Take My Council, Please: The 2015 Rate of Return…
SPRINGFIELD—As it capped off 2014, the City Council formally and narrowly approved the tax rates for residential and commercial property following the annual deliberation over which group of tax payers were more in greater need of relief.
On a 7-6 vote, the Council approved rates that maintain, but do not grow the disproportionate share of the levy that currently falls on businesses. The result is a larger rate decrease for businesses. Almost all rates under consideration would have lowered both residential and commercial tax rates, but a larger residential drop, by some metrics, would have shifted the tax burden further onto commercial property owners.
The Council voted to set residential tax rates at $19.67 per $1000 of valuation (or 1.967%) for residential property and $38.77 per $1000 of commercial value (or 3.877%). Mayor Domenic Sarno had proposed rates of $19.61 for residents and $38.93 for commercial rates.
Technically, the Council’s duty is not to set the rates, but rather approve the formula that determines how much tax shall be exacted from residential versus commercial, industrial and personal property. However, the rates are what taxpayers experience. Despite a decrease in the rates, which was expected, some property tax bills can still rise due to uneven property value growth or decline across the city.
New assessments certified by the state since last week show property values—both residential and commercial (which includes industrial and personal)—grew. City Council President Michael Fenton cancelled a rate-setting meeting scheduled for last Thursday as the state had yet to certify the assessments. He said setting the rates prematurely would be irresponsible.
Citywide property values rose by about $126 million to $7.04 billion from $6.92 billion. Residential values, which represent over 72% of the city’s taxable property rose about $54 million to $5.08 billion, while commercial values rose $72 million to 1.965 billion.
That increase in values only yielded $3.16 million more property tax revenue for Springfield, a 1.83% increase over last year. Under Proposition 2 ½, municipalities’ property taxing powers are limited. The levy limit keeps a municipality’s overall property tax levy—excluding new growth—from growing more than 2.5% annually. The levy ceiling caps property tax revenue at 2.5% of all taxable property.
In Springfield’s, the growth in values was too low to allow the city to realize its 2.5% levy increase. The city should raise about $173 million in property taxes this fiscal year. Chief Administrative & Financial Officer Timothy Plante told WMassP&I in a phone interview the increase this year was less than hoped for, but will be enough to meet budgeted expenses. Richard Allen, Chairman of the Board of Assessors, added in an interview that the property tax revenue does not include funds the city gleans from agreements under Chapter 121A with certain commercial properties like MGM or Monarch Place.
Because Springfield taxes commercial property at a much higher rate than residences, there is gap between how much of the total tax levy commercial owners pay and the percentage of taxable property they represent. Springfield Chamber of Commerce chief Jeffrey Ciuffreda, told the Council he recognized the commercial rate was always going to be higher, but added the city should work to reduce it by maintaining the existing gap with commercial rates lower than what Sarno proposed.
Councilors appeared to sympathize with the impact on both residents and business. Ward 4 Councilor E. Henry Twiggs said residents were struggling, but asked, if semi-rhetorically. “How can I help both?”
At-large Councilor Justin Hurst asked Allen to explain the impact greater homeowner relief would have on businesses. Allen, while not advocating any particular rate, said given the relatively narrow range of rates being considered, the impact in terms of dollars was low. Instead, the Council’s of rate choice boiled down to messaging.
Allen added that since residential property represents the overwhelming majority of city property, lowering the residential rate simultaneously requires almost three times an increase on the commercial side. In 1983 when the rate was split, commercial property in the city constituted far more of the city’s taxable property, making it easier to keep the gap small.
Over the last 30 years, a tremendous amount of commercial property has lost value, shifting the burden to residential property. The tax burden did shift with property values, but city leaders often sought to insulate homeowners resulting in increasingly higher commercial rates. Similar phenomena have happened in other Massachusetts cities.
Ward 7 City Councilor Tim Allen—also the chief assessor’s brother—made his own rate proposal, about three cents lower for residences than ultimately adopted. However, President Fenton said procedurally, the Chair of the Finance Committee, Tim Rooke, had the right to present his recommendation first.
Rooke, building on talk of economic development in the city, said the lower business rates, which represent a 27 cent decrease over last year’s rates would send the right signal to the business community. Residential rates dropped by 4 cents. This is the recommendation the Council adopted.
Before the vote, other Councilors chimed in with non-sequiturs and/or incomprehensible objections ostensibly about the burden of property taxes. Ward 5 Councilor Clodo Concepcion seemed to complain the rates being discussed (those the Council later approved) differed from what was in the paper. Allen, the assessor, tried to explain those reported in The Republican were merely Sarno’s recommendation.
“How did it get in the paper?” Concepcion demanded.
“Well, I’m not a publisher,” Allen deadpanned.
Concepcion went on to note the burden rising property tax bills had on residents, particularly the elderly, a core constituent and cause of the octogenarian councilor from 16 Acres.
At-large Councilor Bud Williams took the opportunity to complain about the amount of state aid the receives from Boston. Williams seemingly suggested the city sends more in tax revenue to Boston than it receives in aid. Plante, the CAFO, said he did not have data to comment on that assertion, but did agree that current funding formulas ties the city’s hands.
(As to Williams’ point on substance, while Springfield could, and perhaps should receive more funds from Boston, it seems unlikely the total sum of fees and income, property and other tax revenue paid by residents exceeds what it gets from Boston in local aid, public benefits and other spending.)
With the debate over, the Council voted on the $19.67 residential and $38.77 commercial rates. Passing 7-6, Councilors Allen, Fenton, Rooke, Twiggs, Williams, Zaida Luna and Melvin Edwards voted in favor. Councilors Concepcion, Hurst, Thomas Ashe, Kateri Walsh, Ken Shea and Orlando Ramos dissented.
After the hearing, Shea told WMassP&I he would have preferred the council maintained the ratio of taxes commercial to residential property owners paid, rather than focusing on the gap. That would have permitted a tad larger rate decrease for homeowners.
Other Councilors focused on homeowners directly. Ashe, while acknowledging the relatively small difference in dollars, told Masslive that he would have liked to have seen more relief for residents.
With the tax rates set, the Council recessed briefly before beginning its regular meeting, the last of 2014.