Opinions Vary On Residential Tax Exemption

ORLEANS – Residents and select board members are still divided on the idea of adopting a partial property tax exemption for the town’s full-time residents.

That was the takeaway from a hearing last week on the proposal, the second that the select board has held since voters approved exploring the possibility of an exemption at May’s annual town meeting.

Currently, year-round and seasonal property owners are taxed at the same rate. An exemption would shift a portion of the residential property tax burden off of year-rounders and onto seasonal owners. The select board has the option of providing an exemption of up to 50 percent by law.

Several communities across the commonwealth, including a number on Cape Cod and the Islands, have adopted exemptions. But in Orleans, the feedback thus far has been mixed. Proponents argue that the exemption would ease the financial burden on the town’s year-round population at a time when more and more people are struggling with the region’s high cost of living. Opponents see the move as divisive and unfair to the town’s seasonal property owners.

“I’m not convinced,” select board Chair Kevin Galligan said at the conclusion of the board’s Sept. 24 discussion, calling the exemption “a blunt instrument” to use to ease the financial burden on year-round property owners.

The select board has historically adopted a single residential property tax rate at its annual tax classification hearing in November. But Orleans resident Tim Counihan, who authored the petition article charging the board to look into the exemption, argued that an exemption is key to keeping the town “a vibrant and affordable community.”

Mefford Runyon of the select board has long been vocal in his support of adopting an exemption. The high cost of housing in Orleans, driven in recent years by out-of-town buyers, combined with the cost of a number of capital projects that could soon come online are putting a strain on the town’s year-round residents, he said. Those projects include a new fire station, ongoing sewering and the possible renovation or replacement of Orleans Elementary School.

Providing some relief through a tax exemption could better position voters to make decisions on those projects based on more than what they cost, Runyon said.

“The real estate tax exemption is the only tool that will allow our residents to consider and vote these projects on their merits without being pressured by personal financial worry.”

But others said seasonal property owners should not be left to shoulder that burden for the town’s year-round residents. Linda Shea, a seasonal resident whose family has owned property in town for 89 years, has always considered Orleans home. But talk of a split tax rate between year-round and seasonal owners has created a sense of division between the two classes, she told the board during the meeting’s public comment period.

“This is the first time I’ve seen where Orleans isn’t quite as welcoming,” she said. She called the proposal a case of “taxation without representation,” noting that seasonal property owners cannot vote at town meetings or local elections.

“And now it’s discrimination,” she said.

Joe Gusmano vacationed on the Cape for decades before he and his wife purchased their seasonal home in 2016. Like Shea, he said he considers Orleans home.

“Money is not an issue for me,” he told the board. “But the fact that you would turn around and suddenly say, ‘Well you know, you are my neighbor but you’re not my neighbor, you’re just someone we take a little advantage of,’ really is heartbreaking.”

But Orleans would be far from the only town to adopt a residential tax exemption. Barnstable (25 percent), Chatham (35 percent), Eastham (3 percent), Mashpee (20 percent), Provincetown (35 percent), Truro (35 percent) and Wellfleet (33 percent) all have either adopted an exemption or are in the process of doing so. 

Counihan said that states including Florida, Georgia, Maine, Michigan, Pennsylvania, Texas, Utah and Vermont have “homestead laws that favor primary residences over investment properties and second homes.”

“I would note that I personally know second homeowners who currently see tax benefits in the states and the towns in which they claim primary residences,” he said. “They have a choice. They chose their primary residence. They don’t get to vote in two places. They get to vote in one place.”

The cost of establishing a residential exemption is also being considered. The May town meeting article approved $19,270 to purchase necessary software and expand the overtime budget in the assessor’s department to allow for a potential exemption. But Town Assessor Brad Hinote said an additional $200,000 to $300,000 would also be needed to firm up the department’s overlay budget. Overlay funds are those used to plug budgetary holes left by property tax exemptions and abatements allowed by the town.

The $200,000 to $300,000 figure is on the low end, Hinote said, noting that would be the amount needed to accommodate a 5 percent exemption for the first two years of the program. 

“The idea to come in at a lower rate with where we are makes a little more sense than jumping right in the way some of our other towns have,” he said.

Hinote recommended that the board vote to reject an exemption for the 2027 fiscal year and adopt it for fiscal 2028, which starts July 1, 2027. That would allow property owners to “prequalify” in January 2007 for the exemptions, which would go into effect at the end of that year.

“A long prequalification period sort of limits the amount of damage you do to your overlay when you put this into play,” he said. After the second year, he said the goal would be to allow the tax rate to carry the work of shifting the tax burden.

“And at that point, you could probably up your percentage if you want to, because your overlay is only really exposed for your new applications that are coming in every year,” he said.

A timeline presented last week called for a request for the additional overlay funding to come before voters at the May 2027 annual town meeting. If approved, the select board could vote to adopt an exemption that fall. The impact of the exemption would appear on property owners’ year-end tax bills in December.

The overlay request is a “big ask,” Hinote said. Residents and board members said the town needs precise numbers and data going forward if it is going to move ahead with an exemption. 

“You get a lot of these emotional arguments,” said Mark Mathison of the select board. “What we need to have are the facts, the data.” He said an exemption should work to help ensure that Orleans “remains a viable year-round community for people of all ages and incomes.”

For resident Alice Thomason, that includes data on how many seasonal homes are “actually income-generating in some way or another.”

“I think that that’s really important for us to get a handle on,” she said. Elizabeth Jenkins, the town’s assistant director of planning and community development, said based on existing data, 7 percent of the approximately 5,400 units in town “are currently listed as short-term rentals.”

“That does not account for seasonal rentals that may be rented for periods of 31 days or more,” she said.

Michael Herman of the select board, meanwhile, pointed out that 22 percent of year-round residents who rent would not qualify for an exemption. Taking those renters out of the equation, he said, the town’s year-round population is larger, somewhere he estimated between 65 and 70 percent. 

“It leads people to believe our community makeup is 55 (percent year-round) -46 (percent seasonal), which in my calculations is not even close,” he said. Herman said the quoted 22 percent figure came from a recent Cape Cod Commission housing report.

While renters would not qualify for the residential exemption, the town could act separately to adopt an affordable housing exemption that would apply to those owners who rent their properties affordably at up to 200 percent of the area median income in Barnstable County. 

The board took no action on the matter last week. Further discussion on the possible exemption could be held in November, members said.