The Not Quite Glorious Property Tax Burden in Springfield…
SPRINGFIELD—The annual tug-of-war between residential and commercial property owners and their tax rates ended slightly in favor of residents this year. Each year, the City Council must set the rates, which distribute the property tax burden. The total amount to be collected was already determined with the budget before July, but who pays what attracts just as much attention.
By turns wonky and populist, Monday night’s meeting set the residential rates slightly lower than recommended—and thus raise the commercial rate. This reflected a desire among councilors to mitigate residents’ inevitable tax bill increases. Though the rate barely budged, growing residential valuation still push tax bills upward.
At-large Councilor Timothy Rooke and Ward 4 Councilor E. Henry Twiggs were absent from the special tax-setting meeting.
Richard Allen, the chair of the Board of Assessor, presented Mayor Domenic’s Sarno recommendation to the Council. Residences would be taxed at $19.69 per thousand of value while commercial property would be $39.25. The rates may also be seen as 1.969% and 3.925% of value. This represents an increase of 3 and 19 cents respectively from this year.
The city should collect about $198 million in property taxes in 2018, not quite $7 million more than the previous year. Last year the city enjoyed a larger increase and avoided hitting its levy ceiling under Proposition 2 ½. That 1980 law caps year over year property tax increases at 2.5% plus new growth, together known as the levy limit. It also imposes a hard cap or levy ceiling on property tax revenue of 2.5% of all taxable property in a community.
A special tax rate review committee chaired by Ward 7 Councilor (and Richard Allen brother) Timothy Allen endorsed Sarno’s rates.
Richard Allen said the city’s property values continue their claw out of the abyss left by the Great Recession. Like last year, the recovery is uneven, particularly for commercial property.
“Commercial/industrial overall has not grown at the rate residential has,” he said.
Residential rates, however, have nearly recovered from the recession. In FY2008, Springfield’s average single-family home valuation was about $151,000. After falling to a foreclosure-driven low of $126,000, the average single-family value is now $146,000. It could surpass 2008’s figure next year. Adjusted for inflation, however, the 2008 price in 2017 dollars is $176,000.
According to documents the Assessor’s office distributed, this year the value of all taxable property in the city rose to approximately $7.33 billion from $7.66 billion. Nearly all of that was residential value growth, which leapt $220 million from FY2017 to FY2018. Commercial only grew by about $48 million.
That discrepancy complicates rate-setting. Greater Springfield Chamber of Commerce chief Nancy Creed lamented rising tax bills even as commercial values stagnate or even crater. Meanwhile, residents face spiking bills as their properties gain value. Several residents spoke about the impact, especially on elderly homeowners on fixed incomes, often to cheers.
However, Creed pointed out that despite representing barely more than a quarter of all taxable property, commercial property bore nearly 43% of all property taxes.
“The chamber recognizes the difficult task you have in front of you,” Creed said. Yet, she urged them to send businesses a message of support by not letting the rate exceed Sarno’s $39.25 recommendation.
Councilors peppered Assessor Chairman Allen with questions about programs to relieve seniors’ tax burden, the valuation process, taxing non-profits and using MGM funds to lower tax bill.
Allen also noted that MGM has a PILOT itself under Chapter 121A, the commonwealth’s urban redevelopment code. The casino is already paying a pre-set amount to the city that avoids the hassle of trying to value the casino itself. He observed that shifting casino market conditions have wreaked havoc on gaming towns like Atlantic City. The PILOT, part of Springfield’s host community agreement with MGM Springfield, avoids this problem. However, Allen demurred on whether that money could offset future tax bills.
“That’s really a conversation with the budgetary officials and the mayor,” he said. “I’m not in those discussions about how to spend the money.”
Because of the PILOT, MGM’s property is not part of the city’s total taxable property figure.
The Council ultimately rejected Sarno’s proposal on a 6-5 vote. Seven votes were needed.
Councilors Allen, Thomas Ashe, Melvin Edwards, Adam Gomez, Ken Shea and Kateri Walsh backed the rates the mayor suggested. Ward 2 Councilor Michael Fenton then moved to reduce the residential rate by a penny to $19.68 per thousand. That, in turn, kicked the commercial rate up to $39.28 per thousand. Those rates passed 9-2. Councilor Bud Williams and Marcus Williams dissented.
Since regaining power from the Control Board, the Springfield City Council has not gone full populism. It has seesawed between the pleas of commercial and residential landowners. Although in this circumstance it favored the latter, the shift was slightly enough to maintain the current gap between how each class of property owner pay.
Not surprisingly, the subject of broader tax relief hovered over the whole debate. However, as Allen noted on several occasions, most of the power there lies on Beacon Hill.