T&G - Commercial assessments may hold up Worcester tax bills

By Nick Kotsopoulos TELEGRAM & GAZETTE STAFF

WORCESTER —  Fourth-quarter property tax bills, which city officials had hoped to mail out by May 1, will likely be further delayed, City Manager Michael V. O’Brien said yesterday.

Mr. O’Brien said the delay is likely because the city did not complete its review of all 4,800 commercial properties and submit those new property values to the state Department of Revenue until yesterday.

The manager did not offer a date when the fourth-quarter tax bills reflecting the new property assessments will be mailed.

“This overall (property revaluation) undertaking has been arduous to say the least, but critical in determining fair and accurate market values based on the current parcel and market conditions,” Mr. O’Brien wrote in a report that went before the City Council last night. “This intensive effort revealed just how antiquated previous systems were and the inconsistencies between previously entered data and current parcel/market status.

“I am extremely cognizant of the compressed timelines we face, but I cannot sacrifice a high level of quality for expediency,” he wrote. “I am convinced at this time that a May 1 mailing of the fourth-quarter tax fiscal 2012 actual tax bills is more than optimistic and will likely be delayed.”

To issue the tax bills by May 1, the City Council would have to hold its annual tax classification hearing and set the tax rates in the next couple of weeks. But the date of the tax classification hearing has yet to be set — an indication that a May 1 tax bill is unlikely.

What this means for city taxpayers is that they could get two property tax bills within a couple of months.

The fourth-quarter bill, which will be the first tax bill for this fiscal year based on the new property values and new tax rates, is expected to be higher for most taxpayers because the first three tax bills for the year used estimates based on old property assessments and last fiscal year’s tax rate.

If the fourth-quarter bill goes out in the middle of May, for instance, taxpayers would have until the middle of June to pay it. Then they will receive their first-quarter tax bill for fiscal 2013 on July 1, and that payment will be due Aug. 1.

But if the tax bills are not issued until the end of May, taxpayers would be hit with a one-two punch, receiving a new quarterly tax bill soon after paying the previous one.

Last month, the city received “pending preliminary certification” of its assessments of 38,277 residential properties — single-family, two-family and three-family homes — and those property owners have already been informed of their new property assessments.

City officials have said that local residential property assessments have decreased by 3.8 percent on average compared to the previous year.

Mr. O’Brien said updating the property values for commercial properties has proven far more complicated.

He said the city assessor used the industry-standard income approach to generate a fair-market value for those properties. The income approach is most applicable to real estate that is normally bought and sold on the basis of its income-producing capabilities.

In the process of modernizing systems, Mr. O’Brien said, assessors uncovered a previous practice of “manual overrides” on as many as 2,000 commercial and industrial properties. He said those overrides allow an assessor to manually enter a data element or formula into the assessment system and override the resultant valuation that should have been calculated by the system for that parcel. As a result, Mr. O’Brien said, the new property value would be based not on the internal calculations of the system, but instead based on the artificial override.

“This manual override would continue, indefinitely, unless human intervention removed it, and (it) was not obvious when reviewing a previous property record,” the manager said. “There may have been reasons for these overrides; however, there is no documentation in the files or the notes as to why or when these manual overrides were placed.

“There was no element within the old software program that highlighted that this action was taken or that prompted staff to review on a year-to-year basis,” he continued. “It appears that some date as far back as 30 years as far as we can tell, with no supporting documentation as to why or when the adjustments were made.”

Mr. O’Brien said all the manual overrides have now been completely removed, because they have no standing based on the current parcel or market conditions.