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Date: 11/9/2021
HADLEY – In a unique situation for the town, the Select Board met on Nov. 3 to have a Tax Classification Hearing for fiscal year 2022 (FY22) and ultimately put off its decision until its Nov. 17 meeting.
Typically, Hadley has functioned with a single tax rate between residents and commercial businesses but due to impacts economically from COVID-19, the town was looking to adjust the tax rate as a one-year plan.
Dan Zdonek, principal assessor of the Board of Assessors, provided the Select Board with a presentation on the options the town has in addressing this new problem. He said the assessors are recommending no open space discount, no residential exemption and no small commercial exemption and recommended a split rate for FY22 for a variety of reasons. This is something being addressed by the Select Board as the town of Hadley saw evaluation of businesses go down while homes went up.
According to the presentation, the history of the split tax rate originated following the passage of Proposition 2 ½ in 1980, requiring all assessments be at full and fair market value. Prior to 1982, many communities engaged in disproportionate assessment policies. Commercial and Industrial properties were assessed at their full and fair market value while residential properties were assessed at a fraction of their full value.
Once enacted, this caused the residential tax burden in large communities to skyrocket while the commercial tax burden decreased. This caused politicians to worry about re-election, so special legislation was passed to allow communities to legally tax commercial properties at a higher rate than what their single tax rate bill would be.
The FY22 tax levy for the town is $13.25 million. Total residential value for FY21 was $698.5 million leading to an FY21 residential levy of $8.7 million. For FY2022 estimated residential value is $730.7 million with a levy of $9.2 million.
For commercial properties, total FY21 value was $352.2 million with a levy share of $4.4 million for the same fiscal year. For FY22, the value is $323.3 million with a levy share of $4.1 million.
The FY21 average for single family homes in Hadley was assessed for $350,200 and the average tax bill was $4,202.40 while in FY22 the average single-family home is assessed for $366,800 and the average tax bill would be $4,610.67, according to the presentation. The presentation from the assessors also made note that splitting the tax rate will not increase tax revenue for the town of Hadley.
Each year, the Select Board must vote on how to allocate the tax levy in Hadley between all classes of property through selection of a residential factor, selection of an open space discount, granting of a residential exemption, and granting a small commercial exemption.
The minimum residential factor (MRF) is the lowest percentage of the tax levy that can be borne by the Residential and Open Space classes. The FY22 MRF for Hadley is 77.8781 percent. The Select Board has the option of adopting a residential factor (RF) between 1.0000 and 0.778781. A RF of 1.0000 would have a single rate of $12.57 for all classes of property. A RF of 0.778781 would decrease residential taxes by 22.12 percent and would increase taxes on all commercial properties by 50 percent.
If the town decides to move to a split rate for the next year, the Select Board will decide a shift of 7, 10 or 12 percent to stabilize tax payments for FY22 and FY23 for both residential and commercial properties. Assessors have recommended the split rate this year due to COVID-19 impacts and said that they anticipate a substantial increase in commercial properties for FY22 regardless of if the rate is split or not. The presentation with visual charts and full Select Board meeting is available to watch the Hadley Media YouTube channel.
“A misconception with a split rate is people are looking at it as raising commercial taxes. It’s not like that, it’s trying to level things off. It would be a reduction tax for most businesses. There are a few cases where some people will pay more, but most people say about 5 percent reduction in value [for commercial taxpayers],” Zdonek said.
The presentation closed with the Board of Assessors recommending adopting a split tax rate for FY22 and no open space discount. They also recommended no residential exemption and no small commercial exemption.
Select Board chairman David Fill opened comments requesting there be no vote until their Nov. 17 meeting on behalf of the Finance Committee so the group can meet with the Assessors and provide comments and recommendations to the Select Board.
Board member Joyce Chunglo’s main concern was with protecting commercial businesses and making sure they are not receiving the short end of the stick due to the great relationships the town and businesses have.
“We don’t want to put people out of business with tax increases. Businesses have been very good to us in the past. I am looking to be fair and equitable,” Chunglo said.
“Everything said relies on not having fallback due to COVID. Everything has continued to roll on and prices are climbing. Hopefully we are passed the worst of it,” Zdonek said. “I can’t predict what will happen next year at this point.”
Hadley Town Treasurer Linda Sanderson was in virtual attendance of the meeting and while the finance committee has yet to discuss this town plan, she felt that a split rate would be beneficial for this coming year to do what it was intended in stabilizing tax payments for both residential and commercial taxpayers.
“We are a single tax rate community, however this is an unusual year,” Sanderson said. “This one year this makes sense for both businesses and residents. If we can level tax bills and give steady growth and we have that tool to use and can help keep things steady I hope we would considered that and do that.”
After much discussion, a motion was unanimously passed to continue the discussion and vote of the tax rate until the next meeting on Nov. 17 when the Finance Committee will have had a chance to evaluate and chime in on these recommendations.