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.
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Monday, May 21, 2012
Friday, May 18, 2012
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.
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.”
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.
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.
T&G: Worcester faces tough choices in setting tax rate this year
By Nick Kotsopoulos TELEGRAM & GAZETTE STAFF
WORCESTER — With many business property owners swooning 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 commerical-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 the tax rates set by the council for this fiscal year will be one of the most difficult decisions it 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 (assessing) missteps."
District 5 Councilor William J. Eddy, meanwhile, said the setting of the tax rates should not come down to pitting homeowners versus 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 kind 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 that was 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 some how 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.
WORCESTER — With many business property owners swooning 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 commerical-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 the tax rates set by the council for this fiscal year will be one of the most difficult decisions it 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 (assessing) missteps."
District 5 Councilor William J. Eddy, meanwhile, said the setting of the tax rates should not come down to pitting homeowners versus 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 kind 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 that was 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 some how 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.
T&G: Worcester earns A's in fiscal ratings
By Nick Kotsopoulos TELEGRAM & GAZETTE STAFF
WORCESTER — The city's fiscal health remains strong as two bond rating agencies have affirmed their previous ratings for it, citing “significant improvement” in its reserve and liquidity positions, as well as prudent management of unused property tax-levy capacity and steady progress toward funding long-term liabilities.
Moody's Investors Service has assigned an “A1” rating to the city's upcoming bond sale — $6.8 million general obligation District Improvement Financing Bonds.
It also affirmed the “A1” rating and “positive outlook” for the city's $573 million worth of outstanding general obligation limited tax debt.
Concurrently, Standard & Poor's assigned its “A-” long-term rating to the city's bond issuance and affirmed its “A-” rating and positive outlook for previously issued debt.
The general obligation District Improvement Financing Bonds are scheduled to be put out for sale on May 22.
At the same time, the city plans to sell $21.9 million in short-term Bond Anticipation Notes.
City Manager Michael V. O'Brien said the ratings are an indicator of the city's long-term “stability, vibrancy and vitality.”
“I am pleased by this news and appreciative of the collective work that has been done by all to help stabilize our municipal finances,” Mr. O'Brien said.
In its analysis, Moody's said its long-term “A1” rating reflects the city's satisfactory overall credit profile, which includes improved financial reserves, moderate tax-levy capacity under Proposition 2-1/2 and medium-term expansion in the city's economic base.
Moody's added that its positive outlook for Worcester recognizes continued improvement in financial operations, resulting in increased reserves, expected medium-term tax-based growth and a prudently-managed debt position.
“Worcester's positive outlook reflects the city's improved financial position and reduced enterprise risk due to a conservative approach to budgeting and expenditure management,” the Moody's report said. “The city's management and elected officials have adhered to its adopted Five-Point Plan, a set of comprehensive financial policies adopted in 2006 to improve financial reporting and forecasting for the city's operating and capital budgets, generate growth in reserves and provide limits for annual general fund borrowing.
“The positive outlook anticipates improvement in Worcester's financial position in the near term, including continued augmentation of general fund and stabilization fund reserves, steady progress toward funding (long-term liabilities) and a prudent approach to capital planning and debt management,” the report added.
Standard & Poor's, meanwhile, said good financial management practices have enabled the city to maintain financial stability through the recession, while many other communities' bond ratings have declined.
“Worcester's financial position has improved substantially over the past three fiscal years,” the Standard & Poor's report said. “The positive outlook reflects our assessment of the city's ongoing progress toward improving financial budget management practices and reserves, while at the same time implementing cost control and reform measures associated with its long-term liabilities.
“In our view, the city has proactively adjusted to lower state revenues and local receipts through the recession,” it added. “Moreover, economic development has been steady.”
Both ratings agencies did express concerns, however, about the city's ability to address a large unfunded liability for post-employment health benefits. According to most recent actuarial projects, that unfunded liability is at about $765 million, which is actually down significantly from an initial 2008 valuation of $1.2 billion.
WORCESTER — The city's fiscal health remains strong as two bond rating agencies have affirmed their previous ratings for it, citing “significant improvement” in its reserve and liquidity positions, as well as prudent management of unused property tax-levy capacity and steady progress toward funding long-term liabilities.
Moody's Investors Service has assigned an “A1” rating to the city's upcoming bond sale — $6.8 million general obligation District Improvement Financing Bonds.
It also affirmed the “A1” rating and “positive outlook” for the city's $573 million worth of outstanding general obligation limited tax debt.
Concurrently, Standard & Poor's assigned its “A-” long-term rating to the city's bond issuance and affirmed its “A-” rating and positive outlook for previously issued debt.
The general obligation District Improvement Financing Bonds are scheduled to be put out for sale on May 22.
At the same time, the city plans to sell $21.9 million in short-term Bond Anticipation Notes.
City Manager Michael V. O'Brien said the ratings are an indicator of the city's long-term “stability, vibrancy and vitality.”
“I am pleased by this news and appreciative of the collective work that has been done by all to help stabilize our municipal finances,” Mr. O'Brien said.
In its analysis, Moody's said its long-term “A1” rating reflects the city's satisfactory overall credit profile, which includes improved financial reserves, moderate tax-levy capacity under Proposition 2-1/2 and medium-term expansion in the city's economic base.
Moody's added that its positive outlook for Worcester recognizes continued improvement in financial operations, resulting in increased reserves, expected medium-term tax-based growth and a prudently-managed debt position.
“Worcester's positive outlook reflects the city's improved financial position and reduced enterprise risk due to a conservative approach to budgeting and expenditure management,” the Moody's report said. “The city's management and elected officials have adhered to its adopted Five-Point Plan, a set of comprehensive financial policies adopted in 2006 to improve financial reporting and forecasting for the city's operating and capital budgets, generate growth in reserves and provide limits for annual general fund borrowing.
“The positive outlook anticipates improvement in Worcester's financial position in the near term, including continued augmentation of general fund and stabilization fund reserves, steady progress toward funding (long-term liabilities) and a prudent approach to capital planning and debt management,” the report added.
Standard & Poor's, meanwhile, said good financial management practices have enabled the city to maintain financial stability through the recession, while many other communities' bond ratings have declined.
“Worcester's financial position has improved substantially over the past three fiscal years,” the Standard & Poor's report said. “The positive outlook reflects our assessment of the city's ongoing progress toward improving financial budget management practices and reserves, while at the same time implementing cost control and reform measures associated with its long-term liabilities.
“In our view, the city has proactively adjusted to lower state revenues and local receipts through the recession,” it added. “Moreover, economic development has been steady.”
Both ratings agencies did express concerns, however, about the city's ability to address a large unfunded liability for post-employment health benefits. According to most recent actuarial projects, that unfunded liability is at about $765 million, which is actually down significantly from an initial 2008 valuation of $1.2 billion.
Sunday, May 13, 2012
Golocalworcester: Chamber Head: Worcester Valuations to Close Businesses
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.
Controversial overrides
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.
Income approach
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.”
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.
Controversial overrides
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.
Income approach
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.”
Thursday, May 10, 2012
T&G - Former Worcester assessor: valuations not tampered with
By Nick Kotsopoulos TELEGRAM & GAZETTE STAFF
The only manual overrides Mr. Allard said he was aware of were for large tax-exempt properties, such as colleges and hospitals.
WORCESTER — A former city assessor insists that computer-generated valuations for commercial and industrial properties were not manually overridden by staff during his tenure at City Hall to produce artificially lower assessments for business properties.
Robert J. Allard Jr., who served as city assessor from 2002 to 2009, said valuations for the city's 3,000 commercial and industrial properties were always determined by using the industry-standard income approach.
He said it was never a practice of his office to override the computer-generated data for commercial and industrial properties and establish lower assessments, and he is unaware of any instances of it ever happening.
“There is absolutely no truth to that,” Mr. Allard said in a telephone interview from his home in California.
But city officials stand by their contention that assessors for years had been manually overriding valuations set by computer program on as many as 2,000 of the city's commercial and industrial properties.
City Manager Michael V. O'Brien said the data and information shows there was “human intervention” to reduce the assessed valuations of those business properties below what was called for by computer programs.
“Things were done (in the Assessor's Office) that did not follow the standards of the (state Department of Revenue) and I have the charge of cleaning it up,” Mr. O'Brien said.
While assessments for residential properties are largely derived on the basis of sales of comparable properties, establishing valuations for commercial and industrial properties is much different. The income approach is most applicable to business real estate that is normally bought and sold on the basis of its income-producing capabilities.
In the process of modernizing the city's property revaluation systems, city assessors said they uncovered a practice that allowed assessors 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.
As a result, they said, commercial and industrial property values were based on an artificial override and not on the internal calculations of the system. All of those manual overrides have since been removed, and what has resulted is a dramatic increase in the assessed valuations of many commercial and industrial properties.
But Mr. Allard said it is inconceivable that there could have been as many as 2,000 manual overrides of commercial and industrial properties because there are only roughly 3,000 such properties in the city. Of other commercial properties, he said there are 600 mixed-use (residential and business uses); 1,100 residential properties with four to eight units; and about 200 residential properties with nine units or more.
He said the letter “m” that was put on many property cards meant that the respective property had been assessed by using the market approach — determining valuation through comparable sales — and did not signify that the assessed values for those properties had been manually overridden.
In many instances, he said, the “m” designation was applied to apartment buildings.
Mr. Allard said the designation was also given to vacant commercial and industrial properties. He said the income method of assessing business properties could not be used on those properties because they were not generating any income.
He said the only manual overrides he was aware of were for large tax-exempt properties, such as colleges and hospitals.
By law, the city is still required to assign assessed valuations to non-taxpaying properties. Instead of assigning personnel and spending money to go out in the field to inspect and assess those properties, the Assessor's Office used financial statements from those institutions to set property valuations as best it could.
But William J. Ford, who succeeded Mr. Allard as city assessor in 2009, said the documentation the city has clearly shows that some 2,000 commercial and industrial properties had a manual override on them that drastically affected the value of the property.
“Having not been here, I cannot speak specifically to the what, whys and when,” Mr. Ford said yesterday. “I do not have any backup documentation or notes in the file to say when these changes and adjustments occurred. There could have been reasons at one time or another, but when you review the property as it stands today, there is no place in law or DOR regulations for this override to exist.
“I cannot speak for previous assessors,” he added. “All I know is that when I came on board I was asked to do a top-to-bottom review of the (assessing) division. I found property cards that indicated that properties had not been inspected for more than 25 years, some dating back to 1985.
Meanwhile, District 3 City Council George J. Russell has challenged the method used in setting new assessed valuations for commercial and industrial properties, contending it may be a big reason assessments for those properties have skyrocketed.
Mr. Russell questioned whether the city was “bullied” by the state to use an income approach to generate a fair-market value for those properties.
“I want to know if the city of Worcester had a choice at all in picking the process that was used to assess commercial and industrial property,” the councilor said at Tuesday's City Council meeting. “The way we put values on these properties was neither fair nor equitable. Did the state force us to use the income approach for businesses?
“The process has to be reviewed,” he added. “I'm frustrated by all heck by this. I'm asking the city to revisit this issue. This city government should be challenging the state of Massachusetts on this.”
The only manual overrides Mr. Allard said he was aware of were for large tax-exempt properties, such as colleges and hospitals.
WORCESTER — A former city assessor insists that computer-generated valuations for commercial and industrial properties were not manually overridden by staff during his tenure at City Hall to produce artificially lower assessments for business properties.
Robert J. Allard Jr., who served as city assessor from 2002 to 2009, said valuations for the city's 3,000 commercial and industrial properties were always determined by using the industry-standard income approach.
He said it was never a practice of his office to override the computer-generated data for commercial and industrial properties and establish lower assessments, and he is unaware of any instances of it ever happening.
“There is absolutely no truth to that,” Mr. Allard said in a telephone interview from his home in California.
But city officials stand by their contention that assessors for years had been manually overriding valuations set by computer program on as many as 2,000 of the city's commercial and industrial properties.
City Manager Michael V. O'Brien said the data and information shows there was “human intervention” to reduce the assessed valuations of those business properties below what was called for by computer programs.
“Things were done (in the Assessor's Office) that did not follow the standards of the (state Department of Revenue) and I have the charge of cleaning it up,” Mr. O'Brien said.
While assessments for residential properties are largely derived on the basis of sales of comparable properties, establishing valuations for commercial and industrial properties is much different. The income approach is most applicable to business real estate that is normally bought and sold on the basis of its income-producing capabilities.
In the process of modernizing the city's property revaluation systems, city assessors said they uncovered a practice that allowed assessors 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.
As a result, they said, commercial and industrial property values were based on an artificial override and not on the internal calculations of the system. All of those manual overrides have since been removed, and what has resulted is a dramatic increase in the assessed valuations of many commercial and industrial properties.
But Mr. Allard said it is inconceivable that there could have been as many as 2,000 manual overrides of commercial and industrial properties because there are only roughly 3,000 such properties in the city. Of other commercial properties, he said there are 600 mixed-use (residential and business uses); 1,100 residential properties with four to eight units; and about 200 residential properties with nine units or more.
He said the letter “m” that was put on many property cards meant that the respective property had been assessed by using the market approach — determining valuation through comparable sales — and did not signify that the assessed values for those properties had been manually overridden.
In many instances, he said, the “m” designation was applied to apartment buildings.
Mr. Allard said the designation was also given to vacant commercial and industrial properties. He said the income method of assessing business properties could not be used on those properties because they were not generating any income.
He said the only manual overrides he was aware of were for large tax-exempt properties, such as colleges and hospitals.
By law, the city is still required to assign assessed valuations to non-taxpaying properties. Instead of assigning personnel and spending money to go out in the field to inspect and assess those properties, the Assessor's Office used financial statements from those institutions to set property valuations as best it could.
But William J. Ford, who succeeded Mr. Allard as city assessor in 2009, said the documentation the city has clearly shows that some 2,000 commercial and industrial properties had a manual override on them that drastically affected the value of the property.
“Having not been here, I cannot speak specifically to the what, whys and when,” Mr. Ford said yesterday. “I do not have any backup documentation or notes in the file to say when these changes and adjustments occurred. There could have been reasons at one time or another, but when you review the property as it stands today, there is no place in law or DOR regulations for this override to exist.
“I cannot speak for previous assessors,” he added. “All I know is that when I came on board I was asked to do a top-to-bottom review of the (assessing) division. I found property cards that indicated that properties had not been inspected for more than 25 years, some dating back to 1985.
Meanwhile, District 3 City Council George J. Russell has challenged the method used in setting new assessed valuations for commercial and industrial properties, contending it may be a big reason assessments for those properties have skyrocketed.
Mr. Russell questioned whether the city was “bullied” by the state to use an income approach to generate a fair-market value for those properties.
“I want to know if the city of Worcester had a choice at all in picking the process that was used to assess commercial and industrial property,” the councilor said at Tuesday's City Council meeting. “The way we put values on these properties was neither fair nor equitable. Did the state force us to use the income approach for businesses?
“The process has to be reviewed,” he added. “I'm frustrated by all heck by this. I'm asking the city to revisit this issue. This city government should be challenging the state of Massachusetts on this.”
Wednesday, May 9, 2012
T&G - Worcester councilor questions property valuation method
By Nick Kotsopoulos TELEGRAM & GAZETTE STAFF
WORCESTER — A city councilor has challenged the method used in setting new assessed valuations for commercial and industrial properties, contending it may be a big reason assessments for those properties have skyrocketed.
District 3 Councilor George J. Russell questioned whether the city was “bullied” by the state to use an income approach to generate a fair-market value for those properties.
While assessments for residential property are largely derived on the basis of sales of comparable properties, the valuations for commercial and industrial property were established differently and were instead based on their income-producing capabilities.
Mr. Russell, who has an extensive background in the real estate field the past 20 years, said business properties should be assessed the same way as residential properties based on comparable sales.
“I want to know if the city of Worcester had a choice at all in picking the process that was used to assess commercial and industrial property,” the councilor said. “The way we put values on these properties was neither fair nor equitable. Did the state force us to use the income approach for businesses?
“The process has to be reviewed,” he added. “I'm frustrated by all heck by this. I'm asking the city to re-visit this issue. This city government should be challenging the state of Massachusetts on this.”
The assessed valuations for most commercial and industrial properties is going up by at least 10 percent — and significantly more in many instances.
Of the city's 2,278 commercial parcels, the assessed valuations for 317 are going up 10 percent to 20 percent; 498 are going up 20 percent to 40 percent; and 540 are increasing by 40 percent to 100 percent, according to city officials.
Meanwhile, the valuations of 174 commercial properties will increase by more than 100 percent.
Of the 598 industrial properties in the city, the assessed valuation of 58 of those properties is increasing by 10 percent to 20 percent; 98 properties by 20 percent to 40 percent; and 101 properties by 40 percent to 100 percent.
In addition, the assessed valuations of 60 industrial properties have more than doubled.
By comparison, residential property assessments have decreased by 3.8 percent on average.
City officials have attributed the dramatic increases to the removal of “manual overrides” that were in place for many years for commercial and industrial properties.
While the assessed valuations for commercial properties were being updated as part of the city's triennial property revaluation, it was discovered that assessors for years had been manually overriding valuations set by computer program on as many as 2,000, or roughly 40 percent, of the city's commercial and industrial properties.
As a result, when the computer-generated values were manually overridden, the new assessments often came out lower.
But one source familiar with the city's assessing practices said the letter “m” that was on the property cards for those commercial and industrial properties did not mean the computer-generated valuations were manually overridden by staff. Rather, the designation meant that the property was assessed through the market (comparable sales) approach.
The dramatic valuation increases have drawn the ire of local business property owners, some of whom contend it will place a significant tax burden on them at a time when they can least afford it.
District 1 Councilor Tony Economou said the dramatic assessment increases could force businesses to layoff employees, reduce work hours and even force some to close their doors.
He also questioned what role the state Department of Revenue played in reviewing the city's past assessment practices.
“We may be on the brink of unraveling everything we've done the past several years,” Mr. Economou said. “There was no planning for these kinds of changes. These kinds of (tax) increases cannot be absorbed by businesses. What I want to know is where has the DOR (Department of Revenue) been in this process?”
Councilor-at-Large Konstantina B. Lukes also raised questions about the legal role of the DOR in reviewing the city's property assessments each year and what legal liability it may have for “misleading us.”
“We are now in a position where we will have to try to correct the culmination of a series of missteps,” she said.
City Manager Michael V. O'Brien said the public disclosure process for commercial and industrial properties ends at 7 tonight.
He said the city must then provide the DOR with all its final revaluation paperwork so it can obtain final certification of its property revaluation. He said the city hopes to receive that certification by next Wednesday.
If that happens, the manager said, the City Council would then be able to hold its annual tax classification hearing May 22, at which time it can finally set the tax rates for this fiscal year, which ends June. 30.
WORCESTER — A city councilor has challenged the method used in setting new assessed valuations for commercial and industrial properties, contending it may be a big reason assessments for those properties have skyrocketed.
District 3 Councilor George J. Russell questioned whether the city was “bullied” by the state to use an income approach to generate a fair-market value for those properties.
While assessments for residential property are largely derived on the basis of sales of comparable properties, the valuations for commercial and industrial property were established differently and were instead based on their income-producing capabilities.
Mr. Russell, who has an extensive background in the real estate field the past 20 years, said business properties should be assessed the same way as residential properties based on comparable sales.
“I want to know if the city of Worcester had a choice at all in picking the process that was used to assess commercial and industrial property,” the councilor said. “The way we put values on these properties was neither fair nor equitable. Did the state force us to use the income approach for businesses?
“The process has to be reviewed,” he added. “I'm frustrated by all heck by this. I'm asking the city to re-visit this issue. This city government should be challenging the state of Massachusetts on this.”
The assessed valuations for most commercial and industrial properties is going up by at least 10 percent — and significantly more in many instances.
Of the city's 2,278 commercial parcels, the assessed valuations for 317 are going up 10 percent to 20 percent; 498 are going up 20 percent to 40 percent; and 540 are increasing by 40 percent to 100 percent, according to city officials.
Meanwhile, the valuations of 174 commercial properties will increase by more than 100 percent.
Of the 598 industrial properties in the city, the assessed valuation of 58 of those properties is increasing by 10 percent to 20 percent; 98 properties by 20 percent to 40 percent; and 101 properties by 40 percent to 100 percent.
In addition, the assessed valuations of 60 industrial properties have more than doubled.
By comparison, residential property assessments have decreased by 3.8 percent on average.
City officials have attributed the dramatic increases to the removal of “manual overrides” that were in place for many years for commercial and industrial properties.
While the assessed valuations for commercial properties were being updated as part of the city's triennial property revaluation, it was discovered that assessors for years had been manually overriding valuations set by computer program on as many as 2,000, or roughly 40 percent, of the city's commercial and industrial properties.
As a result, when the computer-generated values were manually overridden, the new assessments often came out lower.
But one source familiar with the city's assessing practices said the letter “m” that was on the property cards for those commercial and industrial properties did not mean the computer-generated valuations were manually overridden by staff. Rather, the designation meant that the property was assessed through the market (comparable sales) approach.
The dramatic valuation increases have drawn the ire of local business property owners, some of whom contend it will place a significant tax burden on them at a time when they can least afford it.
District 1 Councilor Tony Economou said the dramatic assessment increases could force businesses to layoff employees, reduce work hours and even force some to close their doors.
He also questioned what role the state Department of Revenue played in reviewing the city's past assessment practices.
“We may be on the brink of unraveling everything we've done the past several years,” Mr. Economou said. “There was no planning for these kinds of changes. These kinds of (tax) increases cannot be absorbed by businesses. What I want to know is where has the DOR (Department of Revenue) been in this process?”
Councilor-at-Large Konstantina B. Lukes also raised questions about the legal role of the DOR in reviewing the city's property assessments each year and what legal liability it may have for “misleading us.”
“We are now in a position where we will have to try to correct the culmination of a series of missteps,” she said.
City Manager Michael V. O'Brien said the public disclosure process for commercial and industrial properties ends at 7 tonight.
He said the city must then provide the DOR with all its final revaluation paperwork so it can obtain final certification of its property revaluation. He said the city hopes to receive that certification by next Wednesday.
If that happens, the manager said, the City Council would then be able to hold its annual tax classification hearing May 22, at which time it can finally set the tax rates for this fiscal year, which ends June. 30.
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