Tax relief strategies explored

Selectman Marty O'Brien last week sought unsuccessfully to have the town adopt separate tax rates for businesses and residents, with businesses charged at a higher rate.

The Board of Selectmen decided instead to stick with a single tax rate. Selectmen voted, 2-1, with O'Brien in the minority, to have the town submit a single tax rate of $10.46 per $1,000 to the state, as proposed by the Board of Assessors.

O'Brien said after the meeting that he has not given up on the idea of pressing for a split tax rate, which he believes is needed to address a shift in the tax burden to residents resulting from the revaluation of town properties.

The first-year selectman, meanwhile, is seeking two other forms of tax relief.

On his motion, selectmen voted to have the Board of Assessors investigate the town's adoption of a "residential exemption." Such a measure allows a community to provide all owner-occupants a fixed property tax break equal to the tax on up to 20 percent of the average residential value in the town.

Selectmen also agreed to have the town's treasurer/tax collector research the idea of Winthrop adopting a state-authorized program in which senior citizens can receive a reduction in their property taxes in return for working a set number of hours for the town.

O'Brien said he was not offering the proposals to build support for the $6 million override that selectmen have voted to place on the ballot in February, although he does support passage.

In the case of the split tax rate, he said the proposal was an attempt to address a "fairness issue." O'Brien said that during the last revaluation in fiscal 2003, the value of residential and business properties both rose. Yet because residential values increased by a greater degree, residential tax bills increased while business tax bills fell.

According to figures from the town assessor's office, between fiscal 2002 and fiscal 2003, the share of the town's tax levy paid by businesses fell from 7.36 percent to 5.98 percent. The overall amount of taxes paid by residents rose that year by 8 percent, while the amount paid by businesses fell by 16 percent.

Over a four-year period, the share of the tax levy paid by residents rose from 93.09 percent in fiscal 2001 to 93.92 percent under the proposed fiscal 2004 tax rate. During that time the total valuation of residential properties rose by 67 percent, while total residential taxes grew by 34 percent. The total valuation of business properties rose by 46 percent, while taxes grew by 17 percent.

Deputy Assessor Patrick Harring said the conversion of some commercial properties to residential, coupled with the faster growth of residential values, explained the shift in tax burden. He said the commercial share would have been lower still had it not been for the conversion of Winthrop Hospital in 2002 to a private hospital.

"Winthrop never had a split tax rate and quite frankly, prior to this I don't think it was warranted," O'Brien said. "But when a business increases its value and its taxes drop, that is an unfair situation to the residents of the town because they are picking up that tax cut for the businesses."

He said his proposal would have had the effect of undoing the shift of taxes that had occurred from residential to business.

But Selectmen chairman Ronald Vecchia said, "If we are trying to build up in Winthrop a more solid base of businesses, this to me would be a negative," referring to a split tax rate.

He said he also would have liked to see tax data from a longer period of time, noting that there are fluctuations in the valuations of residential and commercial properties.

Selectman Richard F. DiMento also opposed the split tax rate.

"We do not at this time want to punish the small businesses of the town," he said. "We need every business we have. It's only 6 percent of our tax base."

DiMento also said he believes in time the pace at which commercial values rise will increase.

O'Brien said he hopes to spur state lawmakers to consider changes to Proposition 2 that would address on a statewide basis the problem of residents having to pick up a larger share of taxes because of the disproportionate rise in home values. He said one idea would be to lift the Proposition 2 property tax cap as it applies to business taxes.

Absent the Legislature taking such action, he said he would propose again next year that the town adopt separate tax rates.

O'Brien said he also plans to seek adoption next year of the residential exemption. He said that measure would allow the town to shift the tax burden within the residential class from people who live in their homes to those who maintain property as investors.

"My belief is if the property you own is producing income and you don't live there, you should be taxed at a higher rate than a person who uses their property simply to live," he said.