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Date: 12/15/2022
SPRINGFIELD – Following two meetings, the City Council approved $6.5 million in relief for the fiscal year 2023 (FY23) tax levy and set an FY23 tax rate of $17.05 per $1,000 of value of residential properties and $36.40 for commercial, industrial and personal (CIP) properties. Both the tax relief and tax rate were initially proposed by Mayor Domenic Sarno, although some members of the council expressed desire to provide additional financial relief for the community.
Background
On Nov. 18, Sarno announced that a total of $10 million will be committed to offset the FY23 tax levy if approved by the City Council. The sum combined $3.5 million that was previously allocated from the Sarno administration along with $6.5 million in free cash sourced from Eversource’s $41 million settlement with Springfield over outstanding property tax payments.
“My administration is committed to providing as much relief that is possible for our taxpayers, while also being mindful of maintaining our fiscally sound management practices. In short, we don’t want to mortgage our future with short-term and short-sighted measures that will result in our taxpayers later experiencing a balloon property tax payment in the future, while also hindering our municipal efforts to providing services, programs and relief in the future,” said Sarno via press release.
Sarno explained that a key motivation for providing additional tax relief is due to recent rising property values. A central cause rising property values is the “Seller’s Market,” with Sarno noting that a significant increase with the number of properties bought and sold in Springfield.
The average single-family home rose in value from last year, jumping from $185,000 to $215,700.
Sarno’s press release also highlighted two forms of property tax relief within Springfield that residents can apply for if they qualify. Homeowner Personal Exemption applications for citizens of 65 years of age who meet certain income and asset levels; widows and widowers of any age with assets below a certain level; veterans of at least 10 percent disability or otherwise meeting other criteria; and blind persons.
For FY22, Springfield featured over 1,000 households that received relief from this application, adding up to $601,268 between the different parties.
The other tax relief form is Property Overvalue applications. This allows residents to appeal their property cost if they believe it exceeds its market value. Residents can apply for these applications by contacting the Springfield assessors office.
Sarno and the Board of Assessors announced their recommendations for the FY23 tax rate on Nov 28. Their recommended rates were $17.05 for residential property and $36.40 for CIP properties. Both rates represent a decrease from FY22 tax rates, which were $18.82 for residential rates and $39.04 for the CIP rate.
The decreased rate is another byproduct of the active real estate market. Sarno and his financial team concluded that an approximately $575 increase would have occurred for the average single-family tax bill if the FY22 rates were utilized. Instead, the average single-family tax bill will rise by $194.
The average single-family tax bill under the proposed rate would be approximately $3,678 – a cost that would be amongst 10 percent of lowest tax bills in Massachusetts. The FY23 tax bill still represents an increase from the FY22 average tax bill of $3,484.
Sarno expressed that rising inflation rates made lower tax rates an essential goal.
“I strongly believe that this significantly lower tax rate, especially for our residential rate, will provide much-needed relief for our residents … This strategic and fiscally prudent measures is all about quality of life,” said Sarno via press release.
Sarno continued, “My administration is committed to providing what relief and support we can while maintaining core and vital services to continue stimulating our local economy, business development, and jobs, while just as important, being respectful to our homeowners.”
City Council meetings
The City Council initially discussed Sarno’s FY23 tax proposals during a Nov. 30 meeting. City Councilors At-Large Tracye Whitfield and Justice Hurst, Ward 6 City Councilor Victor Davila and Ward 8 City Councilor Zaida Govan opened the discussion with initial opposition against Sarno’s additional commitment of $6.5 million to tax levy.
Each expressed that the mayor’s administration could provide more extensive relief for residents given the city’s FY23 certified free cash total of $67.8 million and additional funds from the Eversource settlement.
“I think we can do better … I can’t in good faith knowing that we got the amount of free cash that we have,” said Whitfield.
Hurst referenced the perspective of former Springfield Board of Assessors Chairman Richard Allen. Allen spoke during the council’s public input, suggesting that more relief could be provided given seismic shifts in inflation and housing market values.
“In response to these conditions, I urge the council to deliver a message to the mayor and his financial team that significantly more free cash beyond the proposed $10 million needs to be appropriated to reducing the tax levy. The city has a golden opportunity to provide very significant relief to all taxpayers,” said Allen in his statement.
Whitfield suggested $10 million in FY23 free cash toward tax levy, which would have added up to $13.5 million in total tax relief for the FY23 levy. Whitfield asked Chief Administrative and Financial Officer (CAFO) TJ Plante if Sarno considered applying additional tax relief.
“There was a brief conversation, but it was not considered,” said Plante.
Ward 7 City Councilor Timothy Allen viewed the additional funds as a resource for an uncertain economic future. He said the funds could be utilized to help balance the budget during a potential recession or go towards further addressing the city’s unpaid pension fund – which is the largest pension obligation in the state.
The city is paying off the unpaid pension via annual installments. Allen said the final payment installments will be over $100 million.
“I see this as a potential time to add money to the stabilization reserve,” said Allen.
Plante shared a similar vision as Allen. He said the city’s current stabilization fund is $50 million in reserves, or roughly 6 percent of the city’s $819 million budget. Plante said the city is mandated to have 5 to 15 percent of its annual budget in its reserve.
“Our goal is to get closer to the 10 percent mark,” said Plante.
The council ultimately voted to continue the FY23 tax discussion to a future meeting, citing the delay as an opportunity for Sarno to reconsider his recommendations. When the council reconvened during a special meeting on Dec. 5, the recommended tax levy relief and suggested tax rates remained the same.
Whitfield and Govan expressed dismay with the decision. Whitfield said the current market trend of declining home values would not create as large of a balloon tax payment that the mayor administration is planning for.
“The administration could have done more; they chose not to … It’s a shame that we wouldn’t do more for our residents,” said Whitfield.
“We could’ve done a lot more than what we are doing now … I don’t want our residents to lose hope,” said Govan.
Both said they would still support the proposed $6.5 million toward the levy, citing some relief for residents as better than no relief.
Other councilors supported Sarno’s relief plan. Ward 2 City Councilor Michael Fenton considered the total of $10 million of funds for the FY23 tax levy as “unprecedented” for the city.
“I do think that the proposal to apply an outstanding $10 million to taxpayer relief is unprecedented … I am proud of the conservative principals through which the CAFO and the financial team have managed financial crisis after financial crisis,” said Fenton.
The council ultimately approved the additional $6.5 million towards the tax levy in a 12-1 vote, with Hurst representing the only no vote.
The council also endured some debate on the proposed tax rate. Whitfield suggested a tax factor shift of .7834 as opposed to Sarno’s recommendation of .7926. She stressed that her recommended rate would provide an additional $40 off average residential taxpayers’ bills.
“There is a more fair tax factor … I think it should be a more equitable rate,” said Whitfield.
Govan and Hurst supported Whitfield’s proposal.
“The more help we can give our residents, the better … We are in trying times,” said Govan.
The council ultimately adopted the .7834 tax factor for the mayor’s recommended rates of $17.05 for residents and $36.40 for CIP properties in a 10-3 vote. Whitfield and Govan said they will both advocate for additional tax relief throughout next year’s tax process.