Homeowners' property taxes in the vast majority of Massachusetts cities and towns will continue their upward climb in 2005, with double-digit percentage hikes in Boston, Cambridge, Everett, and at least 40 other cities and towns, and smaller increases in Newton, Somerville, and Milton, a Globe review has found.
The median property tax bill for single-family homes across Massachusetts will be $3,166 in 2005, 9 percent more than last year and up 38 percent from the 2000 tax bills. The rapid rise in property taxes that has burdened homeowners around the state will slow this coming year for residents of Boston and several neighboring communities, but in other nearby cities and towns it will accelerate, according to a Globe analysis of the 2005 tax figures recently approved by the state.
Homeowners' tax bills have been driven up by a divergence between soaring residential property values and stagnant commercial values, cuts in state aid, and voter-approved overrides of the state's annual property tax limit, according to local officials and tax specialists. The increases have prompted a call for a variety of fixes, including tax breaks for seniors and local taxing power for some communities, as politicians search for ways to shield homeowners.
The Globe examined the 2005 property tax rates in 305 of the state's 351 cities and towns for this article, and found that 285 of the cities and towns were increasing their average tax bills in 2005. The analysis relied on a median figure for the statewide figures, and an average for individual towns and cities.
The state's largest percentage increase was a 28 percent hike in Everett, where the average homeowner's bill will be $2,376. The deepest cut was a 7.4-percent drop in Hanson, south of Boston, where the average bill will be $3,218. The highest average bill was in Weston, at $11,767, up from $11,238 in 2004.
Bostonians who own single-family homes will see an increase of 11.7 percent in 2005, but that hike is less dramatic than last year's 14.6 percent jump and keeps the average bill $646 lower than the statewide median. The average tax bill for owners of single-family homes in Boston will be $2,520 in 2005, up from $2,257 in 2004.
Homeowners in several communities near Boston will see average increases of 4.2 percent or less in 2005, including Newton, Somerville, Milton, Medford, and Brookline. The average tax bill in Cambridge, however, is set to rise 13.6 percent.
The statewide trend is likely to continue, even as the state's financial situation improves. Residential values are still growing far faster than commercial values in many communities, a situation that shifts more of the overall tax burden onto homeowners. In fiscal year 2004, according to a recent report by the Department of Revenue, residential property values around the state went up 17.2 percent, compared with a 4.7 percent increase in the value of commercial and industrial properties.
In an interview with the Globe on Friday, Governor Mitt Romney said he believes part of the problem is the way cities and towns assess residential and commercial properties. Local officials assess homes based on their market value, but they assess commercial buildings based on their income from rents and other sources. The governor said that system tends to undervalue commercial buildings, and he said he is considering state action to change it.
Romney said the budget plan he will unveil next week will raise state spending on cities and towns by $183 million, a 4.6 percent increase over this year's total and the largest boost since Massachusetts plunged into its state budget crisis four years ago. The additional state dollars should alleviate the pressure on local officials to raise property taxes. But the governor's $4.42 billion proposal is still less than the $4.48 billion the state funneled to cities and towns in fiscal year 2002, and healthcare and other local government costs have risen sharply since then.
According to a recent report by the Massachusetts Taxpayers Foundation, a business-funded nonprofit that monitors taxes and government spending, 163 communities sustained state aid cuts of 15 percent or more between 2001 and 2004.
''We have not made up the lost ground," said Geoff Beckwith of the Massachusetts Municipal Association, which lobbies for cities and towns. ''And because of that, there has been a tax shift. There is a greater reliance on the property tax today to pay for local services than there was before the fiscal crisis."
But Romney pointed out that the recent reductions in state aid followed abnormally high state payments during the economic prosperity of the 1990s. He suggested many cities and towns have felt pressure to raise property taxes in recent years because they expanded services and signed overly generous collective bargaining agreements during the boom.
''State local aid support in the '90s grew at an unsustainably high rate, which many cities and towns came to expect, and they accepted costs well above the sustainable level," the governor said. ''Yes, local aid was reduced by the administration and legislators . . . but over a long period of time, the growth has been in keeping with the expectations of long trends."
Around the state, city officials are seeking solutions to shift the burden to businesses, or restructure the tax system to shield homeowners and apartment dwellers, who see the high property tax rates in their rent.
''The property tax is the most regressive form of taxation that exists, and the Commonwealth needs to look at alternate sources of revenue for cities and towns that are not so reliant on the property tax," said Robert Healy, Cambridge's city manager.
In cities such as Boston and Springfield, city officials complain, telecommunications companies are using loopholes in the tax code to avoid paying taxes on their equipment, forcing homeowners and other businesses to pick up the slack. In Boston, telecommunications firms were able to take more than half of their assets' value off the books by, for example, selling equipment to a tax-exempt holding company and then leasing it back.
Their maneuvers will reduce their 2005 tax bills by $11.6 million and add $48 to the average bills of the owners of single-family homes, according to Boston Assessor Ronald W. Rakow.
Many homeowners believe that Proposition 2Â½, the property tax limit approved in 1980, is supposed to prevent their own tax bills from rising more than 2.5 percent in any one year. But the 2.5 percent limit applies to the community as a whole, not individual buildings. A city or town cannot increase its overall property tax revenue by more than 2.5 percent from year to year (excluding new construction), but the mix of who pays what underneath that ceiling can change dramatically.
In cities and towns with a single tax rate for homes and businesses, a combination of soaring residential values and stagnant commercial values shifts more of the tax burden onto homeowners, leading to residential tax hikes that surpass 2.5 percent.
Boston and other cities that set a different rate for homes and businesses can protect homeowners from that phenomenon -- but only up to a point. The state limits the extent to which cities can shift the burden onto businesses. Tax bills for homeowners jumped in Boston over the past two years because the city reached the limit. Mayor Thomas M. Menino persuaded the Legislature last year to give Boston and other cities a little more wiggle room, but only temporarily, to continue to shift the burden to business owners. Over the next few years, the state will gradually tighten the rules again, restricting cities' ability to shift the burden.
Cuts in state aid have not affected Boston's property tax bills. Because the city always taxes up to the Proposition 2Â½ limit, it didn't have room to increase property taxes to make up for state aid cuts. Boston never attempts overrides, believing them to be politically impossible.
But some cities and towns did have room under Proposition 2Â½ to raise their overall property tax revenue, and did so to make up for the state aid cuts in fiscal years 2003 and 2004. Others simply asked voters for permission to break through the cap: Overrides of Proposition 2Â½ leapt 60 percent between 2002 and 2003, to a total of $49 million in 39 communities.
However, this was followed by a sharp drop to $7 million in 14 communities in 2004, and Romney spokeswoman Shawn Feddeman said the administration believes overrides have had an ''infinitesimal" impact on property tax growth across the state.
Globe correspondent Janette Neuwahl contributed to this report.