Letter: 2022 Southborough Real Estate Tax Policy Review

[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:

How did this happen?

How is it in 2022 Southborough’s residential property owners are paying a real estate tax rate higher than 88% of the residential property in the state while, in stark contrast, our commercial property owners pay a rate lower than 72% of the commercial property in the state. Why are Southborough’s residents paying a burdensome high tax rate while local business owners benefit financially from a low tax rate? Who would support adding cost to an already above average residential tax rate to provide millions of dollars in tax benefits to commercial property owners? These are reasonable questions.

Explaining the mechanics at work here is simple. Southborough’s real estate tax policy, called a single rate, applies the same real estate tax rate to residential and commercial property. In contrast to this, 80% of the commercial property in Massachusetts has a tax rate higher than the local residential property tax rate (aka a split tax rate). It simply is this difference in tax policy that creates the above condition. If you apply a tax policy linking residential and commercial property rates, you diverge from common practice and select to provide commercial property owners with a low tax rate. Whether you agree with the practice of split tax rates, or not, single tax rates communities give commercial enterprises a significant financial advantage. You take a different path, you get different results.

Unfortunately even a reasonable split rate in Southborough is not going to produce residential tax rates below the state average. However, it will better align the town with prevailing commercial tax policy. Simply moving our commercial tax rate closer to the average rate now paid by commercial property owners would be a $3,250,000 annual reduction in the tax burden on Southborough’s residents or approximately $1,000 savings for the average residential property. Again, this will still place Southborough’s residential rate above the state average.

So what is holding up the implementation of a split rate in Southborough? The answer to this question has two parts.

The first part is a widely held belief maintaining a low commercial tax rate will attract significant growth in the commercial tax base and produce lower tax rates for all. Associated with this logic is the belief a split tax rate prevents growth of the commercial tax base. The fact that 80% of Massachusetts’ commercial property is located in split rate communities, the associated argument seems irrelevant. As for the primary argument tax rates will be lowered with additional commercial development, this concept is only amplified with a split rate policy.

The second answer comes from the counsel given to the Select Board every year as part of what should be an impartial assessment of the Southborough’s tax policy. Unfortunately the primary source of this counsel has a strong personal opinion on the subject of split tax rates.

So why is Southborough with a high residential property tax rate aligning itself with a commercial property tax policy used for only 20 percent of the commercial property in the Commonwealth? Clearly, adopting the tax policy used for 80% of the commercial property in the Commonwealth would be beneficial to residential tax payers. We can still give our commercial property owners a tax advantage with a below average tax rate, if that is what is desired, without imposing the now unreasonable burden on our residential property owners. There is plenty of room between our current commercial tax rate and the state average to reasonably burden everyone.

Times change. Economics shift. Southborough needs to adapt to changing conditions.

In closing, there are many benefits associated with commercial enterprises and their industrious culture. We all benefit from the economic engines of these organizations, but we must be realistic about what is happening around us. Finding an optimum economic balance for all is never easy and can go awry if policies are driven by attitude, wishes or beliefs.

Carl Guyer,
146 Middle Road

[Editor’s Note: Carl shared his excel spreadsheet with his data analysis. I know not everyone has excel (or feels safe downloading a file from the internet) so I made some formatting changes to save it as a viewable pdf file here.]

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