When does a decrease result in an increase? At tax time, as it turns out, for many area homeowners.
According to the state Department of Revenue, property values for single-family homes across Massachusetts dropped an average of 8.1 percent per year between the onset of the recession in 2007 and last summer, the end of fiscal year 2010.
So homeowners might imagine that decreasing property values would translate into lower tax bills as well. However, they are likely to find out otherwise when they open their next statement from the local tax collector.
“How can I say this: It’s always been this way,’’ said Bob Bliss, spokesman for the Revenue Department. “Even if values go down, taxes go up. . . It’s like saying it’s extraordinary that the sun rises every day.’’
As the effects of the recession grind on, and declining property values put pressure on town tax bases, municipal officials are shifting tax rates in search of additional revenue.
There are some limits to the increases, however, thanks to Proposition 2 1/2.
The state law, approved by voters in 1980, allows municipalities to boost their total levy by no more than 2.5 percent a year, not counting new construction added to the tax rolls. It also puts the ceiling for annual tax revenues at 2.5 percent of the total assessed value of properties in the community, based on current fair-market values.
The law allows for increases greater than 2.5 percent only when approved by voters, either through operational overrides that allow for a permanently higher levy, or debt exclusions that raise taxes only long enough to pay for a capital improvement project, such as a new school.
Proposition 2 1/2 does not, however, directly limit the percentage by which an individual homeowner’s tax bill might increase.
Revenue Department figures show that every area community filing a report for this fiscal year had increased its residential tax rate, and every community but one — Bellingham — with a split-rate system also increased the commercial rate. As of midmonth, only Maynard had not filed its proposed tax rates with the state.
The Revenue Department also provided information on average property tax bills for single-family homes in most area communities, excluding only Brookline, Marlborough, Maynard, Waltham, and Watertown.
The state agency’s records show that the average bills — calculated by multiplying the tax rate by every $1,000 of a property’s assessed value — went up in every community except Northborough.
Northborough had raised its tax rate, but by a small enough amount that the lower property values caused the bill for the average-value home to decline by $20 — or 0.3 percent — to $5,972.
Careful budgeting and additional tax revenue from new construction led to the decrease, according to Town Administrator John Coderre, who said growth added approximately $68 million to the town’s total property value.
The three largest tax-rate increases, by percentage, are in Boylston, Upton, and Millis, where the average residential bills went up by 4.85 to 8 percent. All three communities have a single rate for residential and commercial properties.
Local officials were quick to emphasize that higher tax rates do not equate to a matching increase in tax bills.
For example, Boylston’s tax rate for the current fiscal year is an increase of 22.15 percent from last year, going from $12.82 to $15.66 per $1,000 of valuation.
The average residential tax bill, however, is rising 4.85 percent this year, going from $4,882 to roughly $5,234. This comes in a town where the average residential valuation dropped approximately 14.17 percent, from $389,418 last year to $334,225.
Upton increased its property tax rate by 14.6 percent, from $12.77 to $14.64, while the average residential tax bill is going up by about 8 percent, from $5,040 to $5,446. Average home values dropped 5.74 percent, from $394,661 to $372,015, records show.
In Millis, the rate increase is 12.98 percent, from $13.64 to $15.41; the average residential tax bill is 4.86 percent higher, from $4,979 to $5,221. Average home values fell approximately 7.2 percent in Millis, dropping from $365,060 to $338,837.
Communities can turn to voters when more money is needed.
Nancy Colbert, Boylston’s town administrator, said the cost of building a new high school, financed by a Proposition 2 1/2 override, will boost local tax bills this fiscal year. She said, however, that falling property values were the “primary driver’’ for the rate increase, after the town’s overall tax base dwindled by about 14 percent. Property taxes provide about 75 percent of the town’s total revenue, she said.
In Upton, the town’s tax base has fallen by about 5 percent this year. Town Manager Blythe Robinson said an $812,044 override approved by voters has allowed Upton to put about $500,000 in a school stabilization fund, pay for Department of Public Works trucks, and add about $100,000 to a townwide stabilization account.
Millis did not pass an override affecting this year’s tax bills, although voters did approve one that will kick in next fiscal year. The reason for the tax-rate increase, according to Town Administrator Charles Aspinwall: “It’s simply market changes.’’
Bellingham is one of 18 area municipalities that use separate tax rates for residential and commercial properties, but this year it is the only one decreasing its commercial figure.
The Board of Selectmen reduced the commercial rate by 4.65 percent, from $16.79 to $16.01. Elizabeth Cournoyer, the town assessor, said the selectmen made the change to “help close the gap’’ between the residential and commercial rates.
Cournoyer said commercial property values in town remained about level with last fiscal year, so the tax bills for commercial properties should show some decrease. Since the value of commercial properties varies widely, she said, there is no way to calculate a relevant figure for the average bill.
On the residential side, where Bellingham’s single-family home values dropped 4 percent, going from $275,984 to $264,943, the tax rate increased from $11.96 to $13.11, up about 9.6 percent. The bill for a property with the town’s average assessment will go up by about 5.2 percent, from approximately $3,301 to $3,473.
Cournoyer said Bellingham residents do not seem to be up in arms about the split-rate difference. As of midmonth, her office had received eight abatement applications seeking to have a tax bill recalculated.
As for when property values increase?
“I think what you’re going to see is that as the economy gets better and values go up, people will see their tax rate go down,’’ said Bliss. But, even though the rate might go down, he said, “they have more valuation, so their bill will still increase.’’
It is a certainty about which Barbara Anderson, executive director of Citizens for Limited Taxation, seems acutely aware. Her organization was instrumental in Proposition 2 1/2 being approved as a ballot measure 21 years ago.
Still, she said, when property values increase again, “a town could choose to not take what they’re allowed. They could say, ‘Even though we’re allowed to take a 2.5-percent increase, we’re not going to.’
“People would applaud,’’ said Anderson, at least until they realize that the untaken percentage increase could still be applied in later years.
James O'Brien Boston Globe January 27, 2011