Boston homeowners are probably in a bad enough mood after learning they will absorb an increase in their property tax bill next year. They might just be pulling their hair out if they’re relying on today’s Boston Globe to make sense of the whole thing.
The Globe account gets confused out of the gate, stating in the opening sentence that taxes for single-family homes are going up (by an average of $173) for the first time in three years “as the city tries to make up for declining property values.” Property taxes are calculated based on tax rates per $1,000 of assessed value. Declining values would require an increase in the rate in order to maintain the same levy, the total amount of property tax collected. But nothing about the effort to compensate for declining values necessarily requires a tax increase.
Taxes are going up this year because they go up every year. Boston’s overall tax levy is a combination of total receipts from residential and business properties, which are taxed at different rates (the commercial rate is much higher). Boston increases the total levy each year by 2.5 percent, the maximum amount permitted under the state’s Proposition 2 1/2 property tax cap law. Residential tax bills in Boston declined over the last couple of years because residential values fell more sharply than business values, shifting more of the city tax burden onto business properties. For the most recent year, however, commercial values experienced a greater drop. That is the reason for the increase announced yesterday in residential tax bills.
The Globe story says the tax rate for residential property will increase “by the maximum 2.5 percent, from $10.63 per $1,000 of assessed value in fiscal 2009, to $11.88 in 2010.” That’s some awfully fuzzy math, since such a change represents an 11.8 percent increase in the residential rate, not 2.5. (The story makes the same error with the commercial rate, claiming it will go up by the maximum of 2.5 percent, and then reporting the increase, from $27.11 to $29.38 per $1,000, which reflects an increase in the rate of of 8.4 percent.)
Proposition 2 1/2 limits the overall annual levy increase in a community to 2.5 percent plus taxes on any new development. There is no limit on changes in the tax rates, which are simply adjusted up or down, depending on what has happened with assessed values, in order to arrive at the total levy target from residential and commercial properties that city budget writers have drawn-up.
