Move to set two tax rates causes rift

By Scott Van Voorhis
Globe Correspondent / October 23, 2011

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Wellesley businesses fear skyrocketing tax bills and rising downtown vacancies if selectmen approve a major shakeup in how the town raises money to pay for everything from schools to fire engines.

Stores, restaurants, and shops could see their taxes rise by as much as 50 percent under a proposal to create a separate commercial tax rate and shift more of the tax burden away from homeowners and onto businesses.

“It is going to be a massive burden on small boutique shops in Wellesley,’’ Kimberly Kissam, owner of Isabel Harvey, a boutique in Wellesley Square, told selectmen at a hearing last week. “That is why people buy homes in Wellesley, because of the uniqueness of the town. I think it would be very tough on people like me, trying to make a go of it.’’

But residents lobbying for the so-called split rate contend it would simply put Wellesley in line with other towns such as Needham and Lexington, while helping shield homeowners from relentless tax increases.

“We are all in it together,’’ said Jim Miller, who is leading the campaign. “It is a privilege to run a commercial business in a community, and it is an absolute boon to run one in a town like Wellesley.’’

The two sides squared off at a hearing Monday night, with the Board of Selectmen preparing to make a decision on the issue in early December before setting the new tax rate.

While the issue comes up annually, the stakes are higher this year, as officials consider seeking a $5.3 million override of the property tax-limiting law Proposition 2 1/2 to cover the town’s growing operating costs. A split tax rate means businesses would shoulder a greater proportion of any tax increase approved by voters.

“It is getting a more rigorous discussion this year,’’ said Hans Larsen, Wellesley’s executive director. “This would essentially transfer the burden of the override onto the backs of the commercial payers.’’

Miller’s proposal calls for boosting the tax rate for businesses to $17.15 per $1,000 of assessed value, compared with $11.43 under the town’s single tax rate, which covers both commercial and residential properties. The tax bill for a commercial building with the median value of $1.8 million would go up by $10,359, according to town officials. By contrast, the owner of a home with the median value of $786,000 would save $590.

The move to set residential and commercial taxes at different rates would not generate more revenue but would simply shift some of the burden from homeowners to businesses, said Larsen.

In theory, under Miller’s proposal, businesses would pay $5.8 million more, while residents would pay $5.8 million less. Larsen said the number is based on an estimate made by Miller’s group using fiscal 2011 numbers, so the actual amount could fluctuate.

Miller suggested the increase could be phased in over two or even three years to help businesses adjust.

“It’s a question of fairness, especially when you take into account what comparable towns are doing,’’ Miller said.

Opponents of the plan say a 50 percent tax bill increase, which commercial building owners would pass on to their tenants, could drive some businesses out of town or even to close.

“Some tenants will be pushed over the line,’’ said Brad Perry, the treasurer for a real estate partnership that owns commercial property in Wellesley Square. “Wellesley already has a number of store vacancies because of the economy.’’

Miller and other residents pushing for a split tax rate contend Wellesley businesses currently enjoy one of the lowest tax rates in the area.

However, Wellesley commercial property values are much higher than in many other towns, so an increase in the tax rate would have a much bigger impact, said Maura O’Brien, chief executive of the Wellesley Chamber of Commerce.

Business owners also warned that moving more of the tax burden onto commercial properties may also ultimately backfire.

By forcing businesses to pay more, it will reduce their profitability and eventually the value of the buildings they rent space in. And if businesses move out or close, that could further reduce the value of the commercial properties, and in turn, decrease the amount of tax revenue they generate, according to opponents.

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