Selectmen approve split tax rate — what it means for your property taxes

by susan on October 20, 2010

Southborough is going to try something a bit different with property taxes this year. For what I believe is the first time ever (someone correct me if I’m wrong), selectmen last night set two tax rates — one for residential properties and a second higher rate for commercial properties.

Selectman John Rooney said the split tax rate is an attempt to minimize the impact of rising property taxes on residents. “Taxes are going to increase this year and next year, and here’s a way to slow it down by shifting the allocation to commercial properties,” he said. “This seems like an opportunity to at least put the brakes on it a little bit.”

What it means for residents is that the tax rate in fiscal year 2011 will increase from $14.06 to $15.38, and the average annual tax bill for a single family home will increase by $128. The exact savings you’ll see is determined by the valuation of your home. Principal Assessor Paul Cibelli said homes in Southborough have decreased in value by an average of 7%.

If selectmen had opted for a single tax rate for both residential and commercial properties, the rate would have been $15.58. That would have translated to an average tax bill increase of $230 per family.

The commercial tax rate for fiscal year 2011 will be $16.36. On average, businesses in town will pay an additional $125 per month under the new rate.

“At end of the day, we have an opportunity here to provide residents with a savings and in doing so businesses will incur an additional expense, but I don’t think it’s an onerous expense,” Rooney said.

The vote to approve a split tax rate was not unanimous. Selectmen Rooney and Bonnie Phaneuf voted in favor of the two rates, while Selectman Bill Boland opposed the move citing concerns about the impact on small businesses.

“We don’t have big box retailers, we don’t have huge manufacturing. If we attract some of those, I would certainly consider (a split tax rate),” Boland said. “Businesses aren’t getting more of a break than residents. In general businesses use less services.”

“Southborough is made up of a lot of small businesses. Many of them are having great difficulty,” Cibelli told the board. “They’re hurting just as much as residents, if not more.”

Cibelli told the board that commercial and industrial properties account for about 6% of the taxable parcels in town, but they contribute 20% of the tax revenue.

At town meeting last April, voters opted to use $417K from the town’s stabilization fund to offset the town’s operational budget. Cibelli said without that money, the tax rate would have been about $0.20 higher this year, but he cautioned that using one-time money to fund the budget is a temporary fix. “Eventually that’s going to catch up with us,” he told selectmen.

“I wish more people would come and participate in town meeting because some things might change,” Boland said. “We can’t maintain the services without increases. That’s the fundamental question to the citizens.”

1 Confused October 20, 2010 at 10:19 AM

I’m struggling a bit with the math on this one. Over the past three years the assessed value of my home has dropped approximately 7%. The amount I’ve paid in property taxes has increased over this same time period by approximately 5%. This latest increase would add an additional 9% to my property tax bill based on my 2010 assessed value. What am I missing? How does an increase of $1.32 per $1000 in assessed value equal an increase of $128 for an average home? Any insight would be greatly appreciated!

2 susan October 20, 2010 at 10:30 AM

Here’s the math from the Board of Assessors report.

In fiscal year 2010 the average single family home in Southborough was assessed at $548,600. Using the FY2010 tax rate of $14.06, the taxes on that average home would be $7,713 (= $548,600/1000 * 14.06).

In fiscal year 2011, the average single family home was assessed at $509,800 (a 7% decrease). Using the FY2011 residential tax rate of $15.38, the taxes on that average home would be $7,841 ( = $509,800/1000 * 15.38). That’s $128 more than last year.

You’re right that the amount you pay depends on the valuation of your home. If your home didn’t decrease as much in value as the average home, you’ll end up paying more than the $128 increase. If your home decreased more than 7% in value, you’ll pay less. Does that make sense?

3 Confused October 20, 2010 at 10:55 AM

Susan, you are the best! Thank you! The piece I was missing was the 2011 assessed values. Perhaps my brain did not want to acknowledge an additional 7% drop in value!

4 susan October 20, 2010 at 11:04 AM

I know the feeling! But glad that helped.

5 Resident October 20, 2010 at 2:46 PM

If you read the Daily News article it says that both Phaneuf and Boland agreed to a higher tax rate, Rooney didn’t, and then Phaneuf changed her mind. Was anyone there and was this how it happened? Do they speak in that order? If so, kudos to Rooney. I am glad we have someone on the bos who has the guts to lead and offer different views.

6 Resident2 October 20, 2010 at 4:17 PM

How it works is that they get together as a board, see presentations, review information, deliberate on issues and then vote. The deliberation is a very important part of the process – probably the most important part. Are you really going to keep score of “who’s idea it was?” Yes, it is good that Mr. Rooney introduced a potentially good idea, but Mrs. Phaneuf doesn’t lose points for being open minded and coming around to that idea too. That is precisely how it is supposed to work. They are not supposed to come to the table having made a decision and then stubbornly stick to it. Do you actually see no value in her having an open mind?

Why do some people always have to “stick it” to someone?

Actually, I am not so sure that Mr.Boland’s position is 100% wrong either. Small businesses are struggling too. However, is this an increased tax on property owners only? In that case, don’t most small businesses either rent their space or work out of their homes? I guess one could make the argument that owners will pass the increase on to tenants by raising rents.

I’d like to know more. Wish I had gone to the meeting.

7 Andrew Zaterka October 21, 2010 at 7:10 AM

I like how both Susan and Selectman Rooney both mention the “savings” we’ll all be getting with this tax increase. Can we roll this into our 401k’s?

8 susan October 21, 2010 at 8:21 AM

Hmm, yes. I meant savings from the $15.38 rate as compared to the $15.58 rate, but I probably could have picked a better word there. Fair point.

9 Pat Q October 21, 2010 at 9:07 AM

Doesn’t sound too bad when it is only mentioned in terms of ……the tax rate going from $14.06 to $15.38 (and, of course, $15.38 is better than $15.58 if it were not a split tax rate).

HOWEVER………no matter how you look at it, it is a 9% TAX INCREASE in the midst
of very difficult times.

Balance the darn budget.

10 Kelly Roney October 22, 2010 at 11:30 AM

Well, no, if I look at in dollar amounts, it’s not a 9% increase. The rate went up 9% because assessed valuations went down.

Using Susan’s numbers above, the tax increase of $128 on the median house works out to a 1.7% increase.

11 Pat Q October 23, 2010 at 11:10 AM

thanks for the correction………………….

12 Al Hamilton October 21, 2010 at 12:36 PM

I am personally not a fan of the split rate.

The vast majority of our public expenditures are for services that are driven by residential property not commercial or industrial property. Schools account for 3/4 of our budget and those expenses are a function of the number of residents in town.

The other reason I am not crazy about the split rate is that it makes Southborough a business unfriendly place. Commercial and Industrial property is a real cash cow from a tax perspective providing vastly more resources than they consume. If we begin to discourage commercial development we will ultimately find that our personal property taxes will begin to rise because of the lack of commercial development.

Mass is already a business unfriendly state, in my opinion, as is evidenced by our very low growth rates and I think a split rate is just another nail in the coffin.

13 DLD October 22, 2010 at 3:19 PM

I’m guessing there will be a lot of families considering abatement applications this year since valuations are based on 2009 sales and the sale prices in town really tanked that year. I’d love to see a Q&A w/ Paul Cibelli on this site. The property valuation process often appears rather murky and arbitrary from the outside and it would be great to see a detailed explanation of how this process really works.

14 Chris Robbins November 15, 2010 at 8:27 AM

This Tuesday evening, Nov 16th. at 8PM the Selectmen will be voting for a second time on whether to keep a single tax rate for businesses and residents or to create a duel tax rate which will increase the tax on business. As a point of interest approximately 70% of all towns in the Commonwealth maintain a single tax rate. One of the reasons for this single tax rate is that it provides an equitable rate since businesses use minimal town services and recources. A single tax rate also promotes a wlecoming climate to new business growth and existing business expansion. This means that a higher percentage of our tax revenues would come from business and thereby lessen the tax impact on residents. Right now only 20% of our tax dollars comes from business vs. Marlboro and Westboro that have attracted more businesses and as a result contribute 40% to 50% of the tax revenues. If we increase the business tax unfairly, many will consider leaving Southboro or other businesses will choose not to come to Southboro. This will mean that residents will have to pay more.

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