Letter: Carl Guyer readressing tax rates

[Ed note: My Southborough accepts signed letters to the editor submitted by Southborough residents. Letters may be emailed to mysouthborough@gmail.com.]

To the Editor:

It is that time of year when the Town of Southborough determines the real estate tax rates for the upcoming year. This process has a long tradition of town hall personnel working with elected officials to determine next year’s real estate rates. In the past 20 years an evolution in our state real estate tax demographics has occurred and, as a result, it appears Southborough’s tradition approach is worthy of review.

In 2017 Southborough set a residential real estate tax rate greater than the rate paid on 79% of the residential property in state. At the same time, the commercial and industrial tax rates are less than those paid on 75% of the commercial and industrial property in the state. Our relatively high residential tax rate may be of no surprise to most residents, however the idea our commercial and industrial tax rates are discounted is not commonly understood.

This high residential vs. low commercial tax rate condition is produced by a constraint the town imposes on itself every year. This constraint is a mandate for inconsistency with statewide demographics.

So what is the “constraint” causing our tax rates to be misaligned? It is our single tax rate policy. This policy forces the residential, commercial and industrial tax rates to be the same numerical value. Constraining tax rates in this manner is at odds with statewide demographics. Statewide the real estate tax rate paid by residents in 2017 is $13.06 while commercial and industrial property owners pay a tax rate of $22.64. Imposing a single tax rate mandate creates an automatic discounting of commercial and industrial tax rates. It is a simple mathematical certainty. Remove this constraint, practical questions about statewide norms will be asked and more reasonable tax policies will naturally be implemented. The single tax rate mandate is costing the average Southborough residential taxpayer between $1,000 and $2,000 each year. 

Now here is an interesting bit of logic used to sustain this imbalance. The commercial and industrial developers/property owners have repeatedly told the citizens of Southborough and our elected officials an interesting story. They say that if we encourage development of commercial and industrial property at the present discounted tax rates the residential tax rates will eventually benefit. So far many in Southborough have accepted this as a rational argument without the knowledge of our very favorable commercial and industrial tax rates. There are conditions were the strategy of growing the commercial and industrial tax base to reduce tax rates does work. For this to work you must have a tax structure capable of producing the desired result. If your strategy is to lower tax rates with commercial and industrial growth, then discounting the commercial and industrial tax rate with a single tax rate is a tactical error.

Many communities have recognized similar quandaries, abandoned single tax rate policies, and adjusted their tax policies to reflect present state demographics. These needed adjustments are now complete in communities with 78% of the Massachusetts’ commercial and industrial tax base. The remaining 22% of the commercial and industrial property is located in communities like Southborough with single rates. As evident by this data, holding down commercial and industrial tax rates with a single rate is not been the key to a substantial commercial and industrial tax base. It is mistake to continue to believe otherwise.

A break from our obsolete tradition would certainly be a welcomed relief for Southborough’s residential taxpayers and would not be unfair to commercial and industrial property owners. Southborough’s 2017 commercial and industrial tax rate of $16.38 has room to grow before it even approaches the average $24.86 rate levied by communities which have abandoned a single tax rate.

I would encourage our elected officials to consider the demographics of our community and the state to ensure Southborough residents are not paying an unnecessary premium on their real estate tax bills to support an obsolete tradition. All the data needed to do this can be found at the Massachusetts Department of Revenue website. To find this data use “Mass DOR Data Bank” as a Google search.

Yours truly,
Carl Guyer

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6 years ago

Makes sense to me.
Could some gradual increase of commercial rates make it a bit more palatable to those effected?
I’d rather receive some benefit in small doses over the next 5 or 6 years instead of no benefit at all.

6 years ago

interesting read, well we have do something here, taxes keep going up and up, going to drive us out of southborough.

6 years ago

Very helpful overview. Sounds like it’s time to examine the single rate.

Frank Crowell
6 years ago

Or we could cut property taxes the old fashioned way……………by cutting town/school expenses and passing the savings onto the taxpayer.

6 years ago
Reply to  Frank Crowell

Wait until the next town meeting when the article for the golf course pops up asking for millions to rehab a business that has no proof of being profitable.

6 years ago

We just voted on this. I don’t see how town officials can make any changes to what the town recently decided. I’m in support of the split rate but that’s not what passed. Bringing it to town meeting again should be the only way to make that change.

David Parry
6 years ago

It seems that Carl’s sensible and we’ll reasoned ideas are steadily gaining more support. And it seems this town remains stuck in old habits and is in the minority State wide.

Our present policy has done nothing whatever to prevent 100 acres of industrial zoned land being converted to residential use at Park Central, nor speed up development of the last major industrial parcel remaining vacant south of Rt 9, which is owned by EMC/Dell.

Please explain more Carl … Is there any evidence that a modest rate change will make any difference to plans by large companies like Dell ?.

And explain …. What are the rates used by our successful neighbors at Framingham and Marlborough ? Why are they successful ?

And is there evidence that any Towns which have made a change from a single rate … have benefited or suffered as a consequence?

Thank for your new information.

SB Resident
6 years ago

If much of the federal tax plans currently being discussed get passed, we are going to have no choice but to implement something like this. The elimination of SALT will hit states like MA particularly hard and much of the benefit is going to tax breaks for businesses. Recovering those taxes at the state and local level is the only way to maintain the current balance and not put MA at a disadvantage.

In a similar vein, Carl is completely right, by not aligning our tax rates with state averages, we are just shooting ourselves in the foot, putting ourselves at a disadvantage compared to those living in other towns. We are literally volunteering to pay more so that businesses don’t have to. I thought we were past debating whether or not trickle down actually exists.

Rose Mauro
6 years ago

But note from last week’s Worcester Business Journal, re: Framingham; might be something to keep an eye on before we make any changes.

“On the business development front, Spicer has called for a review of the city’s dual tax rate, which she recognized is detrimental to the commercial tax base, and she said zoning bylaws may need a review in order to deal with blighted retail plazas, since Framingham has no recourse under existing ordinances. ”


Carl Guyer
6 years ago
Reply to  Rose Mauro

It did not take long for an opponent of split rates to come forward with an exceptional situation to sow fear that split rates cause commercial and industrial property owners will flee and tax rates will skyrocket. Before you succumb to this paranoia consider the following.

As stated in the letter 78% of all the commercial and industrial property in the state is located in split rate communities. What I did not include was the interesting fact that split rate communities account for 30% of the cities and towns in the state. This translates into 30% communities with split rates having 78% of the commercial and industrial property while the remaining 70% with single rates have the remaining 22%. So much for commercial and industrial property owners fleeing from split rates.

As far as skyrocketing tax rates in split rate communities, the average residential tax rate paid in single tax rate communities is $13.78 in 2017 while the residents in split rate communities paid $12.56. Yes, split rates do lower the residential tax burden.

Waving Framingham around as a typical split rate outcome is just factually wrong.

6 years ago

Many communities that have adopted dual rates wish they never had and have watched a steadily diminishing commercial tax base which has the perverse effect of increasing the burden on homeowners. In other words any gain to the homeowner is wiped out over the intermediate to long term as commercial businesses leave town or go out of business. There is only so much people will pay for a cheese pizza or oil change. Worcester made a pack with the fiscal devil over two decades ago and has watched the commercial rate go up and commercial base go way down.

Carl Guyer
6 years ago
Reply to  Publius

That is why the residential tax rates in split rate commutes is lower than those in single rate communities! You need to base you opinion on fact.

Carl Guyer
6 years ago
Reply to  Publius

Here is some more information for you. Worcester’s problem is not due to a decline in the commercial tax base. The problem is on the residential side. From 2008 to 2013 the residential tax base declined by 25% while the commercial base increased by 35%. I have heard the pizza logic before and it makes no sense.

6 years ago

Thank you to Carl Guyer for taking the time to clarify this situation.
Look at Waltham, for example, bursting with commercial property. The residential rate is $12.56 while commercial is $29.04.

2.3X greater!

6 years ago

While it is interesting to cite Southborough’s vs the state wide rates, it does not illuminate how the split rate – what rates exactly – would impact our town. Southborough would have its own res vs commercial taxpaying split to be reckoned with.

Mr Guyer, Do you have any proposals on what the rates should be, if split, in Southborough, and what the impact would be to both residential and commercial sides? Without these details, us residents can’t form an informed opinion, or debate the pros and cons.

Carl Guyer
6 years ago

To answer your question, lets look the community that has demographics that matches Southborough’s and see.

In 2017 Andover’s commercial tax base is 19.2 % of its total tax base, almost identical to Southborough’s 19.1%. If Andover had a single tax rate it would be $17.34 compared to Southborough’s $16.38. Andover’s average residential assessment was $604,053 compared to Southborough’s $577,456. Andover’s 2017 tax rates are $15.18 for residential property and $26.46 for commercial property.

Using Andover as our numerical model, how would Andover’s split rate tax approach
impact the average residential property owner in Southborough? The result would split
Southborough’s tax rates to $14.26 for residential property and $24.81 for commercial
property owners. The typical Southborough residential tax bill for 2017 would drop from
$ 9,457 to $ 7,948, a reduction of $1,509 for the average Southborough homeowner. If you think a commercial tax rate of $24.81 per thousand is excessive, consider that the asset weighted average tax rate for the 78% of commercial property owners in split rate
communities in Massachusetts is $24.86. Something of a numerical coincidence, yet still a relevant fact.

Have you ever been to Andover, it is a really nice place.

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