FY2021 Tax Classification Hearing PresentationFY2021 Tax
Classification Hearing
City of Northampton
November 19, 2020
Marc Dautreuil II, Principal Assessor/Susan Wright, Finance Director
Tax
Classification
Hearing
The Classification Act passed in 1978 requires
municipalities to classify real and personal property
into one of four classes according to use:
Residential
Commercial
Industrial
Personal Property
Municipalities that are certified by the DOR as assessing
property at its full and fair cash value may elect to shift the
tax burden among the major property classes within certain
limits established by law.
Definitions:
Residential – Includes all property containing one or more units used
for human habitation. The class includes accessory land and
buildings such as swimming pools, tennis courts, garages and sheds.
Single-family homes are in this class, as are large apartment
buildings.
Commercial – Includes any property held for the purpose of
conducting a business, such as stores, office buildings, hotels, and
all vacant land classified as forestland (Chapter 61), farmland
(Chapter 61A) and recreational land (Chapter 61B).
Industrial Properties - Includes any property involved in
manufacturing, processing or extraction. It includes utility real
property used for storage and generation purposes.
Personal Property – Contains all taxable personal property of
individuals, partnerships, associations and certain corporations. A
large portion of this class is owned by public utilities.
MGL C.40,
s.56 (excerpts)
“The selectmen or town council of each town and the city council together
with the mayor's approval in each city, which city or town has been
certified by the commissioner of revenue to be assessing property at full
and fair cash valuation, shall annually first determine the percentages of
the local tax levy to be borne by each class of real property, ….”
“In determining such percentages, the selectmen, town council or the city
council, together with the mayor's approval, as the case may be, shall first
adopt a residential factor; provided, however, that if the mayor vetoes the
city council's factor, in a city, the city council may override such veto with
a vote equal to two-thirds of the members elected.”
“Said factor shall be an amount not less than the minimum residential
factor determined by the commissioner of revenue in accordance with the
provisions of section one A of chapter fifty-eight and shall be used by the
board of assessors to determine the percentages of the local tax levy to be
borne by each class of real and personal property.
“Prior to the adoption of such percentages, the selectmen, town council or
the city council, as the case may be, shall conduct a public hearing on the
question of their adoption. At such hearing, the board of assessors shall
provide all information and data relevant to making such determination and
the fiscal effect of the available alternatives.”
Northampton
Property
Values
Definition of
New Growth
The additional tax revenue generated by new construction,
renovations and other growth in the property tax base during a
calendar year. It does not include value increases caused by normal
market forces or by revaluations.
New growth for FY2021 is based on new construction, renovations
and additions that occurred between July 1, 2019 to July 1, 2020.
New Growth
Value by
Classification
Total $61,879,979
Residential $34,426,505
Commercial $27,453,474
This translates to new tax revenue in
the amount of $1,039,583 for FY2021.
Tax Revenue
Generated by
New Growth
New Growth
Values of
Neighboring
Communities
Northampton leads the region
with the largest new growth
values.
FY2020 value of new growth in neighboring communities
FY2021 value of new growth in neighboring communities
Note: Greenfield, Holyoke and Longmeadow and Westfield have not yet received new growth approval for FY2021
Major
Construction
Projects that
contributed to
New Growth
for FY2021
Value added between 7/1/2019 to 7/1/2020 on selected large projects:
•34 New Single Family Homes Added =8,867,100
●117 Olander Dr-18 condos-value added=$5,257,650
●CED Solar-Burt’s Pit Rd-Solar Field-value added=$4,577,149
●46 Round Hill Rd-mixed use building-value added=$3,695,100
●5-9 Pomeroy Terrace-8 condos-value added=$2,492,900
●76 Gothic St– 5 condos – value added = $2,256,950
●82 Bridge St-31 apartments-value added=$1,926,072
●35 Village Hill – mixed use building– value added = $1,737,200
Distribution
by Property
Classification
FY2021
Distribution
by Property
Classification
The Levy Limit for
Northampton for
FY2021 is
$67,364,033
The Actual Levy for FY2021
will be $64,854,759.61
This leaves unused levy
capacity of $2,509,273.39.
Debt Exclusions $633,443:
(represents $0.17 on tax rate)
Police Station – last debt
service payment is in FY2032
Single
Versus
Split
Tax
Rate:
This is what
this hearing is
about……
Note: The total
amount that can be
raised in taxes stays
the same, whether
there is a single or
split tax rate. A
split tax rate does
not raise more
revenue, it simply
shifts the tax burden
among the
taxpayers.
●FACTOR OF 1.00: Selection of a single tax rate means that all four
property classes will pay the same tax rate. This is the
recommendation of the Principal Assessor and the Mayor.
●FACTOR LESS THAN 1.00: The law allows the option to shift the
tax burden among the classes by reducing the share of the tax levy
paid by the residential property owners and shifting/increasing those
taxes to commercial, industrial and personal property taxpayers
through the adoption of a residential factor of less than 1.00.
●FACTOR OF GREATER THAN 1.00: Conversely, a factor greater
than 1.00 may be adopted, which would have the opposite effect,
reducing the share of the tax levy paid by commercial, industrial
and personal property taxpayers and shifting/increasing those taxes
on residential property owners.
Single Tax Rate:
The factor of 1.00 will result in an estimated FY2021 tax rate of $17.37 per $1000 for all property classifications,
which is an increase of ($0.57) or a 3.34% increase.
●For comparison purposes, this is where
Northampton’s residential rate ranked with our
neighboring communities in FY2020
●For comparison purposes, this is where Northampton’s
commercial/industrial rate ranked with our neighboring
communities in FY2020
Split Tax Rate:
The Minimum Residential Factor (MRF) is 88.0364 for FY2021. This is the maximum allowable shift determined
by the DOR. This would result in a split tax rate of $15.29 for Residential and $26.05 for Commercial/Industrial and
Personal Property.
●Residential Impact
Average Single Family Home Value: $334,058.58
Single Tax Rate: $334,058.58/$1000 x $17.37 =
$5,802.60
Split Tax Rate: $334,058.58/$1000 x $15.29=
$5,107.76
Decrease of $694.84
●Commercial and Industrial Impact
Average Commercial Value: $609,132.15
Single Tax Rate: $609,132.15/$1000 x $17.37 = $10,580.63
Split Tax Rate: $ 609,132.15 /$1000 x $26.05= $15,867.89
Increase of $5,287.26
Average Industrial Value: $730,940.33
Single Tax Rate: $730,940.33
/$1000 x $17.37 = $12,696.43
Split Tax Rate: $730,940.33
/$1000 x $26.05 = $19,041.00
Increase of $6,344.57
Single versus
Split Tax Rate:
●235 Massachusetts Communities had a single tax rate in FY2020
●107 Massachusetts communities had a split tax rate in FY2020 with shifts ranging from
$0.25 to $22.04 above the residential rate (favoring lower tax rates for residential
property and higher tax rates for businesses)
●8 Massachusetts communities had split tax rate in FY2020 with shifts ranging from
$0.03 to $0.86 below the residential rate (favoring lower tax rates for businesses, and
higher tax rates for residential property)
Typically a split tax rate might be considered when:
●the percentage of residential property to commercial/industrial/personal property is at
least at 70%-30%
●the major taxpaying businesses are difficult to move such as a power plant or a
shopping mall
It can be difficult for a community to revert back to a single tax rate after splitting the tax
rate, as it often results in a substantial tax increase for residential properties
The Mayor and the Principal Assessor
recommend a Factor of 1.00 – A Single Tax Rate
Other
Exemptions
allowed upon
Mayoral
Option:
Residential Exemption MGL C.59 s. 5C – The Residential Exemption allows for a
shift of the tax burden within the residential class from the lower valued properties
to the higher valued ones and those owned by non-residents. However, this also
shifts the burden to rental properties.
MGL C.59 s.5C “With respect to each parcel of real property classified as Class
One, residential, in each city or town certified by the commissioner to be
assessing all property at its full and fair cash valuation, and at the option of the
board of selectmen or mayor, with the approval of the city council,….”
Small Commercial Exemption MGL C.59 s.5I - The Commercial Exemptions
allows smaller businesses with an average annual employment of no more than 10
people and an assessed valuation of less than $1,000,000 to receive an exemption.
Adoption of this exemption increases the commercial and industrial tax rates. The
amount of the tax levy paid by those two classes remains the same, but because of
exempted valuation, it is distributed over less assessed value. This higher rate
creates a shift that reduces the taxes paid by owners of properties occupied by
small businesses and shifts them to larger commercial and industrial taxpayers.
However, this will not benefit small businesses that do not own the property that
they use for their business.
MGL C.59 s.5I “With respect to each parcel of real property classified as class
three, commercial, in each city or town certified by the commissioner to be
assessing all property at its full and fair cash valuation, and at the option of the
board of selectmen or mayor, with the approval of the city council…”
SUMMARY:
Principal Assessor
and Mayor
recommend City
Council approve a
residential factor
of 1.00 for
FY20201 which
results in a single
tax rate of
$17.37/$1000
valuation
Recommended Residential Factor of "1" for FY2021
Class Percentage Total Valuation
Tax Rate per
$1000
Valuation Levy by Class
Residential 80.69 $ 3,012,838,182.00
$
17.37 $ 52,332,999.22
Commercial 13.96
$
521,105,367.00
$
17.37 $ 9,051,600.22
Industrial 2.94 $ 109,641,049.00
$
17.37 $ 1,904,465.02
Personal Property 2.41
$
90,137,890.00
$
17.37 $ 1,565,695.15
100.00 $ 3,733,722,488.00 $ 64,854,759.61