Walter Bird Jr., GoLocalWorcester Reporter
Worcester businesses will go under if the city levies the highest possible tax rate on commercial and industrial properties, Dick Kennedy said.
That uncertainty, said Kennedy, president/CEO of the Worcester Regional Chamber of Commerce, combined with recent skyrocketing assessment, has city officials and property owners holding their breath until fourth quarter tax bills are delivered.
Kennedy said business owners are worried that property valuations, which in some cases have doubled and tripled, will contribute to a sharp increase in their taxes when the city finally mails out the final fiscal 2012 tax bills. Those will be followed in short order by the first quarter bills for fiscal 2013.
“Yes,” he answered flatly when asked whether some owners would go out of business if their tax bills increase sharply. “Let me put it this way. Very successful businesses are calling me, saying I don’t know if I would move or stay in business.”
Businesses are ‘backbone’
That is not a message Mayor Joseph Petty wants to send to a valuable and much-needed part of the city’s tax base.
“I certainly do not want one business to close in Worcester and certainly not because of our tax structure,” Petty said in a statement to GoLocalWorcester. “I am very concerned as to what the impact of the new assessments will have on the business community. Small business are the backbone of our economy and I will take a very detailed look once we receive the numbers as to what the impact will be for both the residential and the commercial owners.”
What will they pay?
Residential taxpayers, city councilors and officials all share the same concerns: With a tax classification hearing set for May 22, and tax rates (the city has a two-tiered tax system) ready to finally be set, how bad, exactly, will the news be for taxpayers? And is there anything the city can do to avoid putting the hurt on them? The answers aren’t pretty. The current residential tax rate is $16.06 per $1,000 assessed valuation. The commercial, industrial and personal property tax rate is $34.65 per $1,000.
“There are very few options, no one of them good,” At-Large City Councilor and former Mayor Konstantina Lukes said. “Should the council rectify past inequities and give residential taxpayers less of a burden to make up for what they had been picking up? On the other side, these are bad economic times. We’re trying to pass the burden around and we can’t, because we’ll lose business.”
While there is much speculation over just what the tax rates will be, Petty wasn’t about to join the rumor mill or raise any fears.
“I cannot comment on what the implications will be to the taxpayers until we see the numbers,” Petty said. “We currently have not been provided with that information.”
File an appeal
Still, the news does not appear good for residential taxpayers. Of course, there are options. Taxpayers have two routes when it comes to disagreeing with their tax assessments. They can request tax abatements or they can take the city to court. The first step is to file an appeal and the city has plenty of those on its plate. For fiscal 2011, there were a total of 95 residential and commercial appeals filed, according to Christina Andreoli, spokesperson for City Manager Michael O’Brien.
Based on early signs – some property valuations have increased, percentage-wise, in triple digits – a high number of appeals is likely for fiscal 2012. Big businesses are likely to feel the pinch, too. The valuation for the Saint-Gobain Abrasives property at 1 New Bond Street, where there are three factories, jumped by 484.6 percent over fiscal 2011 – from $3.3 million to $19.7 million. The valuation for property owned by Berkeley Management at 90 Front St. increased even more – from $2.19 million to $13.79 million, or 527.2 percent.
Calls to representatives for both companies were not immediately returned.
Adding to the furor over potentially crippling tax bills is a debate over the system the city once used for property valuations. Officials claim assessors previously performed several manual overrides – a practice the Massachusetts Department of Revenue (DOR) acknowledged is standard and widely used. Andreoli said a review of the assessing department, which O’Brien mandated when the new assessor, William Ford, arrived in 2009, revealed more than 2,000 manual overrides. That helped keep tax levels low, many now believe artificially, and when they were removed property assessments shot up.
Manual overrides are used, according to DOR spokesperson Bob Bliss, 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.
“(Ford) found that more than 2,000 properties had manual overrides on them and in some cases properties had not been inspected in years – there was no back-up, documentation, or notes in the file to say when these changes or adjustments occurred,” Andreoli told GoLocalWorcester. “They could have been there for one reason at one time or another, but as they stand today, there is no place in law or DOR regulations for these overrides to exist. The city must develop fair and equitable values for all classes of property. These values must be based on the most current and accurate property data."
Andreoli said, “As part of this required triennial revaluation, property data was checked, double-checked and tripled-checked through virtual reviews, full-field reviews, and valuation reviews. These reviews were necessary to ensure fair and accurate valuations of individual properties.”
The discovery of manual overrides and the resulting increase in commercial and industrial property assessments has led to finger-pointing and blame, and when the question was posed to Lukes, she said, “That’s an interesting question.”
Former assessor Bob Allard’s name has popped up as officials and residents wonder just why so many overrides were done, something he has publicly refuted. Petty shot down any suggestions of wrongdoing by Allard.
“I do not believe there was tampering,” Petty said. “Bob Allard worked for this city for long time and was always held in the highest regards. I am not aware any issues or concerns as to how he acted as the city’s assessor or how the assessing department was run.
An outdated system
The real culprit could be an antiquated process that, as late as 2007 was operating on DOS, or disk operating system. Printers spit out large reams of green-barred paper with perforated edges.
“Now,” said Bliss, “The city has a new, state-of-the art system.”
Actions, which were previously done manually, are included in the new system, although Bliss said manual overrides can still be done.
The new way of doing things has also ignited anger among some observers, including City Councilor George Russell, a licensed realtor whose business also includes a real estate school. The city now assesses commercial and industrial property using an income method, meaning it looks at what a property could generate in revenue. Russell believes the state has forced the city to use this method of valuating property.
“The administration tells me that’s what Boston is making us do,” he said, a charge Bliss vehemently denied.
“No,” Bliss said. “We did not encourage the city to use the income approach. That’s what they used to use.”
There are three approaches to assessing property, he said. One of them, the comparable sales method, is predominantly used to assess residential property, because it is easier to find other properties of comparable worth. That is not the case with commercial and residential property. Russell acknowledged that point, but believes it is unfair when it is the only method used to assess those properties.
“It works when you have income,” he said. “But if you have a vacant property … you can’t say, gee, in a perfect world it would rent for whatever.”
Russell made it clear he is an advocate for the lowest possible residential property rate for homeowners, “or slightly lower, but not more than, last year.”
Confidence high, low
Russell answered directly when asked whether he had confidence in the city’s handling of the fiscal 2012 property assessments.
“I’m confident in the city manager and the administration overall, but not happy with the way the whole valuation process has come out,” he said.
When asked about the current assessor, Russell said, “I don’t have confidence in the way he’s gone about this process. Personally, I think he’s honorable. I just think the process he’s chosen is not accurate.”