Property tax misconceptions and realities

On February 6, 2014, in Latest News, by The Somerville Times

mayor_webBy Joseph A. Curtatone

(The opinions and views expressed in the commentaries of The Somerville Times belong solely to the authors of those commentaries and  do not reflect the views or opinions of The Somerville Times, its staff or publishers)

After the latest property tax bills went out, some property owners found themselves with larger increases than most of us have seen in Somerville for some time. I sympathize with every resident and small business owner facing those increases. This community has a legitimate concern, shared by myself and everyone at City Hall, about residents being priced out of their homes and small businesses priced out of our neighborhoods. It’s a concern shared across the metro region, well beyond our city’s borders, as property values across the metro area rise. It’s why we’ve been working to address affordability via a range of efforts for some time, and it’s why this week we began the first of three public meetings to build on existing strategies and develop new tools to tackle affordability and create a strong, effective housing agenda.

Along with those valid concerns, I’ve also heard of some confusion. I’d like to clear up some of that confusion, put this year’s assessments and tax bills into context and talk about what we’re doing right now to keep Somerville open to all.

It may provide little comfort when looking at just one tax bill, but overall, residential property tax bills in Somerville are lower than in neighboring towns and commercial tax rates fall below the middle of the pack. We are one of only five cities in the Commonwealth that offers a residential exemption to help residents reduce their tax bills. Because of this, when we checked on the average $400,000 property, we found the property tax bill for this fiscal year is $3,178 in Somerville for residents who take the exemption—third lowest among 15 of our neighboring urban communities, and one of only four at $3,200 or less. The average tax bill on a $400,000 residence in most nearby cities and towns is $4,600 and up. For that same property, comparing the last fiscal year (2013) to the current fiscal year (2014), Somerville had the second highest percent decrease of the average tax bill, down 8.7 percent. When the City announced the assessment results and projected tax rates for the year, we said that it would result in modest increases for most—and two-thirds of the properties in the city saw modest increases between 1 and 9 percent.

That is part of the context. Another factor is the fact that Massachusetts has a regressive tax system—a flat income tax, a sales tax that has gone up and a property tax that is levied without taking into account a taxpayer’s income or ability to pay the tax. This tax system disproportionately affects the middle class, retirees and small businesses. So when the real estate market begins to rebound from the worst economy since the Great Depression as it has, our middle class residents, our retirees, and our small business owners find themselves facing yet another tax bill that seems unfair. And because our Assessors are bound by state law to value properties at their actual market value, they cannot lower the assessment based on ability to pay.

At this point, without action on Beacon Hill to address regressive taxation, the question is: What can we do on the local level to ease this burden? On top of the residential exemption we already offer—10 percent more than the state’s limit, thanks to legislation we previously passed—and on top of already offering double the state allowed exemptions for seniors, veterans, widows and those with disabilities, we’re going examine how to do more. To aid this effort, I am reconvening the Financial Advisory Committee. We created this group of outside experts in 2009 to help us reduce the budget while preserving core services during the Great Recession. The Financial Advisory Committee will develop recommendations on how to find the right balance to ensure we are making the tax burden as equitable as possible, while preserving our investments in our schools, public safety and services that we all rely on. That committee can explore additional tax exemptions and relief both for residents and businesses, but it’s important to remember that an exemption doesn’t drive down the tax burden, but only shifts it from one group of people to another.

One subject that has been broached—is this a question of budgeting? No. Outside of fixed costs such as health care, contractual obligations and debt service, we have actually cut our discretionary spending. My administration has never asked for an override or debt exclusion, while almost 90 percent of Massachusetts’ cities and towns have passed one, and unlike many we have not cut teachers, police officers or firefighters or closed libraries or take away resources from our schools. We spend less per capita than two-thirds of the state’s municipalities. Moody’s specifically cited our conservative budgeting approach in reaffirming our highest bond rating ever last year. And we have managed this even though Beacon Hill has been steadily chipping away at its aid to municipalities since the year 2000. Annual net state aid is down 52 percent when you adjust for inflation. That’s roughly equivalent to the entire public safety budget this year. We have even cut our own revenue to create an environment where local businesses can thrive. We improved parking policies to bring more customers to businesses, which have led to significant cuts in fines and fees. We spend to our obligations—and to our values. We do more with less.

What would further cutting mean? Even extensive and damaging cuts would not translate to significant savings on individual tax bills. As an example, if we wanted the average two-family property to have a property tax bill that’s $93 lower than last year’s bill, it would require cutting $3 million from the budget, which would require crippling cuts to the very services that make most of us want to live here from clean streets to free after-school programs. This is why we’re trying to expand our commercial tax base through strategic community-driven development that will draw more tax-paying businesses to Somerville. It’s not just about shifting the burden off residents, which is important, but easing the tax burden on everyone, including small businesses. We need more people paying in so everyone’s share of the tax levy can go down while we still maintain services.

But expanding the commercial tax base is just one part of our long-term strategy. We continually seek new efficiencies, which is why we are able to reduce discretionary spending while still maintaining services at levels lauded nationwide. Whether it’s preventing $20 million in new costs over the past two years by shifting to GIC health insurance or converting our streetlights to energy-saving LED bulbs, we will continue to squeeze the most out of every tax dollar so that we need fewer of them. And we will continue to innovate around affordability, via programs like expansion of the affordable housing program to the working middle-class or the creation of artist districts to protect affordable live/work space.

We are thriving today because we’ve made prudent, strategic, efficient investment in our community. Businesses are thriving, with 73 net new businesses opening in the last three years. Our students are testing better than they have in years. Our residents have indicated via repeated surveys that they feel we are going in the right direction. So we will double down and continue to find solutions that work—for all of us. Our residents and small businesses are what make this city so desirable. And we have to protect them. We have heard you. We are acting. And we will act decisively.

 

14 Responses to “Property tax misconceptions and realities”

  1. matt says:

    The example the mayor gave that a home worth 400k experienced a large tax break between FY13 and 14 is misleading. If the home were in somerville between FY13 and 14 the assessed value would have increased 20-35% (my streets increases over the last year). Meaning that home owner would have experienced a 20% increase in taxes paid vs the prior year.

    FY12: (400,000 – exemption 140,534) * tax rate 13.41 = 3,482
    FY13: (480,000 – exemption 150,674) * tax rate 12.66 = 4,169

    That is a $687 increase

    On the budget:
    There were two sections of the budget that grew at nearly 40% year over year. General government which received a $5,000,000 boost to $15,244,237. At a cursory look – this appears to be growth, but i cant be sure.

    “We have even cut our own revenue to create an environment where local businesses can thrive. ”

    This seems different than the experience of the owner of the winter hill bakery who saw her yearly tax increase by nearly 50%

  2. ritepride says:

    Stop the GLX a needless transportation duplication. Use the commuter rails that already travel these tracks to make stops in Somerville as they do in Medford and Cambridge. Thus no eminent domain of land which would be converting taxable land into Tax-Exempt land for the “T” which would make Somerville’s as having 60%+ of it’s land tax exempt.

    With all the layoffs/reduction of services over the past several decades starting with Prop 2&1/2. The money saved on payroll & benefits has been wasted on hiring more hacks into the system, a gross misuse of taxpayers dollars.

    Waste of taxpayer dollars on developers interests? Needlessly moving City Hall, Central Library so developers can have the land on the hill??
    These are the important issues that need to be addressed instead of one person’s dream$.

  3. E says:

    “… easing the tax burden on everyone, including small businesses. We need more people paying in so everyone’s share of the tax levy can go down while we still maintain services.” … It would help if Tufts paid their fair share or at least the taxes on properties they have transferred to tax exempt status over the years…instead the rest of us must make up for the lost tax money while Tufts is sitting on a $1.2 billion endowment…Time to develop a “Pilot Program” for non-profits similar to Boston.

  4. gregtowne says:

    One of Joe’s best buddies got into the corner office with a promise to lower everyone’s real estate taxes. So much for that!

  5. A.Moore says:

    Nice little pr speech here after just bragging how all this new development his visions was reducing the taxes. Yeah. Right. Pretty soon what he is smoking will be available here legally.

  6. Maybe the mayor should hire a speech writer, his mantra is getting old and so unconvincing.

    The main reason we are being tossed under the tax guillotine is due to one important fact–There is a great need for more housing, thousands of units, condos, single family homes in the Boston area for those seeking new high tech jobs that are being created. This is going to hurt the average homeowner and landlord more than you realize. My advice is to reassess your individual situation, try to hang on, get the kids to move back home and pay rent or borrow, remodel and rent a vacant or distressed apartment–don’t sell.

    The property values are going to continue to go up because we are witnessing a classic case of supply and demand–the supply for housing keeps shrinking, thus making it more valuable. This is due to our proximity to colleges, proposed expansion of Mass transit and possibly the commuter rails. The reason people are leaving suburbia is because all the jobs are coming here, also leaving the Rt. 95 belt.

    I hope The Somerville Times and other news outlets and more importantly–CITY HALL will announce the next set of meetings to discuss this issue again. Most of us have obligations which keep us from attending meetings, but if they are announced early enough, we can rearrange our schedules to attend. Announcing it the day of the meeting is not sufficient time in some cases. Understandably so in cases of bad weather–otherwise no excuse.

    Next time, we should have 500 people fill the room if possible and allow time for residents to share their stories and then print them in the paper, so those who cannot attend can have access to the information.

    I can’t stress this enough–it’s important to be engaged in the system. Our voices need to be heard. I agree we who have lived in this city and dedicated ourselves to improving our properties and contributing to our communities, families who attended schools for generations, those who work and live in the city, we deserve better. They should be working on a plan to reduce this heavy tax burden on the working class and elderly who should be able to remain in their homes. The tax burden should shift towards the ABSENTEE LANDLORDS who live in other wealthier towns and some who have neglected their properties. Force them to sell and let someone else buy the property who will invest as we have–this is the main reason we are faced with this problem. Companies who have signed on at Assembly should be paying commercial taxes–when does the city begin collecting their taxes?

    More needs to be done with the city budget. Hire individuals and pay them a standard cost of living. Stop hiring entire families at high salaries we cannot afford. I saw 3 snow plows go around my neighborhood last night, one after the other when the snow on the street had already been cleared away, storm was over for hours. Give them a GPS and tell them to go home when they are not needed. We either have no plows or too many driving in convoys. I often wonder who is managing this town. Where is the accountability? I don’t believe there is enough oversight on some employees.

    Also, how many politicians and city employees, lawyers of politicians own property in Somerville? If someone owes $75k in uncollected taxes, why are they able to continue their business? Are family members and friends of politicians paying their fair share in taxes? How do we know for sure? These are rumors circulating throughout the city. What happened to all those clever investigative reporters? What does it take to make them go away–if intimidation doesn’t work, you try something else, like giving them a job?

    Keep calling your representatives and demand transparency. Show us where all the money is going and has gone. It’s not surprising the mayor wanted to run for governor–let the next guy take the heat for this one? Was that the master plan? Are we paying for major lawsuits from past misdeeds? Speaking of misdeeds, where is that former alderman hiding these days. Is he vacationing in some unknown country club?

    I really hope the team of Aldermen can grow some much needed backbone and help the residents take this city back.

  7. Maybe this can offer some explanation–

    “The city is requesting $500,000 because that is the approximate amount spent on the city’s plan for the Inner Belt area. The funds would be spent on the services of planners and designers and figuring out how to finance future development, he said”.

    “I need a map, I need this in writing before I can support it. It all makes perfect sense to me, but I’m hearing it for the first time,” Niedergang said. “It would be nice to see a rough budget of how the $500,000 would be spent, even if it’s just $10,000 or $20,000 increments.”

  8. too late says:

    I am physically ill at the new numbers on my tax bill. I just can no longer do it. Yes, I’ll do well selling, but I do not want to do that, and by the time the family splits things, I will not have enough to stay here. Another one bites the dust, and who cares? This is making me sick. and when you talk about affordable housing, you’re not talking about me. I don’t qualify for anything. It’s the middle-class dilemma, and I really didn’t think it would happen here.

  9. A.Moore says:

    This is a problem to a lot of us too late. I have been close to stop paying my taxes and deffering them or whatever it is called. Not sure how much longer I can hang on myself. Never thought I was going to have to leave this city until this mayor got in.

  10. too late,

    Please contact your alderman and alderman at large, representative, senator and congressman.

    If we get enough voices to banned together, we may be able to stop this outrageous tax hike.

    Come to the meetings and tell your story to the local press. I am also sickened by this situation and all the rest of the bad stories about how this city is being run.

    It’s time they took a look at the books and demand explanations. We need proof, not just words. If there really is a mandated tax hike by the state, then lets hear it from the governor himself. There are ways to lessen the burden to local residents. One suggestion is to spread the increases over 10 years. That way, homeowners can have time to come up with solutions to build additional income so they can stay in their homes. If they don’t offer any constructive solutions, then it’s just out-right embezzlement, stealing our homes to sell to the rich and nothing else.

    The aldermen, reps, senators and those in congress work for US and we need to demand they find a solution to their obvious city budget deficits. Maybe they should cut salaries, have a few furloughs, the mayor can give up his annual salary for a few years. Maybe he can find a job with one of his developer buddies during that time. We can all certainly use a break from his heavy fisted form of government. What happened to our city? This use to be a good place to live. It’s no longer a democracy when people have a say in how things get done. We are forced to live in fear of speaking out because he’s allowed the developers to rule over our town. There is another meeting to decide what happens to the Powerhouse School on Monday, 2/10 from 6:00-8:00 p.m. It doesn’t matter which Ward you live in. Every proposed development effects all of us because it’s the same machine at city hall. The more we give away, the more they take. We need to keep calling our politicians and demand accountability and a thorough investigation of where all our tax money has gone. There answers are just not good enough.

  11. Jack Porter says:

    I would have not been worried about this just a couple of years ago. But now that I got seriously sick and cannot work, even though I’m only in my 50s (my wife is also sick), I’m not sure how much longer I will be able to stay in Somerville. The house was reassessed at 670K, so the tax bill is pretty high. Between maintenance costs and taxes, we may be forced to sell and move somewhere else….

  12. Pixie Pocahontas says:

    I would also like to add, a 10 year extension on the massive tax increases would provide enough time for the six figure commercial tax revenue they keep promising us. I’m calling their bluff. If the commercial leases don’t arrive, they can layoff all their friends and family members who are getting paid too much money and outsource – how would that be?

    And the next time the mayor wants to pat himself on the back with a raise, it should be up to his employer the taxpayers of this community, whether he deserves it. Last I checked, workers are entitled to a raise for good performance. According to his record, he fails short on a number of items on that list.

    If he is truly concerned about the local residents and middle class taxpayers of this town who cannot pay these loan shark demands, he should be willing to forgo one of his homes and donate the proceeds to our town budget. Do his kids even go to our “great” schools he’s always touting to the general public?

    Do as I say, not as I do is definitely his way of running this city. If we have to shovel 42″ across so a wheelchair can get by during a snowstorm, at the very least all buildings in our city should have disability access. What’s good for us, is also good for Joey cupcakes, whatever that means. He’s far from anything sweet. If he was my family member, he would be disowned for what he’s doing to the struggling people of this town. Nothing to be proud of here. He should have set his goals to Maiden Lane.

  13. Pixie Pocahontas says:

    A.Moore,

    Don’t give up. Find a friend who can provide legal advice. If you’re talking about a reverse mortgage, be careful, learn all the facts. There are a number of predatory lenders out there even with all the government intervention and empty promises made. It’s a difficult problem to entirely eliminate. Meet with a reputable lawyer and get several or more opinions from others who are in the business and knowledgeable. There were a number of good banking institutions which did not get involved in the dirty loan business for the reasons we see today, millions who lost homes and good credit.

    If you can spare a few hours a day, call and write to local and representatives in DC. For those no longer working and retired, you should be able to get support from the politicians. The worse thing is to give up. I know it’s difficult, trust me. I have had my own battles over the years with this gang. You have to stand up to them, because they are bullies. I am not afraid to challenge them and they know it. I have no problem paying bills to this city as long as they are accurate. What’s going on with the taxes is highly questionable since it comes at a time when we have large scale projects underway and more to come. Maybe he should call his buddy Deval and ask for a loan. This reminds me of the big dig, remember how that turned out? And from what I hear, they’ve been given Union Sq. Project so don’t expect it to get easier. There are a great deal of people upset about the tax hike. Talk to your neighbors and come yo the next aldermen meeting at city hall. Call and check the website for details. You have to stay on it because they have a habit of changing dates and times. I wish you the best. At least we can say we tried. If it gives us a new mayor, that’s an accomplishment.

  14. A.Moore says:

    I was only considering the part of not paying taxes. They can be put off. No intentions of reverse mortgage. As long as Curtatone is in I don’t see any hope for Somerville. I have seen many mayors come and go in this city over the last almost 70 years and I can’t remember any one of them being as bad as this one for the people of Somerville. Some things are a no brainer, giving away the city is of no help to us that are not highly paid. So much loss of revenue with this guy. It’s like he is destroying Somerville on purpose. I will be here until my parents go at least. Even if we get a new mayor I doubt if this mess can be cleaned up.

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