PITTSFIELD, Mass. — The average homeowner can expect to see a 5.1 percent increase in the tax bills.
The City Council approved a tax rate Tuesday night of $20.01 per $1,000 worth of value for residential properties.Last year's residential tax rate was $19.63 per $1,000 of value.
The average single-family home is valued at $181,582, which results in a tax bill of $3,633.46 - for an increase of $176.24 from last year. The tax rate for residential properties is increasing by 38 cents per $1,000 of value.
The tax rate for commercial properties is set at $39.98 per $1,000 of value, up from $39.78 last year.
The median commercial property owner can expect the tax bill to decrease by $24.05 per year. For commercial property, the tax rate is increasing by 20 cents per $1,000 but the median commercial value had dropped by $1,600. The median commercial property is now valued at $198,000.
The council set the tax rate on Tuesday to fund the budget it approved in the spring, which calls for $85,428,188 to come from the taxpayers.
The tax rates were set in a way to move further toward a more even split between commercial and residential properties. Years ago, the city adopted a split tax rate that put much more of the tax burden onto the shoulders of businesses.
But in recent years, the City Council has slowly been chipping away at that shift to bring the two more closely aligned. If both types of properties were considered equal this year, the city would have a $24.56 tax rate.
The largest driver in determining this year's rates was an increase in taxable value determined through a re-evaluation. That had led to a lower tax rate increase than previously predicted, more room under the levy ceiling, and more in free cash reserves.
Every five years the state requires all properties to be reevaluated and assessors this year determined a 3.5 percent increase in total taxable value - an increase from $3,360,079,672 to $3,478,372,726.
"You will see a significant change in the single family," Assessor Paula King said.
The value of single-family homes increased by $60.3 million - while the number of homes in total decreased by eight. King said the trend has been homes under $300,000 are selling for more than in previous years while the high-end homes valued at above $750,000 are declining.
"The two and three family homes are continuing to decline," King said, saying those have dropped in value by .3 percent, indicating that those homes that are typically used for apartments have not been maintained and are selling for less than in years past.
Council Vice President John Krol said that is particularly an area he'd like to see some increased value moving forward.
"I think that is something collectively we need to recognize. We need to encourage development in those 2-3 family homes," Krol said.
The city saw a boost in value for condominiums, particularly because a few had gone from being tax exempt to on the tax rolls. And the city saw a huge jump in apartment values - to the tune of 6.4 percent. About three-quarters of the increase in apartment values are because of Berkshire Town, which hadn't been on the tax rolls at all prior to this year.
"We are seeing rents go up but also that Berkshire Town for the past 40 years has been on a Chapter 121A, which is old school TIFs. They've been in this agreement for 40 years and they've come out of it this year. That's added $6.5 million worth of value to the residential class," King said.
The city saw minimal changes to commercial and industrial real estate values.
But, public utilities are taking a large hit this year in personal property tax value - to the tune of $37.2 million. That is because the city is assessing those utilities differently than in the past.
"This is Eversource, Western Mass Electric, and Berkshire Gas. The reason for this pretty dramatic increase is that in prior years we have always taken the net book value that has been provided to us by Western Mass Electric and Berkshire Gas. Those values are then provided to the Department of Revenue and the Department of Revenue certifies those values. We just took those values," King said.
Now, the assessors are doing their own assessment of the commercial entities and King said, "there are several court cases that have ruled in favor of assessors using this form of valuing." The new way to assess leads to a $22 million increase in personal property value for Eversource and $14.3 million increase in personal property value for Berkshire Gas.
Krol had no objections to seeing those values be increased saying, "they certainly make plenty of money off our residents."
The city also saw a 10.1 percent increase in personal property taxes from individual partnerships, driven by places like Joann Fabrics and two McDonalds changing ownership models. However, corporations have dropped by $1.1 million in personal property taxes.
A half dozen solar projects have also led to $5.2 million in new value, a 264.1 percent increase. Those include projects on Berkshire Boulevard, Churchill Street, East Acres, Cloverdale, and West Housatonic Street.
Those new values combined led to a $45.8 million increase in the new growth calculation (though the change to the utilities personal property assessments isn't part of that calculation), which is then included in determining the city's levy ceiling.
The city had set a budget expecting to be just short of $40,000 under the levy ceiling, projecting the same stagnant growth the city had seen in years prior. The boost in new growth is leading to the city to being about $1.5 million under the ceiling heading into the next year.
The budget predictions back in the spring had bumped the city so close to the levy ceiling, that Mayor Linda Tyer then felt it was needed to use free cash to offset the tax rate and keep the city underneath it. The city is not legally allowed to go above the ceiling, a state restriction limiting the amount of revenue that can come from taxpayers.
For multiple years, auditors have suggested the city avoid using free cash as a funding source for the budget - saying the one-time revenue source should only be used for one-time expenses and not to pay for annual operating costs. But, in order to balance the budget, the mayor had proposed to use $2.25 million to offset the tax rate.
The significant bump in tax value has given the city some breathing room. The City Council approved Tyer's request to lower that free cash amount to $1 million, which in turn boosts the city's free cash total to about $4.5 million.
"With reducing it to the million, I don't believe we are creating an onerous tax burden," said Director of Finance Matthew Kerwood.
Kerwood said it is financially prudent to keep the free cash as reserves or use it to avoid borrowing. For example, Kerwood said if the City Council approves the new trash pick up system, that money can be used for the upfront costs of purchasing toters instead of borrowing and having to pay for them in the future.
"It is an appropriate and valid use of free cash," Kerwood said. "It would eliminate the need to borrow, which honestly I don't want to do for the toters."
However, Councilors Melissa Mazzeo, Anthony Simonelli, and Christopher Connell felt more consideration of how much free cash to use to lower the tax burden was warranted. Connell asked what the tax rate would be under different numbers of using free cash.
"If we have an opportunity to reduce that number by changing this reduction, then I think we should go through that first," Connell said.
But, the city's accounting team based the tax rate proposal on the $1 million and would have needed new calculations based on a different levy number. Mazzeo said she wished the financial team had talked to councilors ahead of time and provided options for the impacts using different amounts of free cash would have on the budget.
"I think residents will want to use the money to lower their taxes rather than do something they might not want to do," Mazzeo said.
Kerwood estimated that for every $1 million less the city needs to generate in tax revenue results in a 30-cent decrease in the tax rate. Connell responded by suggesting the city use $1.5 million to offset the tax rate, a half million more than the mayor requested.
"We have this opportunity right now to give the residents of this city a little bit of a break and I think we should take this opportunity," Connell said.
The mayor, however, said she would not agree to use a different amount on the spot. The mayor needs to approve that order and if she didn't, then the City Council can't set the tax rate. There was a brief conversation about pushing the hearing off until the next meeting, but ultimately seven of the 10 councilors present were confident at the $1 million mark.
The increased values are a good sign for the city's finances and King said she expects values to continue to increase. The assessors make adjustments to the values every year and do a closer look every five years.
"It does look like the trend is continuing. We are seeing good sales in 2017," King said.
Home sales are a major driver of assessments. Even if a person doesn't do anything to improve a property if similar properties are selling for more, the assessment increases.
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