Cities seek to shift tax burden to business
With homeowners facing the prospect of huge property tax increases next year, the city of Boston and other cities and towns across the state are asking lawmakers for the power to force businesses to shoulder a bigger share of the municipal tax burden.
In Boston, homeowners are looking at tax increases that could average $800 a year, an increase of up to 50 percent, if the Legislature does not pass House Bill 1980 before it adjourns for the year on Nov. 19.
Mayor Thomas M. Menino met last week with members of the Boston delegation to ask them to lobby lawmakers across the state to approve the bill, which would allow municipalities to raise the limits that a 1978 law places on commercial tax rates.
If the bill does not pass, Menino said, homeowners in nearly two dozen communities could be slammed by tax increases.
"It doesn't just affect Boston," he said. "We want to move this legislation through the House and Senate as quickly as possible and get the governor to endorse it," Menino said. "It's important to get relief to the residential taxpayers. We're pushing as hard as we can."
Boston's tax assessor, Ronald W. Rakow, predicted that businesses would not see higher taxes under the bill, though it would halt the steady decline in tax burden they have enjoyed in recent years.
Business groups are opposed to the measure, which they say will hurt businesses already reeling from the sluggish economy.
"This bill can be a death knell for places like Worcester, where we need revitalization," said Ed Shanahan, chief executive officer of the Greater Boston Real Estate Board. "For Lawrence, Brockton, New Bedford, and the other older urban communities, we need to encourage economic activity. This approach isn't a way to revitalize them. On the contrary, it's a way to further depress those blighted business districts."
In Massachusetts, 102 cities and towns have chosen to tax homeowners and businesses using different rates. Under the 1978 Classification Law, those cities and towns can impose a tax rate on businesses that equals 175 percent of what the rate would be if there were a single rate for homeowners and businesses. The law gives those cities and towns the flexibility to adjust the rate and shift the burden to protect homeowners, as long as they stay under the 175 percent ceiling.
Under the bill, that limit would be increased to 200 percent, allowing cities and towns to place a greater burden on businesses.
Under the bill, Rakow said, Boston homeowners would still see a tax increase, but the increase would be smaller than it would otherwise be. Businesses would not be hard hit, he predicted, though he declined to give specific examples for next year. Officials said the city has not set tax rates for next year, and they are revaluating properties around the city.
The Boston tax rate for fiscal 2003 is $11.29 per $1,000 of assessed value for residential property, compared with $31.49 per $1,000 for commercial property.
In Boston, city officials have traditionally sought to have businesses shoulder 70 percent of the property tax burden, and homeowners the remaining 30 percent. Lately, the business share has dropped to 68 percent, and the homeowners' share has risen to 32 percent. If the bill passes, the city would keep it at 68-32. A greater share of the burden is falling on homeowners because in the past few years residential property tax values have risen, while commercial values have been stagnant. In Boston, residential values grew by 10.6 percent last year, while the value of commercial property declined by 1/10 of 1 percent, according to Samuel Tyler, executive director of the Boston Municipal Research Bureau.
Without the new legislation, the average homeowner in Boston, who now pays approximately $1,970, could see a tax increase of between $700 and $1,000, according to Tyler and two lawmakers.
"Because values at the residential property level have continued to climb in these bad economic times, it means property taxes will increase," said Representative Anthony Petrucelli, an East Boston Democrat who is head of the Boston delegation. "The bill would at least lessen the blow."
Fall River is in a similar situation, according to Mayor Ed Lambert. Residential property values in that city went up 46 percent last year, while commercial property values rose only 16 percent. As a result, the owner of an average Fall River home had to pay $130 more in taxes. Lambert is backing Menino's bill, and the city is also pushing a version that would apply only to Fall River.
Both proposals would slow the increase in residential bills and slow the decline in commercial ones, but they wouldn't lead to a bigger tax bill for the average Fall River business, according to Lambert. In fact, he said, the average commercial property tax bill would still decrease by $200 under either the statewide or Fall River measure.
"It's hard for the business community to credibly say they'll be gouged by this bill. Their tax bills will go down, because there's such a disparity between residential and commercial growth," Lambert said.
But Michael Widmer, president of the Massachusetts Taxpayers Foundation, said businesses are already paying too much.
"Our overall view is that this is a bad piece of legislation," he said. "Businesses are already underwriting community services and providing tax relief for homeowners in a major way across the Commonwealth. In Boston the shift is about $300 million [to business, under existing law]. It's clearly inequitable to try to add to that."
Boston homeowners pay among the lowest property taxes in the metropolitan area, continuing a tradition of low residential tax rates since the days of James Michael Curley. Taxpayers in Brookline, for example, paid an average of $9,370 last year. Newton taxpayers paid $6,481 and Cambridge $4,748.
In addition, the city of Boston offers substantial exemptions for owner occupants, veterans, and widows. The city also lets financially burdened property owners defer tax payments until they sell their property.
Because so many cities and towns across the state are looking at hefty tax increases, Boston officials are hopeful the measure will pass. According to Boston officials, 22 communities have chosen to impose the maximum tax rate for commercial property and another 28 municipalities are approaching the limit. That translates into 90 state representatives and 33 senators whose constituents have an interest in seeing Menino's measure pass, said Howard Leibowitz, the city's chief lobbyist.
"We've done one of our most extensive efforts in terms of reaching out to representatives, because it affects so many cities and towns," Leibowitz said.
Scot Keefe, research director of the House Taxation Committee, would not predict whether the measure will make it out of the House Taxation Committee. "I have no sense of that," he said.
Its prospects remain uncertain. Boston city officials have been pushing since spring for the bill.
Romney spokeswoman Shawn Feddeman said the governor has not yet reviewed the bill. House Speaker Thomas M. Finneran and Senate President Robert E. Travaglini, who both are from Boston, did not return phone messages left by a reporter.
