FinCom Seeks Tax Exemption Delay

CHATHAM – The finance committee wants to pump the brakes on a residential tax exemption.

The group is sponsoring a town meeting article asking voters to advise the select board to postpone implementation of the proposal for at least a year. On Tuesday the select board agreed to place the nonbinding measure on the warrant for the May 11 annual meeting but voted 3-2 not to support it.

By the same margin, the board last September voted to adopt a 20 percent real estate tax exemption for year-round property owners. The exemption won’t be implemented until September, when the board sets the new tax rate. 

However, finance committee members say the proposal needs more vetting and an explanation of exactly whom it is designed to benefit.

The finance committee’s article seeks a delay of at least one year in implementing a residential tax exemption (RTE) to allow time for town officials and residents “to learn more about the financial and legal costs and opportunities involved” in adopting the RTE, and to “evaluate whether there are more targeted means of providing tax relief to full-time resident taxpayers in need.”

“It seems increasingly clear that the full impacts of the RTE were not evaluated by the select board” when it voted in favor of it last September, the explanation accompanying the article reads. 

Those impacts include the effect on the overlay fund, which makes up the difference when the assessors reduce an owner’s taxes through an abatement; the inability of properties owned by a limited liability company (LLC) to qualify for relief; the possibility that rents could increase if property owners’ taxes go up because of the RTE; the impact on the approximately 1,700 properties owned by trusts; and the impact on nonprofit organizations.

“To seek to drastically change the application of the town tax code without identifying a specific and targeted goal for such action does not represent the ideal means of making policy,” the finance committee reasoned in its explanation.

Finance Committee Chair Stephen Daniel said at the finance committee’s March 5 meeting that it is “not remotely clear” whom the select board is trying to help via the residential tax exemption.

“You’ve got to start with the definition of the problem,” he said. “Let’s start with who we want to help and figure out the best way to get them that assistance, to the best extent possible.”

“This is an extraordinarily blunt hammer,” Daniel said.

Those who rent will not see a benefit, finance committee members said at the session, and some residents who have rental properties or whose homes are valued at more than $3.25 million could see their taxes increase. Renters could see their rent hike if landlords have to pay higher property taxes, finance committee member Eric Whiteley said.

“That alone to me makes this not a good idea,” he said. 

On March 3 the select board voted to support a town meeting article seeking $500,000 for the board of assessors’ overlay fund, which would cover the cost of the RTE after the tax rate is set. Finance Director Carrie Mazerolle said at 20 percent, the exemption will cost about $1.5 million in its first year. Most of that can be covered by the overlay account, but she estimates that 40 percent of those who qualify will apply after the tax rate is set, which will require the additional funding. She said the funds would come from free cash and not impact the tax rate.

The finance committee, however, unanimously opposed the measure in a March 5 vote.

“This is, to me, an absolute no,” said member Jo Ann Sprague, arguing that it would be taking money away from other town projects.

Finance committee members said officials should concentrate on adopting and/or expanding existing tax relief measures before implementing the RTE. The select board did so last week, endorsing town meeting articles that seek adoption of several provisions in state law that provide property tax relief to veterans, seniors and other residents. Daniel also noted that the town established a residential tax aid committee last year to help residents who are having trouble paying their property taxes; residents can contribute to the taxation aid fund by checking a box on their tax bill.

One area of concern is properties held in trusts. In order to qualify for the exemption, owners of properties in trust must not only be year-round residents but must be a trustee and a beneficiary of the trust. According to Finance Director Carrie Mazerolle, there are 1,764 properties in town owned by trusts. Of those, 802 have a Chatham zip code while 962 have an out-of-town zip code. Properties in trust have assessed values ranging from $159,600 to $12,924,500, she wrote in a memo.

Trust must meet the criteria as of Jan. 1, meaning if the board adopts the RTE this September, those that do not currently meet the criteria would not qualify. There’s a legal cost to residents who need to change their trust in order to qualify, the finance committee noted.

Select board members Stuart Smith, Shareen Davis and Jeffrey Dykens support the RTE and voted to recommend that voters not endorse the finance committee article. Board Chair Dean Nicastro and member Cory Metters oppose the RTE and backed the finance committee article.

While acknowledging that it has shortcomings, Smith said that the RTE is a “rare” statutory opportunity for the board to provide financial relief to year-round property owners, whether they be young people or seniors. 

Daniel said the finance committee has created a working group to “thoroughly study” the RTE issue and present its findings to the select board. Dykens said he would welcome the committee’s examination of other “more targeted means of relief.” One possibility, said Nicastro, would be to petition the legislature to allow the town to expand the recently-created taxation aid committee’s ability to provide tax relief beyond its current focus on seniors and the disabled.