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Wednesday, May 23, 2012

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

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