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.