Year-rounders To Get Property Tax Break Select Board Votes Exemption Effective Next Year

CHATHAM – In a reversal of its previous position, the select board voted last week to implement a property tax exemption for year-round residents.

 The 35 percent tax exemption applies to properties occupied year-round by full-time residents. It will go into effect in fiscal 2027, which begins July 1 of next year.

The Aug. 19 vote was not unanimous. Chair Dean Nicastro cast the only dissenting vote, saying he had opposed the exemption in the past and hadn’t heard anything to change his view.

The four other board members were in agreement, however, that the exemption was necessary to help year-round residents battle the town’s high cost of living, especially housing. 

 “We should be doing everything we can to keep [year-round residents] in this community,” said board member Stuart Smith.

Chatham joins 10 other communities on the Cape and Islands and 11 other cities and towns across the state in adopting a residential tax exemption. 

Nicastro and others, including the town’s summer residents advisory committee, argued that the residential exemption was unfair because it shifts the property tax burden to non-resident owners. Year-round residents who own more than one property would also pay a higher tax rate. 

But the four select board members who supported the exemption, and resident Seth Taylor, who has advocated for it for several years, countered that non-residents have contributed to the escalation in real estate costs that are pricing year-round residents out of the market. Taylor also argued that recent federal legislation that increases the tax dedication for state and local taxes primarily benefits second homeowners.

 “The vast amount of wealth in this town in residential property is held by a disproportionate number of people who aren’t residents of this town,” Taylor said. “I don’t think it’s too much to ask to look at this as a realistic way to help the middle income folks that we say we want to have in our community.”

The state law enabling the residential exemption — which can be up to 35 percent, or even higher for communities, like Chatham, with a seasonal designation under the state Affordable Homes Act — requires that the exemption amount be calculated based on the average residential property value. In Chatham, that value is $1,575,077, according to Director of Assessing Ardelle Kelley. Thirty-five percent of that results in an exemption value of $551,277. That figure would then be subtracted from the assessors’ market rate valuation, with the owner paying property taxes on the final figure. The owner of a home at the average value, for instance, would pay taxes on $1,023,800, not the full $1,575,077 valuation. Under state law, exemptions cannot reduce a property’s tax valuation below 10 percent of its fair market value.

According to data from the assessing department, 3,258 of the town’s 7,404 residential parcels would be eligible for the exemption. Because the tax on those properties would be reduced, the tax rate would increase, Kelley said, because the town still has to raise the same amount of money to fund the government. Based on the current $3.47 tax rate, the rate under the exemption would be $4.10.

Kelley said there’s also a point at which a home value, even if owned and occupied by a year-round resident, would not qualify for the exemption. That value is $3,750,000 and above; 575 properties in town are above that value, and 128 of them are local residents.

With the higher tax rate, second homeowners would pay more than year-round owners who have the benefit of the exemption. That’s unfair, said summer residents advisory committee chair Jeff Spalter. Adoption of the exemption could damage the good relationship year-round and summer residents have enjoyed for years, he said.

 “The residential exemption is a flawed tool,” he said at last Tuesday’s select board meeting. “It is a blunt instrument that merely moves tax dollars between residential classes and does nothing to move the town forward.”

While the exemption may provide financial relief to some residents, others, including those who own more than one home and those with high-value properties, will pay more, he noted. The town should instead use other available methods to help owners who have trouble paying taxes, such as exemptions for the elderly and disabled.

 “We definitely want to provide support for those in need, but the residential exemption is not the way,” Spalter said.

Second homeowners can afford a $1 tax increase, Taylor said. He urged the board to help “the people who put you in your job, the residents of Chatham. That’s who we serve first.”

Resident Hannah Smith grew up in town and said very few of those she went to school with can afford a home here. The town can’t function without its year-round residents, many of whom struggle financially, she said.

 “For people that don’t have a lot of money and are just making ends meet, any amount of money makes a difference,” she said.

Select board member Jeff Dykens said he voted against the residential exemption in the past but has now warmed to it.

 “We have priced our residents out of existence in this town,” he said. For many year-round residents, “every single dime…every dollar is important to them,” he added. He also noted that the town’s tax rate is currently one of the lowest in the state, and even with the increase due to the exemption, “it’s still a wonderful tax rate, folks. You got a bargain.”

The federal reduction in social services such as SNAP will hit local residents hard, board member Shareen Davis said. She noted Cape towns from the elbow to the tip recognize the need to help year-round residents. Provincetown, Truro and Wellfleet have the exemption in place; Eastham is in the process of implementing it, and Orleans is exploring its adoption.

 “We’re all in the same boat,” she said. “People love us, they love the beauty and everything, but we’re the ones that struggle the most with what our year-round residents need. And if we can provide some kind of break or opportunity, then that’s what we should be doing.”

Board member Cory Metters noted that if the exemption “doesn’t work,” it can be rescinded.

Smith said he owns a rental property and will pay higher property taxes on it. 

 “You know what? That’s fine, because I have the privilege of having that opportunity,” he said.

Nicastro said he worried that adoption of the exemption leaves the town open to legal action; he did not know if the state law allowing the exemptions has ever been challenged in court. “We could very well wind up as that community, if we adopt this.”

Some cost will be involved in implementing the exemption, said Kelley, including updating assessing software, identifying properties that are the primary domicile of year-round residents, and obtaining legal assistance in helping staff on issues such as trusts. Owners will not have to apply for the exemption annually, but changes in ownership due to sales or deaths or changes to trusts or other ownership formats will need to be reviewed annually. Last year, 548 properties had to be reviewed due to those factors, she noted.

She asked that the board not implement the exemption when it holds its annual tax classification hearing on Sept. 30, as that would cause a delay in issuing tax bills. The board agreed with her recommendation that the exemption be implemented next year.