Growth Cuts Anticipated Tax Increase; Board Rejects Resident Exemption

By: Tim Wood

Topics: Board of Selectmen News , Development , Property taxes

New construction and renovations contributed to more than $500 million in new growth in Chatham last year. TIM WOOD PHOTO

CHATHAM – Based on spending approved at the May annual town meeting, town officials estimated that the tax rate would increase by about 16 cents. But after factoring in new growth, revised property values and increased local revenue, the rate increased by just one cent.

As they do every year, selectmen last week voted to retain a single tax rate for all property classifications. Later in the week the state department of revenue certified the fiscal 2017 tax at $5.03 per thousand, which translates to an annual tax bill of $4,074 for a home at the average value of $810,000.

The board also decided last Tuesday not to move ahead at this time with a residential property tax exemption at this time.

The underlying numbers show strong growth in real estate values, construction and local revenues, including room and meals taxes, all of which managed to soak up the increase in expenditures while having a minimal impact on property owners' tax bills.

Overall property values increased by 4 percent as of Jan. 1 of this year, according to Finance Director Alix Heilala. The total value of all property in town, as certified by the state department of revenue, is $6,438,586,200. The majority of that – $5.9 billion – is residential property. Assessing Director Ardelle Kelley told the board that revenue from new growth for fiscal 2017 was $524 million compared to $301 million in fiscal 2016.

Local revenue was also up significantly. Actual revenue from fiscal 2016 was up nearly 20 percent from estimates included in the fiscal 2017 budget, which are traditionally conservative. Those estimates anticipated $8.7 million local receipts, while the money actually deposited in town coffers during fiscal 2016, which ended June 30, totaled $10.8 million. The biggest increases were in motor vehicle excise tax, which was up 19 percent over estimates; meals tax, up 15 percent; hotel/motel tax, up 13 percent; and water revenue, up 29 percent.

The meals and hotel/motel taxes alone brought in more than $1.7 million last year. Water revenue, at $3.2 million, covers the cost of operating that department as well as its capital expenses.

While the increased revenue and new growth is good news for homeowners, most of whom will see minimal if any hike in their property tax bills, the possibility of residents paying even lower rates was put on hold by the board of selectmen.

Under state law, communities can enact a residential property tax exemption of 10, 20 or 35 percent, which shifts the tax burden to non-resident property owners. Exactly how much is a subject of contention among board members, with some seeing it as divisive, pitting nonresidents against residents.

Homeowners who are legal residents would be able to exempt a percentage of the value of their primary home. According to calculations provided by the town's finance department, a 10 percent exemption would result in an adjusted tax rate of $5.23. Based on the average home value of $810,450, a qualified taxpayer would see a $423 reduction in their tax bill, while a non-qualified taxpayer's property taxes would increase by $235. Under a 20 percent exemption, a resident would save $914, while a nonresident would pay $494 more. In the 35 percent exemption scenario, a resident homeowner pays $1,758 less while a second homeowner pays $948 more.

According to town officials, 54 percent of the town's 7,401 residential parcels, or a total of 3,997, would be eligible for the residential exemption.

But there's a “breaking point” at which the value of a property owned by a resident reaches a level where the tax bill would increase, even with the exemptions. That number appears to be about $1.47 million.

Selectman Dean Nicastro said a lot of year-round residents, including himself, have seen their property values quadruple since they purchased their homes.

“The number $1.4 million is certainly not out of reach” to many, he said. He also suggested the exemption has “divisive consequences,” dividing residents and nonresidents, and even, above that breaking point, pitting residents against residents.

Selectman Seth Taylor said he's pushed to get “an honest assessment” of the impact of a residential exemption on both residents and nonresidents. The legislature allowed the exemption, he said, because it recognizes that the increase in property values in destination communities like Chatham could mean a less viable year-round community.

“The concern is that someone would turn off the lights on Columbus Day and have to turn them on again on Memorial Day,” he said. But he said he has yet to see a full, honest assessment of the numbers, and until that happens, “fear mongering is pointless.”

“All I want is the numbers and shame on those who want to bury those numbers and don't want the numbers to be known,” Taylor said.

He called the vote on Tuesday a “charade.” Without knowing have all the numbers in front of them, “there isn't a member on this board who knows what the implications of the change will be.”

The board voted 3-0, with Taylor abstaining, not to pursue a residential tax exemption at this time.

Tax bills will be mailed Friday and are due Nov. 1, said Town Manager Jill Goldsmith.