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Date: 11/9/2021
NORTHAMPTON – The City Council accepted a single tax rate for all property categories for fiscal year 22 (FY22) during their Nov. 4 meeting.
The Northampton Assessor’s Office gave a presentation on what the local tax levy will look like for real and personal property for FY 22 in Northampton.
Under Massachusetts General Law, the City Council and mayor decide each year whether to implement a single tax rate or a split tax rate in the city. According to Marc Dautreuil, the principal assessor for Northampton, the best way to determine whether a single or split tax rate is appropriate is by determining what the city’s tax levy percentage split is between residential and commercial/industrial/personal property.
Dautreil and the mayor are both recommending the use of a single tax rate for Northampton, which would mean all four property classes would pay the same tax rate. Under this rate, the estimated FY22 tax rate would be $17.89 per $1,000 for all property classifications, which would amount to a tax rate increase of 3 percent based on new growth and the approved $2.5 million override budget from 2020. The FY21 tax rate for Northampton was $17.37 per $1,000. This would mean that the average property bill would go up by 8.6 percent due to a raise in market value and the approval of the city’s $2.5 million override budget. This will not be everyone’s rate, but rather some bills will go up that much and some will go up less.
“If we did decide to split the rate, the lowest we could lower the residential tax rate would be $15.80 per $1,000,” said Dautreil. “This would in turn raise the commercial rate to $26.84 per $1,000.” The residential bill would in turn be lowered by $736 on average, and it would raise the average commercial bill by $5,428, and the average industrial bill would be raised by $6,809.
“The city of Northampton is not designed for a split tax rate … I wouldn’t recommend splitting the tax rate in the best of economies,” said Dautreil. “If we ever did decide to split the rate … it’s extremely difficult to revert things back to the way they used to be because obviously folks don’t like getting their residential taxes raised.”
City Councilor Marianne LaBarge agreed that this is not the right time to implement a split tax rate, especially considering the impacts of COVID-19. “We have had so many businesses go under and still trying to get on their feet; homeowners who have lost their jobs,” said LaBarge. “So, I have concerns of even looking at that split rate.”
Northampton has traditionally carried an 80/20 split between residential and commercial/industrial/personal property, but the latter properties have recently sunk under 20 percent over the past couple of years mainly because of a closure of commercial businesses due to COVID-19, but also partially because the city passed a personal property law that anything under $2,500 will not be taxed anymore.
According to Dautreuil, there continues to be an increase in property values over the past few years due to a lack of homes for sale coupled with a high demand. “We also have a lot of folks moving to Northampton from larger cities with more disposable income, and that does drive the market higher,” said Dautreil, adding that commercial property went down a little bit due to the hospitality industry being hurt by COVID-19.
The city also had $1.1 million in taxable new growth compared to $1 million in 2020, mainly because of a typical inspection that occurs every 10 years, as well as a number of construction projects the city undertook, like the Emerson Way Development project and Village Hill Residential project that have been going on for the past few years.
“The increase in value of the city … the fact that we’re getting close to being a $4 billion city it’s actually what tempered the tax rate,” said David Murphy, a member of the Board of Assessors. Murphy explained that the basic 2.5 percent tax increase was $1.5 million, while the override budget adds another $2.5 million. Additionally, the new growth alone was another $1 million, which essentially means that there is a total of $5 million on the levy, which he described as a substantial increase. “Even though the levy went up $5 million, the increase in property value is what kept the tax rate down because it’s getting distributed over more valuable property.”
According to Murphy, half of the people living in Northampton are renters, so a residential exemption would raise taxes on their end in Northampton. This is something Murphy said the city should avoid using because it would increase rent.
A split rate, according to Murphy, would increase the tax burden on the commercial/industrial/personal side, which means the operating expenses are increased and the value of these properties go down. “The impact of increased taxes actually drops the value of the buildings you’re taxing, so the return starts to decline,” said Murphy.
These new tax rates will be reflected in the second half of the fiscal year, and the city of Northampton is looking for ways to make people aware of the changes before they would occur.
Later in the meeting, the council voted to accept the single tax rate.