Residential Tax Bill to Rise Modestly, Commercial Payers Take Larger Hit

November 29, 2018
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The City Council made two key votes Monday night that helped to set the current fiscal year’s tax rate, putting into place modest increases on the residential tax bill, but – for the first time in several years – some hefty increases for commercial/industrial properties.

“We’re seeing commercial/industrial rates up significantly,” said CFO Eric Demas. “Most of that is in the Commercial Triangle area. A lot of what we’re seeing is industry is being pushed out of Cambridge and Somerville. Those uses need to be close to Boston and Everett and Chelsea are seeing the benefits of that with our properties. We’re going back to what we had about 10 years ago. For the last several years, commercial/industrial stagnated while the residential values increased. We’re seeing that change…Everything now is being driven by land. It’s the one thing you cannot create more of. We thought we’d see it last year, but we didn’t This year we see the increase and it’s going back to what it was a decade ago.”

The residential tax rate was set at $12.38 per $1,000 of value, with the commercial/industrial rate set at $35.27.

The Council also voted to install the 25 percent residential, owner-occupant exemption, and voted in the maximum shift of 1.75 percent to commercial property – as allowed by state law.

That translated to the average single-family tax bill coming in – with the exemption – at $3,032, which is up $194 over last year (about 5 percent).

Other average tax bills included (with exemption):

  • Two-family, $4,832 (up by $116 or 2 percent).
  • Three-family, $6,392 (up by $385 or 6 percent).

While those values seemed to moderate, it wasn’t so for commercial/industrial properties due to the increase in the values of those properties after many years of slow growth.

“We’re seeing one acre lots sell for $2 million,” said Assessor Bill Hart.

Many commercial type properties will see large increases on the tax bill, Demas and new Assessor Bernard Devereux said.

Examples included the average chain convenience store going up from $21,529 to $29,024 – an increase of $7,495 or 35 percent.

A typical fast food restaurant would see a $12,379 increase to around $62,160 annually. That was a 25 percent increase.

A typical warehouse would see an increase of $7,229 for a $28,050 tax bill, which is an increase of 35 percent.

Demas told the Council that the City was strong financially, despite the fact that this has been dubbed the most challenging financial year for the City prior to the opening of the casino.

“The City is financially strong and I’m very pleased where we are,” said Demas. “We will only get stronger. We’re just in uncharted waters right now as we have the largest construction project on the eastern seaboard. It’s having an impact on our valuations. We’re seeing numbers across the board. Last year the single families went way up, and this year they stabilized…Business owners will feel it a little more this year. It’s the growing pains…We’re now going to see all that start to balance off.”

The City also provided relief to the tax rate by using $4 million of recently approved Free Cash from the state. The City was approved for $9.99 million in Free Cash, and the Council approved the use of $4 million of that for tax relief on Monday.

  • A major piece of the tax situation in Everett has been the astronomical “new growth” number that the City gets to add to the overall tax levy. A tax levy is the total amount the City is allowed to raise from taxpayers. In most years, the City gets to raise 2.5 percent more than it raised in the previous year. As part of that formula, they get to add “new growth” to the total. In most years, that number is about $1 million or less and it represents the value of new construction in the City.

This year, because of the ongoing Encore project, the new growth number in Everett is $23.5 million – nearly 25 percent of the entire tax levy.

Demas said there are several reasons for the large number, as there are many construction projects now in the works, but most of that number comes from Encore.

  • The City was approved recently for $9.99 million in Free Cash, and $3.6 million in Water and Sewer Enterprise Fund Free Cash.

“Those are both very healthy surpluses,” Demas said.

He said that he is soon going to propose using about 50 percent of the surpluses to deposit into Rainy Day Funds that have been used. He said those funds need to be built back up, and now might be a good time to do that. He said the administration plans to propose those transfers to the Council in the near future.