December 08, 2010

Four, or is it, five or more units taxed commecially

This is a complete waste of time.... Let me give you an example,  lets say I have a 4 family that is assessed at 150,000.  Residentially ($15 per thousand) I would get one bill in the amount of 2,250.  If it was tax commercially ($33 per thousand), my tax bill would go up to 4,950.    That is an increase of 1,700 in one year.

The justification for this is that this is a commercial enterprise.  O'kay, let's say I agree with that.   Why not tax commercially a two unit building or three unit building?  Aren't these apartments technically commercial too??    

Better yet, you an owner-occupied four family that will get taxed commercially but a non-owner occupied three family will get taxed residential?    Both buildings have three apartment rentals???  

On a practical side this is what I would do.   Other then consider a rent increase I would spend $2,000 and turn the mulit-family into 4 condos.  Instead of one bill at $2,250, I would receive 5 tax bills (one for the common area and 1 for each condo unit) and get taxed residential and my bill would be right back to the $2,250.  Other then being a boon for lawyers and surveyors, this would in the end not address the real problem--our disappearing commercial tax base. 

Consider this.  You are the Mayo Group and have about $4,000,000 of residential real estate in Worcester paying $60,000 per year in taxes.   A conversion will increase their tax bill to $132,000.  What message would that send to developers considering Worcester?  They are not stupid either, however, and they would mostly go the condo conversion route to retain the residential rate.

Versus splitting residential into two groups, we need to focus on the real problem.  The only thing that I have seen as a solution in the Philadelphia Plan.   The City of Worcester needs to target 50 under-utilized commercial parcels offer:
  1. Hodling the current assessed rate for 10 years
  2. Waive all permitting feees
  3. Waive all water and sewer
Jahn, I know you don't like this idea, but give me one other way that we can increase our commercial base.


Jahn said...

Bill, the real question is how do we decrease the citys expenses

We can increase our commercial base by decreasing our city employee base i.e......make more of them work a full day, privatize services, eliminate services, and/or a combo of the above.

Decreasign the number of employees will decrease the taxes that have to be levied, thereby decreasing all property tax rates

Why cant we combine the fire/police depts? This will put more public safety officers on our streets; it will eliminate the need for bunkbeds, pool tables, televisions, & BBQ Grilles in our so called fire stations(dormitories); and it will decrease the ranks of both depts.

Then we can have the city trash haulers full 8 hrs ( vs the current 4 to 4.5 hours they work, just like the Waste Mangement re-cycle guys do.

Your condo example, IMO is flawed. Once you cut anything up into pieces the sum of the pieces (condos) is always worth more that the whole (one former apt block).

MMMMMMMMMM .....but i am just licking my chops seeing Worc Common Grd getting hammered with more taxes on their MAY & MAIN Sts new apt block...dittos for City Builders site project and Cambridger & Hacker Sts, too...........BTW how is that coming along??

Brendan Melican said...

I'm still convinced the Philly plan is also over thinking a simple problem. If the goal is truly to increase the tax base, primarily on the comercial side, we don't need to change the curent tax code. We just need a long term plan to bring the two rates closer without bleeding revenue.

It would seem the easiest thing to do, easy in that it wouldn't take a rewrite of the current code or necessitate use of the home rule charter, would be to identify a 10-15 year period of time over which the commercial rate is lowered at the same percentage the residential rate is raised while making some concessions on the residential side to protect people on fixed incomes. Off the top of my head I'd lump homeowners who are elderly or have children under pre-school age into that category. The goal here would be to have the two rates eventually meet, with two potential outcomes.
1. We see a spike in commercial growth and the two, now unified rates could start being brought down in unison as revenue stabilizes.
2. Nothing changes, so we tie Dick Kennedy and Roberta Schaefer to a tree and let fire ants eat them. I don't think this would be the case, but even if it were, since we really wouldn't have changed anything within the existing code we could call the experiment a failure and return to where we are today at the next available tax classification.

I would guess the majority of concern with changes to the current code come from people who can't handle an increase burden, appeasing that relatively small population by grandfathering them in at current low rates would eliminate much of the outcry on the residential side.

Jahn said...

I Meant to add...... What happens when assessed values get locked in under the likes of a Philly Plan........and then were have a 10 year recession that absolutely slams real estate prices down....withh assessed values quilckly following suit and you re the Landlord left holding the locked in higher assessed value?

Like Harry T. , The only Philly plan I like is 18 inches of steak, onions, & cheese on a piece of French stick bread of about the same size

Also WTH is that old canine Paulie. I am tellin' ya ........ he's love.

Bill Randell said...


Of course the real solution is to close the gap over 10-15 period!!!!!!!!

It ain't going to happen!!! The next property tax hearing is this month. Best case it will be 9-2 for lowest residential, although I think there is a chance it may be 11-0.

Even if you did this how much would it really spur commercial development in Year 1-5? Not much.

Jahn, the parcels that we would identify are either empty or have abandoned structures and there assessed values are low right now. even if the market crashed the current assessed values would be lower then the market value no matter how bad the real estate values dropped.


Bill Randell said...

Meant to say Jahn and Brendan

Brendan Melican said...

The problem Bill is we're looking to solve a problem that has been created during a 20+ year span overnight. Providing incentives such as the ones you outlined are a great start, but on their own only provide a band-aid to a larger problem.

Since most business is based on both short and longterm forecasts, if the city were to start down a path with clearly outlined goals we should see increasing growth in comercial development as we head further down that road.

The reality is, us discussing this stuff changes nothing in the real world. We already know how the votes will fall (mostly) and we know not much if anything will change. That 10-15 years sounds like a long time, but is based on us having had this same public conversation for at least that long. At least this way we get actual parity in the local tax rates without risk of killing off either the residential or comercial base.

Bill Randell said...


I agree with you 100%.

In the short-term, I would like to see a targeted Philadelphia type plan. This can get done.

Over the long-term, a plan that closes the gap between commercial and residential would be ideal. I dont see this getting done.

Not saying we should give up on the later plan, but lets take advantage of the "low hanging fruit" and do the Philly Plan.


jahn said...

Folks the problem is the expense side of teh equation and not nec. the revenue ( property tax) side.

No one dares to talk about expenses in the city.

Brendan 99% of the people who claim to be on fixed incomes like Social security, actually in reality get a Cost of living raise every year and does the city already have a provision for elderly people to get an exemption?.....PLUS........elderly who meet certain income guidelines already get an automatic "rebate"/credit of up to 900$ from the State every year on their property taxes when they file their income taxes.

How many classes of property tax payees and properties are we going to set up before thsi entire city taxing structure ends up looking like the internal revenue laws. You'll need god dam bean counter just to fill out an annual property tax filing form to determine what class of payee and what class of property you own.

This simple..the council votes one unified rate.......none of em will do their job properly.

Bill I agree with what youre saying if we're talkign about locking in a property with a dilapitated building on it which property is then signinficantly upgraded & improved..clealry the assessed value probably would nt fall all that far even in a 10 year real estate recession b/c it would be so low to begin with. That being said I am still opposed Phlliy Plan. All it does is just kick the can (city expense issues) down the road. It analogous to citing the landlord because his tenants misbehave. The Landlord ( tax revenue) aint the problem the problem is the tenants (city expenses).

You wanna see this go down in smoke..........get about 200 tenants in city hall the night it is discussed.......all 11 of these jokers will run for cover b/c the tenants will be sreaming about higher taxes that will get passed on to them in higher rents. To really drive the pint home give he tenants hockey sticks and basketballs. :)

Whats Worc Property Owners Ass'n have to say about this?

Anonymous said...

I would like to see the general downtown area made subject to a Philadelphia-style plan.

Well actually, the best spot would be Ashland St, specifically in the condo building where I am saddled with a unit.

A permanent, 100 percent abatement on my taxes there would do wonders for the city's overall economy. Trust me on this one. Thanks in advance for your support.


David Z. said...

According to Phil Palmieri on this morning's gab fest with Jim Polito on WTAG, it is for 5 or more units. I think this strategy is to protect the owners of the city’s three deckers. All they are asking for at this point is for a study to be done by the City Administration. Any such change would be far in the future.

As some of you may or may not know, I am currently house hunting in the city. Has anyone looked at the property assessments in this city? There is absolutely no rhyme or reason to any of them with big disparities even in the same neighborhoods for comparable houses. The city coffers would be much better off if assessments were more equitable.

As for your Mayo Group logic Bill, I have a question. I do not know the answer so please help me if you know. Aren’t their downtown holdings already taxed at the commercial rate? Aren’t mixed use buildings taxed at the higher rate? If not, why wouldn’t any commercial property owner try to convert their building to mixed use to get the lower rate?

And the condo market is dead right now so there would be no incentive for anyone to convert from rental to condos. At least as a rental unit there is income coming in rather than having an empty condo.

I agree with Brendan, if the CC doesn’t start slowly working towards a unified rate every business in Worcester will be relocating to the suburbs. Even Auburn with one of the highest residential/commercial splits outside of Worcester is aggressively moving towards a unified tax rate. When Julie Jacobson takes over as their Town Manager, don’t think for a moment that she will not use Worcester’s onerous commercial tax rate against the city. And point to the business she is trying to woo to Auburn that they are closing their gap.

As for you Jahn, with all due respect, you have no clue what a Firefighter or Police Officer does to make such an outlandish suggestion to combine the two departments.

Bill Randell said...

Dave Z:

Mayo group.. let me give you an example. Say they have some storefronts--they are taxed commercially. The residential units above are taxed residential. Iother words, they get two tax bills.

Anonymous. You should watch you assessed value on Ashland Street. The condo market is in the toilet. Not sure what you are being assessed at but the market is very low. File an abatement in January---only month you can do it.


Bill Randell said...

Guys & Girls

My main point here is why waste our time on a study and then trying to file a Home Rules petition that has no chance, when you can simply do a condo conversion to avoid its passage.


Brendan Melican said...

Jahn, Social Security recipients haven't seen a cost of living increase since 2009 and won't see one in 2011. The other issue is the CPI dosent factor in food and energy costs which are also rising and lead to the same issues you pointed out with the Philly Plan in that it dosent truly account for market shits.

My point isn't that we should create a new classes of residents, but to keep the residents who are most likely to scuttle any attempt to merge rates from having the ammunition to do so.

David Z. said...

Thanks Bill for the clarification. I did not know they would get two different tax bills for their holdings.

David Z. said...

Bill, there is NO market for condos!!!

OMFG said...

“I kind of want to say hallelujah.”

- Salmon Rushton

Libturds are socialists said...

Out of the mouth of Babes...

Anonymous said...

Real World - property is worth much more to non-profits than to Commerical owners.

Normally, the difference is marginal, but now, because of the huge disparity, only through a TIF could you design a profitable, private development in the city. [And, if you don't believe me, take your proforma to a bank that *might* lend you money].

Personally, I'm looking to sell my $50,000 a year tax (not assessment) liability to a non-profit, because they can pay the most money for the property. This will be a downward spiral on city revenues.

Now, if there was a Philly type plan to encourage capital and investment in the city, the outgrowth would explode (but then you wouldn't need to grovel to city politicians to get a TIF).

The real solution, is the tough solution, which is to surgically, dig in the budget, and look for places to make percentage pay cuts in city workers [not lay off city workers](and other towns will follow, so you won't 'lose the best talent' argument). Give that savings back to commerical owners, who can CREATE jobs and prosperity.

Do I see it happening - Nope - don't see the political willpower, just a bunch of windbags that like getting re-elected more than serving, and LEADING.

JaHN said...

Brendan SS folks a got a 1 time 250$ check in place of a COLA raise in 2009. That comes out to about a 2% increase on their SS when many privater sector employees got no Cola. Granted it wasnt called a COLA or inflationary increase, but it was an increase.

David, I just heard on 300 pm news right from the Horses mouth ( Dr Pilot Payment Phil) that the tax would be not on 5 units or more, but on 5 or more TENANTS But I think we all know what he meant. Prob. be on again at 400pm news and I think it was taken from Polito's interview with old Sno Shovel Phil

Also, David, I do know what many public safety employees and DO NOT do..esp on the 500pm to 700am shift.......or what the graveyard shift hours are for some safety employees...then after the that night shift (sleeping all or part of it) they go out and take work away from struggling small, local contractors doing cash jobs w/o the required insurance.

And David are you saying it makes no sense to have some fire fighters out patroling the city as general safety public employees....looking out for bad guys and the like.......fires, too....maybe have a few small pieces of FF'ing equipment on board their vehicel ,too....for more prompt responses to waste cans that are on fire.

Please don tell me that cops arent smart enough to pass the FF'er exam (or vice versa).........this chillin' around the fire barn all day doing and night doing nothing when not on call at an incident has to cease as a motis operandi. Years ago FF'ers were on the run to fires much more than they are today. Now municipal fire depts have to generate work for themselves by being declared first responders to any kind of incident..........I call these synthetic responses.

We should go back to the days when insurance companies provided fire protection. See how many IOD employees you have then.

Steve Grossman (not really) said...

That is all the matters...

Turn out the lights... said...

Please embed this.

The city council is so stupid it just isn't funny anymore.

Cut Spending first then talk about tax rates.