 tax rates.

With just six weeks left to this fiscal year, the City Council will finally get around to setting this year’s residential and commercial-industrial tax rates Tuesday night. The tax classification hearing is scheduled for 7 p.m. in the Esther Howland Chamber.

That became possible when the state Department of Revenue late last week finally certified Worcester’s new property valuations that resulted from its triennial property revaluation — a process that ended up taking some two years to complete.

Mind you, the City Council normally sets the tax rates in November or early December at the latest, but this has been anything but a normal year when it comes to getting the DOR to certify the city’s property values.

Now, the fun begins — that being the setting of the tax rates. And this exercise should be anything but routine.

With many business property owners reeling from dramatic increases in their assessments, the local business community sees this as a golden opportunity to try to bring greater balance between the residential and commercial-industrial tax rates, which have been skewed heavily in favor of homeowners for years and years.

More often than not, the commercial-industrial rate has been more than double the residential tax rate. Last fiscal year, for instance, the residential rate was $16.06 per $1,000 valuation while the commercial-industrial rate was $34.65.

While the business community has had relatively little success over the years getting the City Council to bring the tax rates more into balance, things could be much different this time around.

Interestingly, while some individual business owners have spoken out about their skyrocketing property valuations, business leaders in general have not bad-mouthed the city’s property revaluation process. That’s because they fully understand that property assessments are just one factor in the mix; the other just as important factor is the tax rate.

In the end, all that matters is the bottom line — that being what is owed in property taxes.

You kind of get the feeling that business leaders will take the higher property assessments if it means getting a lower tax rate in return.

The higher commercial and industrial assessments have already worked in favor of business property owners, as several city councilors have signaled they will not consider the lowest residential tax rate allowed under tax classification for this fiscal year.

They fear that voting the highest possible tax rate for commercial and industrial properties, combined with the skyrocketing assessments, would place a tremendous tax burden on many businesses.

Indeed, if the council voted the lowest residential tax rate, property taxes for commercial and industrial properties would go up by nearly $4,500 on average, while homeowners would see their tax bill decrease by $435 on average, according to city assessors.

“It doesn’t take a math whiz to figure out that with the lowest residential tax rate, commercial tax bills would go through the roof,” said Councilor-at-Large Frederick C. Rushton.

All of which means that the City Council will have to adopt a set of tax rates that shifts more of the tax burden on to homeowners so businesses don’t get over-burdened with tax increases.

But how far will the City Council go?

And, is it fair to make homeowners pay more in taxes than they otherwise would have had to pay in order to minimize the tax increases for business property owners? After all, if more than 2,000 business properties had been under-assessed for years, as city officials have said, an argument could be made that those businesses weren’t paying their fair share, at the expense of residential property owners.

Councilor-at-Large Konstantina B. Lukes, who has traditionally voted for the lowest residential tax rate, said setting this year’s tax rates will be one of the most difficult decisions this council will have to make.

She acknowledged that adopting the lowest residential tax rate could cripple many businesses, but she does not want to see homeowners have to bear the burden through higher taxes. At a recent council meeting, Mrs. Lukes suggested that homeowners be asked to pay no more of an increase in their property taxes than what they paid the previous year.

But there is no need to even consider that. The tax rates adopted by the council for fiscal year 2011 produced an average tax increase of $178 for homeowners; if the council was to adopt a residential tax rate that generated that kind of tax increase again, the corresponding commercial-industrial tax rate would lower the annual tax bill for business property owners by $178 on average, according to assessors

You know that’s not going to happen. City councilors are going to want business property owners to pay some kind of tax increase if homeowners are going to be paying more in taxes.

The chances seem very good that the commercial-industrial rate will go below $30; just how far though remains to be seen. If the council adopted a residential rate of $16.64 and a corresponding commercial-industrial rate of $29.98, the average tax bill for homeowners would go down by about $11, while the tax increase for business property owners would be about $1,274, according to assessors.

Given that, there seems to be room for the council to go well below a $30 commercial-industrial rate. For instance, a $17.20 residential tax rate and a corresponding commercial-industrial rate of $28.30 would leave homeowners with an average tax increase of $115 and business property owners with an average tax increase of $306, according to assessors.

Such a scenario would make the local business community ecstatic because it would make a significant dent in the imbalance that has existed between the two tax rates.

Yes, something good may actually come out of the skyrocketing assessment increases for the business community.

Friday, May 18, 2012

Are Some Property Owners Getting Steam Rolled?

GoLocalWorcester: Questions Answered – and Raised – over Worcester Property Values

By Walter Bird Jr., GoLocalWorcester Reporter

City councilors wanted answers regarding the mystery surrounding the manual overrides of property valuations being blamed for this year’s sky-high assessments.

“We’re in limbo,” said At-Large Councilor and former Mayor Konstantina Lukes. “I’m not sure it’s any clearer than before.”

Lukes spoke to GoLocalWorcester after a marathon session that saw councilors tackle the first part of City Manager Michael O’Brien’s fiscal 2013 budget, before heading into a regular council meeting. There, the City Manager tried to explain why so many property values – during the city’s triennial revaluation – have doubled, tripled and, in some cases, quadrupled.

O’Brien was armed with a report councilors had been anxiously awaiting. But it ended up raising a lot of questions. For example, the council had asked for a list of the approximately 2,000 valuations of commercial and industrial properties that O’Brien had said were manually overridden by the city’s previous assessor. O’Brien provided records from 1998 – one year before current Assessor William Ford came on board – detailing 2,155 properties for which an override was entered.

Manual overrides are a legal practice used to account for any number of factors in a valuation, such as a change of building use or for a property that had become vacant. According to O’Brien, the overrides were done in two main categories: Functional Obsolescence and Economic Obsolescence. The former refers to a reduction in property value due to an inability to perform the function for which it was designed. The latter is a reduction in the value of a property because of effects, events or conditions not controlled by the current use or condition of the property.

In an accompanying report provided to councilors, O’Brien pointed out that the percentage adjustments for economic and functional obsolescence were, in some cases, as high as 100 percent. Some councilors have questioned the overrides. No specifics

The problem, at least for Lukes, was that the report O’Brien put forth did not mention specific properties or their owners. Instead, properties were identified by their location on a city map, their block and lot.

“I wanted names,” Lukes said. “I wanted property owners, not blocks and lots.”

What she walked away with instead, Lukes said, was the feeling that “there’s another player here.” She was referring to the Massachusetts Department of Revenue (DOR), the agency Councilor George Russell previously accused of forcing the city to adopt a new valuation method that he said inflated property valuations. The DOR has denied any such action, while acknowledging it played a huge part in reviewing the assessing systems and their ultimate overhaul.

In his accompanying report to the council, O’Brien said, “The Commonwealth’s Department of Revenue’s (DOR) oversight was present throughout this process, conducting detailed data quality reviews of all categories and classes of properties. I am confident that based on this extensive undertaking and the checks and balances that have been put into place, that this is the most current and consistent assessment database and system we have had as a City.”
DOR involved

In addition to asking for a list of the manually overridden properties, councilors had also asked for a report on the legal responsibility of the DOR. In his report, O’Brien said the DOR’s Bureau of Local Assessment “is responsible for regulation, oversight, training and technical assistance to cities and towns in the areas of real and personal property valuation and classification. Consequently, one of the main duties of the Bureau is to review and re-certify each municipality's property values once every three years to ensure they are at full and fair market value.”

Based on the DOR’s apparently close involvement, Lukes does not believe there was anything illegal about the manual overrides.

“I think if something was illegal, there would have been action taken,” Lukes said. “I’ve been poking around, but I’m only scratching the surface. But I don’t believe there was anything illegal.”

Former Assessor Bob Allard has denied any wrongdoing and has refuted assertions that he performed more than 2,000 manual overrides.

GoLocal Worcester: Worcester Could Face Flood of Abatement Requests After Tax Bills

By Walter Bird Jr., GoLocalWorcester Reporter

It’s safe to say many Worcester taxpayers are sitting on pins and needles waiting for the city to set the tax rate. Likewise, city officials are bracing for what could be a mountain of tax abatement requests from unhappy customers.

“I think so, yes,” At-Large Councilor and former Mayor Konstantina Lukes said when asked whether she thought taxpayers might be biting their nails. “And there’s a more intense advocacy for a more favorable rate for businesses. Instead of the same predictable folks, we’re seeing a lot of different people.”
Pressure Is On

That puts the pressure on councilors during next week’s tax classification hearing. However it turns out, most appear in agreement on one issue: City Hall is going to be swimming in abatement requests once customers get their bills. They have 30 days to file for an abatement, which is when a homeowner appeals the new tax rate given to them by the city.

“We’re going to have a ton of requests, absolutely,” said At-Large Councilor Joseph O’Brien, another former mayor, who believes the city should ready itself by beefing up staff “as much as necessary” so taxpayers can send their requests.

There could be another wrinkle. Lukes said the city has its next tax classification hearing in November, saying, “There may be two sets of abatement requests within six months.”
High Number Expected

While the exact number remains to be determined, the city projects between 1,600-2,000 abatement requests this year. Those who are successful will be paid out of an overlay reserve account. The assessor raises money in that account to cover abatements and exemptions that meet state requirements. According to Christina Andreoli, spokesperson for City Manager Michael O’Brien, abatements are granted when real or personal property has been overvalued or disproportionately valued.

There was $3.9 million budgeted for overlay in fiscal 2012, according to figures Andreoli supplied to GoLocalWorcester. In fiscal 2011, that amount was $3.11 million. In fiscal 2010, $2.75 million was budgeted. The figures did not include how much was spent.
‘Considering’ Abatement

Several businesses throughout Worcester have already learned their property values, which in some cases increased by more than 100 percent. In extreme cases, such as with Saint-Gobain, values shot up more than 400 percent. That company could be among those seeking an abatement. Worcester businesses can expect to find their new property bills in the mail in the coming weeks.

“Anybody in the 100-percent-plus range is certainly at least considering it,” said Richard Kennedy, president and CEO of the Worcester Regional Chamber of Commerce.

A company like Saint-Gobain, from whom Kennedy is retired, needs to consider all its properties. The 400-percent increase was for just one parcel.

“First of all, you can’t file (an abatment) until you get your tax bill and pay it," Kennedy said.
Staying Positive

District 4 City Councilor Sarai Rivera said she is maintaining a positive attitude – even though she is positive there will be a high number of abatement requests.

“Definitely a lot of people are going to apply,” said Rivera, who also thinks a good number of those requests will be granted. “I think with a couple people I talked to, yes, I think they will be successful. The numbers are just so very different. I mean we’re talking way over-the-top increases. I would imagine there would be a measure of success.”

O’Brien agreed, saying: “From my perspective, I think we’re going to have a high number of requests, and looking at some of the numbers, we’re going to see a high success rate.”
Another Bill

Taxpayers face more than the prospect of high tax bills. They’re also going to be hit with the first-quarter fiscal 2013 bill in July. That prospect has generated some talk over whether the city should delay sending out that bill. Councilors are not unaware of the financially dire straits in which many homeowners and businesses find themselves.

Rivera said she would support a delay in sending out first-quarter bills, if the city is allowed under state law. Massachusetts Department of Revenue spokesperson Robert Bliss was not immediately aware of the laws governing tax bills.

“If it’s something within our power, yes,” said Rivera. “I would support anything that will help our business owners or residents.”

Added Lukes: “Seventy percent of the property in the city is in escrow with a mortgage. They may not feel a hit, but what about those who have no mortgage or escrow and are paying for this right out of their pocket? There has been discussion on delaying the first-quarter bill. We haven’t spent a whole lot of time on it. We’re not going to make a hard and fast rule. This is probably a once-in-a-lifetime event.”

Wednesday, May 16, 2012

T&G: Lowest residential taxes unlikely in Worcester. Fear of burdened businesses

By Nick Kotsopoulos TELEGRAM & GAZETTE STAFF

WORCESTER —  With many business owners reeling from dramatic increases in their property assessments, some city councilors are signaling that the lowest residential tax rate allowed under tax classification is not in the cards this fiscal year.

They said that may have to be the case because the highest possible tax rate for commercial and industrial properties, combined with the skyrocketing assessments, would place a tremendous tax burden on many businesses.

“It doesn’t take a math whiz to figure out that with the lowest residential tax rate, commercial tax bills would go through the roof,” said Councilor-at-Large Frederick C. Rushton.

“We have to figure out what we’re going to do with this situation,” he added. “The way I’m reading the tea leaves, if we vote the lowest residential tax rate it would send a true shock to the business community. We have to be cognizant of the cause and effect of the tax rates we eventually set because the bottom line is what the final bill ends up being.”

Since the early 1980s, the city has set separate tax rates for residential and commercial-industrial properties, as is allowed under tax classification.

The City Council has adopted the lowest residential tax rate in several of those years, and in all years the residential tax rate has been significantly lower than the commercial-industrial rate.

Adoption of the lowest residential tax rate translates into the highest possible tax rate for commercial and industrial properties.

Pending final certification of the city’s triennial property revaluation, the City Council hopes to finally be able to set the tax rates for this fiscal year on May 22.

Councilor-at-Large Konstantina B. Lukes, who has traditionally voted for the lowest residential tax rate, said setting the rates for this fiscal year will be one of the most difficult decisions the council will have to make.

While acknowledging that adoption of the lowest residential tax rate could cripple many businesses, she said she does not want to see homeowners have to bear the burden through higher taxes as a way to correct past assessing practices.

Mrs. Lukes has suggested that homeowners be asked to pay no more of an increase in their property taxes than what they paid the previous year.

“We’re all going to get blamed for this,” Mrs. Lukes said. “We find ourselves having to correct the culmination of a series (of assessing) missteps.”

District 5 Councilor William J. Eddy, meanwhile, said setting the tax rates should not come down to pitting homeowners against business owners, as seems to happen every year.

“We’re one community,” Mr. Eddy said. “We have to make a decision on the tax rate that ensures our residents have a livable city.”

District 1 Councilor Tony Economou said he fears a higher tax rate for business properties could unravel all the progress that has been made in the city the past several years.

“We have to look at all options going forward,” he said. “These kinds of tax increases simply cannot be absorbed by many businesses.”

But District 2 Councilor Philip P. Palmieri, who has already indicated that he is leaning toward once again supporting the lowest residential tax rate, said it is an issue of fairness.

He said homeowners should not be asked to pick up a greater share of the tax burden to compensate for many business properties being under-assessed for so long.

“This is a problem no one had anticipated, certainly not of this magnitude,” Mr. Palmieri said. “I’ve always committed to the lowest residential tax rate and will probably remain that way. Residents shouldn’t have to carry the full burden.”

District 3 Councilor George J. Russell, who has questioned the method used to assess commercial and industrial properties, said he has always advocated for tax rates that favor the homeowner.

“My fear is that the council is going to shift the tax rate to the homeowner to somehow make up for an assessment process that does not reflect accurate values,” Mr. Russell said.

Of the city’s 2,278 commercial parcels, the assessed valuations for 317 have gone up 10 percent to 20 percent; 498 went up 20 percent to 40 percent; and 540 went up 40 percent to 100 percent, according to city officials.

Meanwhile, the valuations of 174 commercial properties have increased by more than 100 percent.

Of the 598 industrial properties in the city, the assessed valuations of 58 of those properties have increased by 10 percent to 20 percent; 98 properties went up by 20 percent to 40 percent and 101 properties shot up 40 percent to 100 percent.

In addition the assessed valuations of 60 industrial properties have more than doubled.

Meanwhile, residential property assessments have decreased by 3.8 percent on average compared with the previous year.