Worcester Tax Rate Showdown Pits Businesses Against Residents
Tuesday, December 17, 2013
Business leaders have lambasted the current disparity between residential and business property taxes, which they say has dampened the city's economic climate and had a negative effect on the overall tax base.
“We need dramatic action. We need some leadership from the city council,” said John Giangregorio, the chair of the Canal District Business Association, who said there was a clear decision to be made, either allowing an “exodus” of business to continue or making Worcester “a little more business friendly.”
“It's critical that we send a signal to keep current businesses and attract more.”
Commercial/industrial currently accounts for 28 percent of total taxable property in the city; however, 39 percent of the levy is paid by that group according to data compiled by the Worcester Regional Chamber of Commerce.
“We've been arguing that it has had a detrimental effect (for years),” said the Worcester Regional Research Bureau's executive director, Roberta Schaefer. In that group's latest report on city finances, Worcester's commercial tax rate was the second highest in the region, leaving the city “at a competitive disadvantage when trying to attract business.”
“In addition, higher commercial tax rates have not guaranteed Worcester's residents the lowest residential tax rate,” the report continues. That residential rate was the sixth highest in central Massachusetts in 2013.
Differing opinions on tax rate structure
The annual discussion in Worcester spurs an ideological debate over taxation while prompting a thorny dilemma: By reducing the relative tax burden on business now, the proportion of the tax levy borne by residents will rise.
“I'd like to do whatever I can to keep the residential side in the same ballpark as it is now,” said City Councilman George Russell, one of two dissenting voices during last year's tax vote that increased both rates and narrowed the divide.
Russell said he saw the debate as a continuation of wrangling after 2012's revaluation, which saw some commercial assessments go up dramatically. While he said he didn't agree with the reassessment's approach then, Russell said it wasn't fair to impact residential tax rates now.
Giangregorio said he agrees that residential taxes are too high. “The way out is to broaden the tax base,” he said. “And the way to do that is to attract more business.”
Growth of nonprofits shrinks taxable property base
“The real problem we face as a city is the exponential growth of non-profits in our community,” responded Paul Giorgio, founder of the local publishing company Pagio Inc., and a GoLocal MINDSETTER.
Giorgio said the problem wasn't solely with large institutions and colleges, but also a proliferation of small nonprofits, storefront churches, and social service agencies. While providing a service, those properties are off the tax rolls and not directly contributing toward city coffers.
According to the latest research bureau tally, the value of tax-exempt property currently totals 28.89 percent of Worcester's total property value, or $4.4 billion.
“If we don't solve this problem, no business and no homeowner will choose to live here or afford to live here,” Giorgio opined.
Speaking to the city council last week, chamber President Tim Murray asked for an equal dollar increase in average business and residential tax bills for 2014.
“To us, that was the most fair and equitable rate available,” said Stuart Loosemore, the chamber's director of government affairs and public policy.
The chamber, which successfully lobbied for the rates approved by the city council last year, has proposed a residential rate of $19.77 per $1,000 property value (up $1.19 from fiscal year 2013's $18.58) and a commercial rate of $30.24 (a $0.61 decrease from this year's $30.85).
With those numbers, the average residential tax bill would increase $172, while the average commercial/industrial bill, $171.
Loosemore said last year's revaluation process weighed heavily for the chamber after some businesses saw their tax bills skyrocket. “With those valuations being just a year old most of those businesses are still reeling from the increase,” he said.
For Giangregorio, the proposed shift is moving at a “snail's pace”.
“The city council needs to make a hard decision,” he said.
Dual structure reasonable, say some residents
Joan Crowell, director of the Accurate Worcester Assessments on Real Estate Coalition, contends that the chamber rates are far from fair and equitable. While the average single-family home tax bill would increase in line with the average business, condominiums and multi-family homes would see larger hikes.
Worcester being the second largest city in Massachusetts, Crowell points out that all 10 of the largest communities in the state have dual rate structures, most with a commercial rate more than double that of their residential rate.
Instead of reducing business rates, “Worcester has to do a better job in marketing the attributes that make Worcester a great city and a destination for both residents and businesses,” she said, adding the city should consider adopting residential and small commercial exemptions.
Schaefer acknowledged the contention that other large cities have dual structures, but “the problem is, we're not near them.”
“If a company is looking to relocate, they're looking at a region,” said the research bureau head. By moving into a surrounding community with a single, lower tax rate, Schaefer said that company would benefit from Worcester's resources without paying Worcester's taxes.
Question on whether delayed vote will be held
Crowell said she didn't expect a vote to be held this week regardless, given state Department of Revenue guidelines covering public disclosure periods before a triennial revaluation year. (The city is scheduled for revaluation in 2014 after receiving an extension the last time around, pushing that revaluation from 2011 to 2012.)
At the last council meeting Dec. 10, the city's Chief Financial Officer Thomas Zidelis said he expected certification from the state in time to allow tonight's hearing and vote. Lack of that final certification held up the process one week.
Schaefer said she expected to see tax rates in line with the chamber's proposal pass. But to continue narrowing the difference between residential and business taxes will take years. “This is a really long-term process. ... There has to be a commitment every year,” she said — dependent on finances, and political will.
Christopher Pinto, a member and former vice-chair of the Worcester Republican City Committee, said anyone who can live or run their business outside of city limits should do so “ASAP”.
Given current tax rates, without an incentive tax-increment financing, or TIF, agreement, “why would it make any sense to come to the Woo?” Pinto asked.
Related Slideshow: Worcester’s Most Dangerous Neighborhoods
Neighborhood search website Neighborhood Scout indexed violent and property crimes data from the Federal Bureau of Investigations to determine the crime rates on a neighborhood-by-neighborhood basis in Worcester. The slides below show the overall crime index (a score of 100 is best) as well as the per capita crime rates broken down by violent and property crime. The data is sourced from 2011 figures, the most recent year available from the FBI. The online resource is created by Location, Inc., a Worcester-area company that bills itself as a leader of location-based data and risk analysis information.
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