Tax Break For Year-rounders Possible, But Not Yet

By: Alan Pollock

Topics: Municipal Finance

Budget and finance.

CHATHAM — Acknowledging that it’s too late to implement it for the current fiscal year, the select board plans to continue talks about a residential property tax exemption starting in fiscal year 2024. That’s a significant shift for the board, which has for many years summarily dismissed the idea of offering tax breaks for year-round residents.

Each year, state law allows communities to adopt an exemption that would shift some of the residential property tax burden from owners of lower-valued year-round homes to those with more costly properties. The shift, adopted by several other towns on the Cape, aims to provide relief for year-round residents of more modest means. It would not raise additional revenue for the town, nor would it benefit year-round residents whose homes are valued over about $2.87 million.

The board held a public hearing on the topic Tuesday and heard from both supporters of the exemption and critics of the idea.

“I think it’s extremely divisive,” year-round resident Michael Young said. It’s understandable that summer residents oppose the proposal, “but it’s also unfair for reasons that you might not consider,” he said. Many lower-income residents rent apartments, but under this exemption, “you get no benefit at all,” Young said. Young also argued that even modest homes in Chatham have uniformly risen in value more than $100,000, and a residential exemption would provide a tax break “to people who have just had this windfall.”

Karolyn McClelland, chair of the town’s community housing partnership, questioned the idea that rising property values are a windfall for year-round residents. “That’s only an advantage if you liquidate your property,” she said. For those who hope to stay in their homes, a higher valuation just means a property tax increase, McClelland said.

Seasonal resident John Hallgren said his taxes would likely increase by about $500 under the plan. “That doesn’t seem like that much, but in my budgeting system, that’s a fair amount,” he said. Hallgreen said he wants to support year-round residents, but “I’m not sure this is necessarily the best way to do it.”

“Affordable housing is really the issue,” resident Bob Potter said. Now a full-time resident, Potter opposes the exemption. “It’s terribly unfair to seasonal residents to pay a surcharge,” he said.

“This is not going to solve our problem,” resident Bruce Beane said, but it might make a property more valuable to a potential year-round resident than to a seasonal occupant, and thus might help the town retain some year-round families.

Resident David Whitcomb said the exemption could be adopted one year and rescinded the next if it isn’t helpful. Processing applications for the exemption would likely require the town to hire an additional part-time employee and might also create other expenses; Whitcomb urged the select board to prepare for those costs in its next budget, even as it continues the community debate about adopting the exemption.

Select board member Shareen Davis said the exemption is no “silver bullet” to help retain year-round families, but said it can be part of a solution. The select board convened the Chatham 365 working group to consider ways town government could support year-round families, and adopting the residential exemption was one recommendation, Davis said.

Though he is a year-round resident, board member Michael Schell said he would pay more under the residential exemption. He acknowledged town projections that year-round residents with properties valued at between $500,000 and $1 million could see annual tax breaks of between $704 and $889. “For a certain percentage of the residents of this town, that is meaningful,” he said. High-end property owners would see their taxes increase the annual equivalent of buying a few fancy dinners out, he said. Schell acknowledged that no one likes to pay higher taxes, and discussing it is “almost a third rail.” While a residential exemption is “a somewhat blunt instrument,” it seeks to achieve a worthy objective, he said.

Keeping young families in town is “going to take more than just this one tool,” board member Cory Metters said. “But it could, if structured properly, be an important component” of reaching that goal, he said.

Steadfastly opposing the residential exemption was board member Dean Nicastro, who said supporters have failed to show any evidence that it would achieve its goals. Testimony from assessors in other towns that adopted the exemption isn’t uniformly favorable, he noted. Describing it as a “transfer payment,” Nicastro said the exemption comes close to seeking a redistribution of wealth. “That’s a social goal” rather than a financial one, he said.

“I don’t think I would ever support this,” Nicastro said. Year-round residents whose properties are held in certain trusts, many of them cash-poor senior citizens, will not benefit from the exemption, he said.

If the select board intends to continue discussing the exemption for FY24, it should place an article on the annual town meeting warrant seeking the non-binding advice of voters on the matter, Nicastro said. Under state statute, the select board holds the sole authority to adopt the exemption each year.

Board Chair Jeffrey Dykens said he sees a need for relief for year-rounders.

“The last year or so, we've kind of reached a tipping point here in Chatham where the local folks are really getting kind of priced out,” he said. “And at times, we’re blind to those folks.” Dykens agreed that creating affordable and attainable housing is an essential step in maintaining a sustainable community, and agreed that the residential exemption is “more of a cudgel” than a surgical tool, financially. While more research is needed, Dykens said he’s committed, as chairman, to keep the topic on the board’s agenda during FY24 budget preparations.

The board voted to make no changes in the current year’s property tax structure.