See also:
Why are
residential property taxes so high? Action you can take
now - 2/12/2004
New Tax Legislation
(1/16/2004): "Chapter 3 of the Acts of 2004: An Act
Relative to Property Tax Classification in Cities and
Towns"
Property Taxes in
Boston - notes from Feb. 12, 2004 ABN meeting
2/12/04
Why are residential taxes soaring?
Boston's residential taxes have been rising for a few years; the residential levy was $225 million in l997, $292 million in 2002, and $330 million in 2003 (up 47%), shared by basically the same number of households. (The commercial levy rose only 35%, despite much new construction.)
Home prices, thus assessments, have been rising due to increasing demand from job creation, immigrants, and empty-nesters, and inadequate construction of new housing to meet the growing need.
What would be the effect if we built 20,000 new housing units in Boston? Would that drive down the prices and thus the tax assessments per home? Would the tax burden be shared by more owners and thus lower for each? Would the increased assessed value of new housing cancel out that reduction? Would additional service costs drive up the tax burden?
What if we converted existing office space to housing? Would it count as new growth for Prop 2 1/2 calculations? Would it help office occupancy rates? Would it reduce the individual tax burden?
For 2004, housing taxes were going to take a big jump because while housing prices kept rising, the poor office economy lowered commercial taxes on the biggest properties.
Why were housing taxes going to jump so much at once, an average of 40% on a single-family home? What was the residential percent going to be in 2004? Even if home prices had not risen, would assessments and/or rates have gone up to make up for the falling commercial share of the total levy?
How was the 30%/70% residential/commercial split of the total tax burden originally established?
Must it remain so regardless of the amount of commercial development added to the city?
How does it relate to the residential "floor" (45-50%) and the commercial "cap" (175-200%)?
How did this split get "frozen" at 30.1%/69.1% from l997 to 2002 -- and then jump to 31.9%/68.1%??
How do commercial and residential tax assessing methods differ?
Office and apartment towers are not taxed on market value, but on net income; residential properties pay based on sales prices of comparable properties. Both are defined by the Assessor as "full and fair cash value" (one for investment purposes and one for residential uses); however, corporations' taxes are an "income tax," set by ability to pay, while residents must pay regardless of income changes.
Is this different taxation method required by law, or just Boston practice? What do other cities do?
Are commercial properties paying their fair share? Do their assessments capture "full and fair cash value" as closely as residential assessments? Do higher classified rates give a cross-subsidy to homeowners if the underlying assessments are low?
What did the recent State legislation do for us?
The legislation, Ch 3 Acts of 2004, reduced the jump in next year's residential tax by lessening the reduction in commercial taxes that would have occurred due to falling office lease income. But it kept the residential portion of the city's $1 billion tax levy at no lower than last year's, about 32% or $330 million, to be paid by homeowners and landlords/renters. The remaining 68% is to be paid by commercial properties, but only up to 200% (up from the current 175%) of the amount they would have paid without rate "classification." For the next 5 years, the balance will shift back as the cap goes down to 170%. So, at the end of this legislation's term of effect, commercial properties will pay less of the tax burden than they did before it was passed unless they appreciate greatly in value.
What is the "minimum residential factor" held to at least 45% in 2004, up to at least 50% in 2007?
Why did the law keep the "floor" for the residential proportion of the total levy at 32%, and not let it go back to 30.1% as it was since 1997?
What will be the effect of bringing the commercial cap down below 175% later?
The legislation also requires the State Dept of Revenue to study the tax classification system and determine "sustainable and equitable methods for addressing the current and future divergence in property values that result in an abrupt shift of the tax levy onto one class of property taxpayers." The report and recommendations are due to the Joint Committee on Taxation by December 1, 2004.
What is the status of this State study? What can we do to participate?
What is the City doing to further this study?
Has the City begun to provide all the information the law requires?
Is the burden of taxes fairly distributed within the two classes?
Residential:
Are assessments in various neighborhoods equally reflective of market values?
What is the redistributive effect of the homeowner exemption? How much of the levy does it shift from low- to high-assessment residential houses/apartment buildings? Should there be a minimum homeowner tax?
Big apartment buildings are assessed as commercial property. Condos are residential properties; each gets homeowners exemption. Has the wave of condo conversions affected the residential tax distribution?
Commercial:
Do office towers have an advantage over "small businesses" in assessments?
If a small-business exemption is created for protection from the rising commercial cap, will leased office towers convert to condos, reducing the revenues with multiple exemptions?
Vacant land is assessed far lower than the permitted development value. The city loses revenue, and under-taxation encourages speculation instead of development (Fan Pier: assessed $23 million, appraised $150-250 million; McCourt land: assessed $23 million, appraised $175-200 million).
Could we use a "land value tax" to set appropriate assessments, and get the land into productive use, or tax it at the point of sale at full market value, similar to agricultural land??
How much revenue does the City lose in development tax breaks?
We are giving tax breaks (e.g. Chapter 121A and TIF) to big commercial and luxury housing developers without any "blight" justification (121As: Herald, 2/9/03, TIFs: Globe, 1/25/04). Residents and small businesses are thus subsidizing big developers.
How much is lost annually to 121As, TIFs, old Tax Letters of Agreement, etc.?
Why is the City still giving these tax breaks? How do we stop them, and renegotiate the ones given?
How much of our budget should property tax cover? What are other sources of funds could reduce the dependence on property tax?
New/updated Payments in Lieu of Taxes should be put on non-profit institutions, Boston Redevelopment Authority (450 properties totaling 250 acres), Massport, etc.
How much are these properties worth?
City properties taken by BRA using eminent domain without compensation (e.g., Hayward Place worth $23M)
Why did the Mayor give them away? What is their total value? How can the City get sale or lease proceeds?
City-owned developable land should be sold; the Mayor just announced a program to do this.
How much is available? What is the value at current zoning?
Get increased State local aid.
How could we get back to earlier levels of State aid?
Document outstanding taxes, and collect or foreclose and sell the property.
Impose a city wage tax on suburban commuters.
Examine the BRA budget (rent-free use of City Hall while City departments rent/buy space elsewhere, BRA use of State/Federal grants, City capital appropriations to BRA, etc.)
What are the powers of the Mayor, Assessing Department, BRA, City Council and the State Commissioner of Revenue in addressing this tax issue?
Mayor Menino said at the State House hearing that the legislation is a "band-aid" and we need a long-term solution.
What is the City doing now to find a long-term solution?
What studies is the Assessing Department doing? Can it model the effects of alternatives discussed?
What is the Mayor's role in setting tax policy? The BRA's role?
The City Council's role?
The State Commissioner of Revenue's role?