Average single-family tax bills are calculated in the following way: first, sum the assessed value of all of the single-family parcels of each community; this community specific total is then divided by the number of parcels in that community resulting in the average single-family property value for that community. This average value is divided by one thousand (as Tax Rates are expressed as per $1,000 of assessed property value) and then multiplied by the community's residential tax rate.
The 14 cities and towns that have adopted a residential exemption are excluded from this study because they do not submit sufficiently detailed data to DLS to determine their average tax bills. Therefore our analysis covers the remaining 337 municipalities.
The property tax is by far the largest and most reliable component of revenue for cities and towns. Data collected by DLS makes it clear that whether property values are moving up or down, property taxes will increase, except in rare instances, given the need to provide ever more costly services. This is particularly true during times when there is less state aid, stagnant local receipts, and little new growth. Over each of the past ten years, the statewide average single-family tax bill has increased in both actual and constant dollars. The weighted average tax bill increased in 2010 by $140, or 3.3 percent, to $4,390, the smallest percentage increase of any year in the past decade. The percentage increase during this time ranged from the current low to a high of 6.7 percent in 2002. The cumulative percentage increase over this period is 55.3 percent, an average of 5.5 percent each year. Generally speaking, the average bill has recently increased at a slower pace suggesting a few factors are at play, such as leaner budgets, reduced excess levy capacity and Proposition 2 ½ override fatigue.
For most of the past decade, the average single-family tax rate steadily decreased, from a high of $14.73 per $1,000 in 1999 to a low of $9.74 per $1,000 in 2007. The rate changed direction in 2008 when it went up to $10.00 per $1000. It has continued to increase since then to the current rate of $11.75 per $1,000 primarily as a result of decreasing valuations.
The valuation of property represents half the tax rate formula. Average assessed values rose in Massachusetts from 1994 to 2007. However in 2008 the average assessed values across the state dropped for the first time since the early nineties contributing to the increase in tax rate mentioned above. Since then values have continued to fall, which is largely reflective of national trends and the onset of the so-called Great Recession. The good news is that the swings in our state have been much less volatile then in some areas of the country where regional conditions have resulted in near collapse of housing prices.
This year average single-family property statewide value showed a net decrease of 4.61 percent. The average value decreased from $391,762 in 2009 to $373,702 in 2010, but this average value is still double that of 2000. Since the high-water mark of $406,673 in 2007 the single-family property has lost an average of 8.1 percent in value. In contrast, the average single-family value was increasing at double-digit percentages every year from 2001 through 2005. The highest one year increase was in 2005 when the average single-property value jumped from $307,361 to $352,820, or14.8 percent. Some have described that period as a bubble that is now deflating.
Over this past year, of the 337 communities evaluated, a substantial majority - 281 - dropped in average value from 2009 to 2010. Of those 281 with decreased value, 136 communities lost 5 percent or more in value, with Brockton's values slipping the most at -17.7 percent. On the flip side, the other 56 municipalities had increased home values, but only nine of those 56 towns gained more than three percent in value. Continuing a trend that has been documented since the run-up in real estate beginning in the nineties is the variation in timing and volatility between the eastern and western part of the state. Forty-three or almost 80 percent of those that increased this year are west of the Quabbin Reservoir. Generally speaking, values increased faster and went higher in the eastern counties. Then they dropped more quickly and steeply. In the western half, increases in value came later and have been more conservative. The softening in the west has also come later as demonstrated by the data.
Table 1 details the average assessed value, and tax bill of single-family homes for fiscal years 2009 and 2010, the 2010 tax rate ranks the 337 communities from high to low for the 2010 average tax bill and shows the percentage change in assessed value and tax bills.
The nine communities with the highest average tax bills in FY09 remained the top nine in FY10 with slight movements in their rankings. These are the only towns in the state with average bills that exceed $10,000. As recently as FY2002, no town had an average bill over this mark. High to low in this group are: Weston ($15,542), Sherborn ($12,626), Dover ($11,704), Lincoln ($11,684), Carlisle ($11,276), Wayland ($10,982), Concord ($10,939) and Wellesley ($10,581). Not unexpectedly, these towns also all ranked among the highest with respect to average assessed property value. Their rankings by assessed values are Weston (2), Sherborn (21), Dover (7), Lincoln (9), Carlisle (14), Wayland (31), Concord (13) and Wellesley (10). The five communities with the lowest single-family average tax bills also remained the same: Hancock ($824), Rowe ($1,048), Monroe ($1,113), Florida ($1,276), and Erving ($1,308). These small rural towns are all in the lower 20 percent of average assessed residential values. It is also noteworthy to point out that, with the exception of Hancock, which is the home of state's largest ski resort and condominium developments, each of the remaining communities have a major taxpaying power-generating-plant allowing them to split the tax rate and shift the tax burden away from homeowners.
Similar to the results in past years is the statewide relationship between the average tax bill and average assessed value, which is generally strong with a few exceptions. A key one is that communities on the Cape and Islands tend to have high assessed values but lower tax bills due to the large number of seasonal properties, which is cause for a lower demand for services and thus cost. In fact, Chilmark on Martha's Vineyard is noted for having the highest average single family home value in the state ($1,841,890), but the second lowest tax rate of $2.03 per thousand. This resulted in an average 2010 tax bill of $3,739 that put them squarely in the middle of average bill rankings at 168. The town of Gosnold, which encompasses the Elizabeth Islands northwest of Martha's Vineyard, has the lowest tax rate of $1.81 while being fifth in average value ($1,110,067). This leads to an average bill of $2,021 placing it near the bottom of the rankings at 326 of 337.
In FY10, nine communities experienced increases in their average tax bills that were greater than 10 percent (ranging from 10.1 percent to 17.9 percent). In Hancock, the nearly 18 percent jump resulted largely from the use of $130,000 in excess levy capacity, which accounted for about 2/3rds of the increase. Paxton (+15.4 percent) had substantial new debt exclusion votes of about $800,000 go into effect, which caused 81 percent of their increase. Rockland (+15.2 percent) had a successful override of almost $2.8 million contributing to 70 percent of their increase. Almost 80 percent of Winthrop's increase (+13.36 percent) was due to a $2.5 million override. Three quarters of Milton's (+11.45 percent) increase was due to the combination of a $3.4 million override and a debt exclusion increase of $1.1 million. In the case of Rowe (+14.8 percent) and Florida (+14.8 percent), the large rate of increase was due to a substantial decline in the value of their power plants, which caused a shifting in the tax burden to the residential sector.
As determined in the analysis in City & Town two years ago, there is still a correlation between value changes and the DLS community recertification schedule. This year all but one of the 11 communities with the largest value increases (2+ percent) had just completed a triennial recertification in 2010. Even on the bottom side, 10 of 22 municipalities with a drop of 10 percent or more were in a revaluation year. These figures continue to suggest that the largest changes are still occurring in certification years, despite the push for annual interim adjustments, which if properly completed should soften abrupt changes that occur if values are only considered every third year during scheduled certification. It is also worth repeating that 13 of the twenty in revaluation with large changes were smaller towns from west of the city of Worcester indicating that interim adjustments may not be being made.