Petition Article Seeks Residential Tax Exemption

ORLEANS – A petition article headed to the warrant for May’s annual town meeting would provide an annual property tax exemption for the town’s year-round residents.
 
The article, which is being brought forward by Orleans resident Tim Counihan, seeks to raise and appropriate or transfer from available funds $13,270 to increase the overtime budget in the assessor’s department, as well as an additional $6,000 to customize software to allow the department to implement the exemptions.
 
“It’s just a patch to our software that lets it get smart enough to do that calculation, including the exemption,” Town Assessor Brad Hinote said.
 
Counihan’s article proposes a 25 percent property tax exemption for year-round residents, but he said last week that he is “open and flexible” on that figure.

“The beauty of this is seasonal communities are allowed to go up to 50 percent (with their exemptions),” he said. “So there’s a lot of runway on this.”

Each November, the select board holds a tax classification hearing to determine how to levy property taxes on residential and commercial property throughout the community for the coming fiscal year. Customarily, the board has opted to tax by what’s called a “factor of one,” meaning that all properties in town are taxed at a single rate. The board voted for the factor of one in November.

But there has been talk about exploring a residential exemption, especially given the rising cost of living in town. Last month, Counihan addressed the board during public comment urging the town to pursue the exemption, citing the relief it can provide almost all of the town’s full-time homeowners. In consulting with Hinote, he said that 92 percent of year-round residents would see some savings from the annual exemption.

“It actually creates a more progressive property tax rate,” he said.

Counihan said that the existing tax structure effectively serves to “subsidize” seasonal properties at the expense of those who live here year-round. The goal of the petition, he said, is to bring the issue to the forefront for voters to consider.

“By bringing it to town meeting, I’m trying to get citizens’ involvement and citizens’ awareness and begin the education process around what this means and how it’s going to affect everybody,” he said.

Hinote said that based on figures for the current fiscal year, a year-round resident with a home valued at $750,000 would save $1,135 on their property tax bills with the exemption as proposed.  Alternatively, approximately 2,200 seasonal properties would absorb additional costs. A small percentage of year-round homeowners with properties valued at more than $2.4 million would also pay more, he said.

To qualify for the exemption, the Orleans address has to be the address on the federal tax return, Hinote said. If your home is in a trust, you must demonstrate “sufficient beneficial and legal interest in the property,” he added.

“If your kids are the trustees of your trust but you live here and you pay taxes, your taxes go up. You don’t get this,” he said. Year-round property owners with homes in an LLC and those that own vacant land are also excluded from the exemption, Hinote said.

But with a number of ongoing and future capital projects projected to raise residential tax bills even further in the coming years, the exemption could bring some measure of financial relief to almost all year-round homeowners, Counihan said.

“The debt from the first phase (of sewer) is going to hit now,” he said. “The second phase is going to hit soon. We [may be] about to pass the fire station. The library’s on the docket. These are all things that are going to increase the tax rate down here, and I see the residential exemption as a way to sort of soften that for full-time residents.”

The particulars of how the exemption would be implemented if approved still need working out. But Hinote said it would take at least a year before the town would be set up to allow for it. Specifically, he said it would take six months for the new software to be created, installed and properly tested. The exemption would also still need a vote of support from the select board this fall, he added.

Meanwhile, Counihan said he’s received some pushback on the exemption in the early going from some residents who favor the existing single rate.

“To them I’d say it’s awfully noble of you to want to subsidize these second homeowners at the expense of your neighbors in your community,” he said. “But I personally think the people in our local community are more deserving.”

The annual town meeting is scheduled for 6 p.m. May 12 in the gymnasium of Nauset Regional Middle School.

Email Ryan Bray at ryan@capecodchronicle.com