Tyer Proposes Property Tax Rate Cut
PITTSFIELD, Mass. — Do you remember where you were in 1993?
That's the question Mayor Linda Tyer asked in her office Wednesday morning. Because 1993 was the last time the tax bill for the average single-family home in Pittsfield decreased.
Next week that could change. Tyer is putting forth a proposal to cut the tax rate for both residential and commercial properties and in turn, she said the average tax bills will go down even though values have risen.
"The residential tax rate is going down from $20.01 to $19.42. That's a decrease of 59 cents per thousand. The commercial tax rate is going down from $39.98 to $39.94, that is 4 cents per thousand," Tyer said.
The mayor said the average single-family home, valued at $186,600, would see a $9.48 decrease in the tax bill after the increased property value is factored in. Last year the average single-family home was valued $181,572. That's a $5,000 increase over fiscal 2017.
The median commercial property would see a decrease of $367.38 after factoring in a decrease in assessed value. Last year the median commercial property was valued at $198,000 and that has dropped to $189,000.
The budget for fiscal 2019 was approved in the spring and in next week the City Council will be asked to vote on the tax classification.
"From our perspective, this is a pretty remarkable turnaround considering where we were when we came into City Hall in January 2016 and we were confronted by a fiscal crisis," Tyer said. "When we came in we inherited about a decade of declining property values, rising fixed costs that put significant pressure on our budgets and there was no plan to address these trends."
The council's vote will be on keeping a split tax rate and the shift factor, a determination on who pays more of the levy burden — residential property owners or commercial property owners. Tyer said the proposal does shift more toward commercial than last year but she said increased residential values and fairly flat commercial values offset the shift.
Pittsfield has more than 19,000 taxable properties; of this number, 11,332 are single-family homes in the city.
This year a 4.9 percent increase in state aid, adding $2.5 million more to the city's coffers, and a little over $100,000 in local receipts is reducing the reliance on property taxes. The mayor is also proposing using $1 million in free cash. Those combined outpaced the increase of $2.8 million in the city's budget, resulting in less needing to be pulled from taxpayers.
"We're seeing growth trends in motor vehicle excise, we're seeing growth trends in hotel tax, meals tax, we will eventually see the marijuana tax in the next fiscal year," Finance Director Matthew Kerwood said of increase local receipts. "We're still being conservative from a budgetary standpoint with local receipts but we are able to creep those up from year to year based on what we are seeing on actuals."
The mayor said the ability to reduce taxes is a culmination of multiple factors over her three years in office. The city was — and still is but to a lesser degree — facing a significant fiscal crisis. The city's levy ceiling had crossed below the levy limit, restricting how much could be raised from taxes.
In Tyer's second year of office, the city cut a number of position in the schools in order to keep under that ceiling.
"We had to make some really difficult decisions to contain costs. That was a difficult time for all of us. It was not easy to tell people we have to relief you, we have to have a reduction in force. It did provide us with the ability to contain costs within our budget framework. In that year, we didn't have all of these other things we have been striving for coming to fruition that we do this year," Tyer said.
The major driver of that budget was an increase in health insurance. The mayor has since negotiated a new contract with the Public Employees Committee on health care that tempered the yearly increase.
"The big nut in that budget was the health insurance and being able to talk with our employee groups about the serious nature of our situation and being able to come together at a table and have a fair and good faith negotiation that led to significant savings on the budget side but also allowed for them to have more choices is a big part of the cost containment formula," Tyer said.
The mayor said the city developed better financial forecasting models and new ways to manage the city's debt, negotiated longer contracts with the unions to create more stability, and tried to limit increases to the budget. The city also adopted a new way to assess utilities that brings in additional revenue from those companies.
"In three successive budgets, we had many departments that were either level-funded or reduced. The strategy was to control costs by building these conservative budgets while at the same time ensuring city services are strong and reflect the expectations and values of our community," Tyer said.
Meanwhile, Tyer said more resources were put toward the Police Department, the development of a new therapeutic program in the schools, and the paving this year of "nearly 11 miles of roads."
During the last three years, property values have risen — especially following the re-evaluation — and so have tax bills. Increased property values also push the levy ceiling up. Tyer said, with her proposal, the city increases its distance between the levy ceiling even more.
Assessor Paula King said residential properties have again risen this year but commercial properties decreased slightly.
"Our average single-family homes have increased about 2.77 percent overall and it is dramatic because there are 11,000 single family homes, the majority of our properties. That is a significant increase and it has continued over the past few years and we are finally at a point where we were prior to when the market crashed," King said. "Commercial values have stayed relatively stable."
Kerwood said the administration has also been looking to reduce the amount of free cash being used to lower tax rates. Auditors have said free cash is a one-time revenue source and should only be used for one-time expenses and not the city's operating budget. Auditors have also pushed for increased reserves.
"Our strategy has been to reduce the amount of free cash being used to offset the tax rate," Kerwood said. "In FY15, FY14, they were using in excess of $2 million to reduce the amount that would be coming from the levy. We're doing it with a million."
City councilors during the budget hearings had urged the mayor to use more free cash to further reduce the residential tax burden.
Kerwood said reserves will be increasing by 1 percent, moving to 7 percent of the city's budget, which is closer to the 10 percent auditors target. Kerwood said the city will have about $11 million in reserves.
"This is really remarkable but it is not the end. It is not the period at the end of a sentence because we have to keep working at this to show a real, proven methodology. We will continue to budget conservatively. It doesn't mean that when we all come together in January for our budget summit that it is free for all for department heads," Tyer said.
"It means we will continue to monitor debt and adjust accordingly. We'll bring on the school as some debt falls off. We manage the wastewater upgrades, manage that debt, bring some on as some come off. We continue to build reserves."
The city has not flipped the levy ceiling and limit yet. Kerwood said if the ceiling wasn't lower than the limit, the city would have an excess levy capacity of more than $5 million. But since the ceiling is still lower, the city has a capacity of $3.1 million — more than double what the city had at this time last year.
"We're inching toward that but we are not there yet," Kerwood said.
Tags: fiscal 2019, property taxes, tax classification, tax rate,
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