BLOG
01/16/2011
January 16th 2011 | Apartment Tax Proposal Debated
By Livia Gershon | Worcester Business Journal Staff Writer
The yawning gap between commercial and residential tax rates in Worcester has long been a point of contention for the business community.
And after years of watching city councilors vote for the lowest possible residential rate — thereby ensuring the highest increase to the commercial rate — many have resigned themselves to the fact that Worcester just won't change.
But a new proposal floated by two city councilors and the Worcester Regional Chamber of Commerce aims to make a dent in that gap. But it's not without controversy.
The proposal calls for designating apartment buildings of 5 units or more as commercial properties — they are currently taxed as residential properties. There are estimates that such a change would net the city of Worcester more than $13 million, allowing it to reduce taxes for residents and other businesses.
Active Resistance
While such a plan could be an overall positive move for business owners in the city, it's understandably coming under fire from apartment building owners. In fact, some say the proposal has no chance of becoming reality.
"They're not going to do that," Sandra Katz, president of the Worcester Property Owners Association said definitively. "They understand the temper of the times."
Katz said she and other city landlords would mobilize against the proposal to tax apartment buildings with five or more units at the higher commercial rate. She said it's already difficult enough to operate an apartment building, and adding to owners' expenses could lead to higher rents and more foreclosures on multifamily buildings.
But the Worcester Regional Chamber of Commerce has come out in favor of at least studying the idea.
"Some of these properties are large commercial establishments, and they're in the business to make money," said Michael S. Lanava, the chamber's business resource manager. "Why aren't they paying what other large commercial endeavors are paying?" The chamber floated the idea in advance of the most recent city council vote on the tax rate as a way to begin to close the gap between residential and commercial tax rates. The city council set the commercial rate at $34.65 per $1,000 of assessed value and the residential rate at $16.06.
City Assessor William Ford said there are about 1,200 apartment buildings in the city with more than four units, for a total of about $750 million assessed value.
Under the current residential tax rate, that puts their city taxes at $12.8 million. If the properties were switched to the current commercial rate, they would pay about $26.1 million.
But Ford hastens to point out that the actual effect of switching the buildings' tax classifications would depend on how the city council sets residential and commercial tax rates in future years.
District 2 City Councilor Philip P. Palmieri proposed the change along with District 3 Councilor Paul P. Clancy Jr. Palmieri says anyone who dismisses the notion of changing apartment buildings' classification should remember that many people in the city support eliminating the differential between commercial and residential tax rates altogether.
"Is a single tax rate any less extreme than this?" he said.
Palmieri said it's important to look further into the ownership of the city's large apartment buildings. The question of whether owners can afford a tax increase, and whether they'd pass it on to tenants, may depend on factors including whether they're individuals or corporations and whether they have large mortgages.
A change in the way the city classifies apartment buildings would require not only an act of the city council but also a change in state law. Lanava said even if further study supported the proposal and politicians lined up behind it right away, it would probably take two or more years to move forward.
Lanava said the most likely avenue for further progress in that direction would be if other large cities in the state also decided they'd like to push for the statewide change.
Edward Murphy, CEO of the residential leasing company WeRentCentralMass.com, said he's unhappy that the city would even discuss changing large buildings' tax classification.
He said some property investors from Greater Boston and MetroWest have just entered the Worcester market over the past year and a half, and they're concerned about the possible increase in taxes.
"They're calling us on this," Murphy said. "I think a lot of these investors might back out."
Given widespread concerns about taxes being too high in the city, Lanava said it would be irresponsible not to consider an idea that could reduce taxes for most residents and businesses. But he said considering isn't the same as acting.
"Nobody is committed that this is the right thing to do," he said. "...We're committed to looking into it."
http://www.wbjournal.com/news48199.htm
By Livia Gershon | Worcester Business Journal Staff Writer
The yawning gap between commercial and residential tax rates in Worcester has long been a point of contention for the business community.
And after years of watching city councilors vote for the lowest possible residential rate — thereby ensuring the highest increase to the commercial rate — many have resigned themselves to the fact that Worcester just won't change.
But a new proposal floated by two city councilors and the Worcester Regional Chamber of Commerce aims to make a dent in that gap. But it's not without controversy.
The proposal calls for designating apartment buildings of 5 units or more as commercial properties — they are currently taxed as residential properties. There are estimates that such a change would net the city of Worcester more than $13 million, allowing it to reduce taxes for residents and other businesses.
Active Resistance
While such a plan could be an overall positive move for business owners in the city, it's understandably coming under fire from apartment building owners. In fact, some say the proposal has no chance of becoming reality.
"They're not going to do that," Sandra Katz, president of the Worcester Property Owners Association said definitively. "They understand the temper of the times."
Katz said she and other city landlords would mobilize against the proposal to tax apartment buildings with five or more units at the higher commercial rate. She said it's already difficult enough to operate an apartment building, and adding to owners' expenses could lead to higher rents and more foreclosures on multifamily buildings.
But the Worcester Regional Chamber of Commerce has come out in favor of at least studying the idea.
"Some of these properties are large commercial establishments, and they're in the business to make money," said Michael S. Lanava, the chamber's business resource manager. "Why aren't they paying what other large commercial endeavors are paying?" The chamber floated the idea in advance of the most recent city council vote on the tax rate as a way to begin to close the gap between residential and commercial tax rates. The city council set the commercial rate at $34.65 per $1,000 of assessed value and the residential rate at $16.06.
City Assessor William Ford said there are about 1,200 apartment buildings in the city with more than four units, for a total of about $750 million assessed value.
Under the current residential tax rate, that puts their city taxes at $12.8 million. If the properties were switched to the current commercial rate, they would pay about $26.1 million.
But Ford hastens to point out that the actual effect of switching the buildings' tax classifications would depend on how the city council sets residential and commercial tax rates in future years.
District 2 City Councilor Philip P. Palmieri proposed the change along with District 3 Councilor Paul P. Clancy Jr. Palmieri says anyone who dismisses the notion of changing apartment buildings' classification should remember that many people in the city support eliminating the differential between commercial and residential tax rates altogether.
"Is a single tax rate any less extreme than this?" he said.
Palmieri said it's important to look further into the ownership of the city's large apartment buildings. The question of whether owners can afford a tax increase, and whether they'd pass it on to tenants, may depend on factors including whether they're individuals or corporations and whether they have large mortgages.
A change in the way the city classifies apartment buildings would require not only an act of the city council but also a change in state law. Lanava said even if further study supported the proposal and politicians lined up behind it right away, it would probably take two or more years to move forward.
Lanava said the most likely avenue for further progress in that direction would be if other large cities in the state also decided they'd like to push for the statewide change.
Edward Murphy, CEO of the residential leasing company WeRentCentralMass.com, said he's unhappy that the city would even discuss changing large buildings' tax classification.
He said some property investors from Greater Boston and MetroWest have just entered the Worcester market over the past year and a half, and they're concerned about the possible increase in taxes.
"They're calling us on this," Murphy said. "I think a lot of these investors might back out."
Given widespread concerns about taxes being too high in the city, Lanava said it would be irresponsible not to consider an idea that could reduce taxes for most residents and businesses. But he said considering isn't the same as acting.
"Nobody is committed that this is the right thing to do," he said. "...We're committed to looking into it."
http://www.wbjournal.com/news48199.htm
We Suggest
Monthly Archive
