Assessors are projecting a larger tax increase for residential property owners than was projected last spring. Based on concerns that included longer term impacts, the Select Board chose not to approve using federal ARPA funds to make a one time difference in next year’s bills.
The discussions and decisions were covered in two back-to-back items on Wednesday night. The Select Board met with the Town’s Assessor about the assessments and a consultant on allowed uses for American Rescue Plan Act funds.
Property Tax Projections
In May, Town Meeting voters were told that approving the Town’s budget would cause a projected 3.19% tax increase for the average homeowner in Southborough. This week, the Town’s Assessor explained why that figure is jumping to a projected 5.43% increase.
The big difference isn’t an increase in the total funds the Town needs to raise through property taxes. It’s based on a shift in the tax burden from Commercial and Industrial property owners to owners of residential properties.
Taxes are charged based on property values. Residential values have been spiking while CIP values have dipped. (Scroll to the bottom for more details on the presentation.)
The annual Tax Classification Hearing will be held on November 16th. However, Assessor Paul Cibelli told the Board he needed information this week if he was to change plans for setting the tax rate.*
The Select Board’s unwillingness to vote that night on specific ARPA fund uses appeared to eliminate the possibility of lowering rate for 2022 bills.
Considering Use of ARPA Funds
At a meeting with the Advisory Committee, the Board heard about the uses it can put $3,051,241 in one-time, eligible American Rescue Plan Act funds towards.
One allowable use was paying for certain items under the approved FY22 Budget, therefore lowering the property tax burden. The Assessor’s office, Finance Team, and a consultant warned that using non-renewable funds to decrease taxes one year magnifies the increase in following years.
Next year’s tax burden situation is expected to be even worse given the trends in property values. (Assessed values are based on values as of January 1st. Residential property values have continued to climb this year. Meanwhile, commercial properties are still having vacancy issues.)
Board members decided they weren’t prepared to vote on earmarking funds without first seeking public input.
Members of the groups stressed that the $3M offered a singular opportunity. Select Chair Lisa Braccio noted that the ARPA funds are funded by taxpayers.
Advisory Chair Kathy Cook and Select Board member Sam Stivers discussed the potential of using some ARPA funds to lessen the sting of this year’s tax bills. Cook estimated that using $440K would lower the tax increase to below 4%. Stivers posed the possibility to use half that to bring the increase to under 5%. He pointed out that part of why voters elect them is to make decisions like these.
In the end, the Select Board voted unanimously to appoint a Working Group to solicit input and consider possible uses for the ARPA funds.
ARPA Working Group Concept
The group will include three Citizens-At-Large who do not serve on any other boards or committees. (They hope to attract residents who haven’t previously served on committees.) It will also consist of two representatives from the Capital Planning Committee, one member of Advisory, and one member of the Economic Development Committee.
The charge will be voted on at the November 16th meeting. Braccio said she wanted the group to reach out again to all departments to make sure they know about any potential projects they are looking for. She also wants a public survey or 1-2 input forms as part of the process.
The group will be assisted by consultant Capital Strategic Solutions (CSS). CSS will vet that any proposed projects are ARPA eligible. The group will report out to the Select Board who will make the decision. The Town has 3-4 years to spend the funds. Ideally, the Board would like a recommendation in time to plan for the Annual Town Meeting.
More Details on the Tax Rate projections and changes
Assessor Paul Cibelli laid out the Timeline for the Assessor’s Office’s determination of Property Values. His slides included ones that showed that changes in past years didn’t cause a significant adverse impact on residential rates. He presented that this year the increase to total property rate values was 3.76%. Residential went up by 4.83% while CIP went down by 0.6%, a 5.63 gap.
Last spring, the Finance Team, Advisory and Select Board members made the mistake of basing average single family home tax increases on past years. This week, they discussed the need to run a number of conservative financial scenarios this winter for projecting tax impacts on FY23.
No mention was made of exploring splitting the Residential and Commercial tax rates. The potential is generally included in the Tax Classification Hearing. However, the Assessors have consistently recommended against it. They’ve explained that the ratio of properties means that making a significant reduction for residents requires a much larger increase to businesses.
*Normally, the Tax Rate would already have been set by now to allow the Town to prepare to issue tax bills for the 1st Quarter of the calendar year.
The Tax Classification hearing is normally held in October. This year, the hearing was pushed to November to allow for the possible impact of items in the Special Town Meeting. After learning in late October of the projected tax rate change, Advisory and the Select Board agreed to ask STM voters to approve funding out of the “Free Cash” certified in July, so as not to add to the FY22 budget burden.