The Town Council voted to give Watertown residents living in their property a bit of a break on property taxes Tuesday night be increasing the residential tax exemption, but some on the Council wanted to increase it more.
Since 2002, the Town Council voted to have a 20 percent owner-occupied exemption, but this year – Fiscal Year 2017 – Councilors increased the exemption to 22 percent.
With the 22 percent exemption and the tax shift of 175 percent from residential to commercial/industrial and personal (CIP), the tax rate will be $13.90 per $1,000 of assessed value, said Watertown Assessor Francis Golden. See the tax levy presentation here.
With those factors, there will be a $192 (3.80 percent) increase on bill of the average valued owner-occupied home, worth $547,540. With the 20 percent exemption, the increase would have been $267 (5.27 percent), on the same property.
Golden added that the 2 percent surcharge on taxes from the Community Preservation Act that passed in Tuesday’s election, will not hit people’s property tax bills until Fiscal Year 2018.
For a non-owner occupied property worth $547,540, the rate will be higher with the 22 percent exemption.
“The residential exemption is funded by by non-owner occupied properties,” Golden said.
With the 22 percent exemption, the average bill for a non-owner occupied residence will rise $451 (6.95 percent), while it would have gone up $351 (5.41 percent) with a 20 percent exemption.
The tax rate is based on the tax levy, which can go up no more than 2.5 percent each year due to Prop. 2 1/2. The new growth also goes into that, but the taxes on those new or improved properties, are paid by those property owners, Golden said.
Most of the increase is due to the rising value of property in town.
“We are at a time when values of residential properties are growing dramatically,” Golden said.
Calculating Tax Bills
Figuring out exactly how much a person’s tax bill will change is a complicated calculation, Golden said. The increase will be different, depending on the type of property, and the location, he added.
For single-family homes, the average increase will be $280.44, or 5.21 percent; condos will go up $161.65, or 5.03 percent; two-families will go up $156.98, or 2.34 percent; and three-families will go up $231.51, or 3.04 percent.
The town is broken into 12 neighborhoods for assessment purposes, Golden said, and prices rose in eight of those neighborhoods. Others remained the same. Golden said some condos, for instance, that did not rise in value will actually have a lower tax bill.
Commercial property values have not kept pace, but Golden said he expects them to grow in coming years as projects such as the Arsenal Mall renovation, new office buildings and athenahealth’s renovation of the Arsenal on the Charles are complete.
The commercial rate (CIP) will be $25.34 per $1,000 of assessed value. Using the average commercial property value – $48,180 – that would be 9.88 percent increase, $4,334. However, some larger properties skew that value, so Golden said he and Town Auditor Tom Tracy looked at the median commercial property value of $17,770. Using that value the increase would be $229, or 1.31 percent.
Dushku said he wants to see exemptions for small businesses. Golden said that is possible for properties worth $1 million or under, and have 10 or fewer employees. That would be 247 commercial properties.
Councilor-at-Large Susan Falkoff said the Economic Development and Planning Committee has already started discussing that and other ways to help small businesses in Watertown.
The Town Council voted to increase the residential exemption to 22 percent, but a couple Councilors wanted to make it even higher.
District A Angeline Kounelis, who represents the East End, said she had received calls from many residents who are struggling to afford to live in town.
“We have residents can no longer afford to reside here, who have been here 50-60 years,” Kounelis said. “They can not afford the increase. For many years we have advocated for the 25 percent residential exemption.”
Councilor-at-Large Aaron Dushku agreed and made a motion to adopt the 25 percent exemption. He also wanted the town to explore increasing the shift to commercial properties up to 185 percent, which would require the town to apply to the state with a Home Rule petition. Golden said that was allowed in the early 2000s during the down economy, but the state required communities to scale it back after a few years.
Others wanted to make the change more gradually. District D Councilor Ken Woodland who represents the westside, said he wants to keep tax increases down, but property values are expected to rise, plus the CPA surcharge is coming.
“I would like to see us get down to (increases) of 2 to 4 percent,” Woodland said. “I hesitate to go to 25 percent because of the growth we see coming next year plus the CPA. If we go to 22 percent, then we have room next year to go to 25 percent.”
The town has the ability to go up to a 30 percent residential exemption, after getting a Home Rule petition approved by the State Legislature.
Council President Mark Sideris said he worries about making the jump to 25 percent, because the increase would be much sharper for non-owner occupied properties.
“To the Assessor’s point, I want to keep owner occupied and non-owner occupied rates close,” Sideris said. “To me, this puts an onerous burden on non-owner occupied property owners.”
Sideris said he knows of people who bought a second home for their children or their parents to live in, but they do not get rent out of them.
The Council voted 2-7 for the 25 percent exemption, with Dushku and Kounelis supporting it. They then voted 7-2 for the 22 percent exemption, and also for the main motion that included the 175 percent shift to commercial properties. Kounelis and Tony Palomba voted against those motions.