Most cities and towns see property tax hike

Page 3 of 3 -- In cities such as Boston and Springfield, city officials complain, telecommunications companies are using loopholes in the tax code to avoid paying taxes on their equipment, forcing homeowners and other businesses to pick up the slack. In Boston, telecommunications firms were able to take more than half of their assets' value off the books by, for example, selling equipment to a tax-exempt holding company and then leasing it back.

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Their maneuvers will reduce their 2005 tax bills by $11.6 million and add $48 to the average bills of the owners of single-family homes, according to Boston Assessor Ronald W. Rakow.

Many homeowners believe that Proposition 2½, the property tax limit approved in 1980, is supposed to prevent their own tax bills from rising more than 2.5 percent in any one year. But the 2.5 percent limit applies to the community as a whole, not individual buildings. A city or town cannot increase its overall property tax revenue by more than 2.5 percent from year to year (excluding new construction), but the mix of who pays what underneath that ceiling can change dramatically.

In cities and towns with a single tax rate for homes and businesses, a combination of soaring residential values and stagnant commercial values shifts more of the tax burden onto homeowners, leading to residential tax hikes that surpass 2.5 percent.

Boston and other cities that set a different rate for homes and businesses can protect homeowners from that phenomenon -- but only up to a point. The state limits the extent to which cities can shift the burden onto businesses. Tax bills for homeowners jumped in Boston over the past two years because the city reached the limit. Mayor Thomas M. Menino persuaded the Legislature last year to give Boston and other cities a little more wiggle room, but only temporarily, to continue to shift the burden to business owners. Over the next few years, the state will gradually tighten the rules again, restricting cities' ability to shift the burden.

Cuts in state aid have not affected Boston's property tax bills. Because the city always taxes up to the Proposition 2½ limit, it didn't have room to increase property taxes to make up for state aid cuts. Boston never attempts overrides, believing them to be politically impossible.

But some cities and towns did have room under Proposition 2½ to raise their overall property tax revenue, and did so to make up for the state aid cuts in fiscal years 2003 and 2004. Others simply asked voters for permission to break through the cap: Overrides of Proposition 2½ leapt 60 percent between 2002 and 2003, to a total of $49 million in 39 communities.

However, this was followed by a sharp drop to $7 million in 14 communities in 2004, and Romney spokeswoman Shawn Feddeman said the administration believes overrides have had an ''infinitesimal" impact on property tax growth across the state.

Globe correspondent Janette Neuwahl contributed to this report.