Author: Tom Guilfoyle - Bureau of Accounts
This article reviews property tax levies and assessed values for all 351 communities from FY2012 to FY2022. For 335 communities with FY2023 tax rates approved or received by the Division of Local Services (DLS) Bureau of Accounts as of December 22, 2022, the article compares FY2022 and FY2023 tax levies and assessed values and then provides some quick FY2023 stats. It then updates the status of several communities that hit their levy ceilings in FY2016 and of several that are close to their levy ceilings in FY2023. Finally, it reports on tax rates and shifts between property classes. For a variety of trainings and informational resources about property taxes and related content, please visit the Property Taxes and Proposition 2 ½ Training and Resources page.
Tax Levies
The property tax levy is the annual amount of taxes assessed upon real and personal property in the community. For most communities, the property tax levy is the largest revenue source. Along with other revenue sources such as estimated receipts and available reserves, these revenues balance the spending needs voted in the omnibus budget. Since FY1982, the property tax levy has been subject to the limits of Proposition 2½.
The graph below shows property tax levies for residential and open space (RO) classes as well as commercial, industrial and personal property (CIP) classes for FY2012 to FY2022. Tax levies grew by 52.3% ($6.8 billion), up from $13.0 billion to $19.8 billion over this time.
In proportion, despite a decrease followed by an increase by the RO classes during the time period shown below, overall property taxes owed by the respective class groupings have remained about the same as seen in the following chart.
The graph below shows that in total for the 335 communities with certified FY2023 tax rates, tax levies increased from FY2022 to FY2023 by about 4.6%, or by about $900.8 million, from $19.6 billion to $20.5 billion. The tax levy increased in 322 communities and decreased in 13 communities. The median percentage for increases was 3.9%. The largest increase was the Town of Petersham (30%) and largest decrease was the town of Mount Washington (7.6%).
Assessed Values
The tax levy is distributed among taxpayers based on the assessed value of their properties as determined by the local assessors. DLS Bureau of Local Assessment staff reviews and certifies the assessors’ estimates every five years to ensure that they comply with legal standards. Interim year adjustments to reflect changes in market conditions must also meet legal standards, although they are not certified.
The next graph shows total assessed values from FY2012 to FY2022. Values rose from FY2012 to FY2022 by 62.5% or by about $565.5 billion from $904.8 billion to $1,470.3 trillion. In FY2016, assessed values first grew to over $1 trillion.
In proportion, total assessed value of the CIP classes gained more share of the total over the time period shown but has remained about stable since FY2014 as seen in the chart below. Assessed values increased in 333 communities and decreased in two communities. The median percentage for increases was 12.8%. The largest increase was the Town of Oak Bluffs (31.8%) while the largest decrease was the Town of Rowe (6.4%).
This next graph shows that in total for the 335 communities, assessed values increased from FY2022 to FY2023 by 12.2% ($178 billion) from $1.45 trillion to $1.63 trillion.
The Levy Limit
Proposition 2½ places limits on the amount of property taxes a community can levy. One limit is a tax levy ceiling, which limits the property tax levy to 2.5% of the full and fair cash value of all taxable real and personal property in the community without specific further community action. Once the 2.5% level has been reached, the levy limit is said to have “hit the ceiling.” In FY2016, six communities “hit the ceiling” and the following chart reports on their progress.
Communities Where the Levy Limit “Hit the Ceiling” in FY2016
A levy ceiling is one of two types of levy (tax) restrictions imposed by MGL c. 59 § 21C (Proposition 2½). It states that, in any year, the real and personal property taxes imposed may not exceed 2½ percent of the total full and fair cash value of all taxable property. A levy limit is the other of the two types of levy (tax) restrictions imposed by MGL c. 59 § 21C (Proposition 2½). It states that the real and personal property taxes imposed by a city or town may only grow each year by 2½ percent of the prior year's levy limit, plus new growth and any overrides or exclusions. The levy limit can exceed the levy ceiling only if the community passes a capital expenditure exclusion, debt exclusion, or special exclusion.
The above chart shows that by FY2023, Holyoke’s levy limit is still at 98% of its levy ceiling and tax levy at 95% of its levy ceiling. For the others, there is more room for the tax levy to increases if needed before the ceiling could be met again.
As seen in the following chart, the following communities “approached the ceiling” in FY2023 (Levy Limit is within 90% to 99% of levy ceiling).
The above chart shows that although the levy limits are near the ceilings, in only three cases (Heath, Holyoke and Pittsfield) are their tax levies at or about 90% of their levy ceiling (Levy %).
As the incremental lower limit of Prop 2½ continues to increase, the extent to which future changes to the real estate market, either locally or statewide, add to or subtract from the number of communities found in either of the above charts remains to be seen.
Tax Shift
At the annual classification hearing, mayors, city/town councils and boards of selectmen decide how to further distribute the tax levy. These boards may decide within certain legal limits upon a single tax rate structure which distributes the tax levy in proportion to the share that their property class bears to the total assessed valuation of the community, or a multiple tax rate structure which shifts some of the taxes that would be paid by RO taxpayers under a single tax rate structure onto CIP taxpayers. These boards and councils may also decide to grant a residential exemption, an open space class discount and/or a small commercial exemption.
By the Percentages
Most communities do not shift the tax burden from the residential and open space classes to the other classes of real and personal property. Generally, the communities that do so have done so for many years. The chart below shows that among the 335 communities, this multiple tax rate pattern has continued. For the 16 tax rates yet to be certified, two (Florida and Monroe) shifted the burden in FY2022.
Tax Rates
The calculation of the annual tax rate involves the efforts of many local officials as well as the citizenry who, in some cases, assemble data and in other cases vote financial policy. Timely tax rate setting is an important key to a successful financial operation and helps avert a cash shortfall, temporary borrowing costs and work-flow disruption in city and town hall financial offices.
Across the Commonwealth, residential tax rates increased in 15 communities and decreased in 320 communities. The highest FY2023 residential tax rate is Longmeadow ($22.92) while the lowest FY2023 residential tax rate is Edgartown. The greatest dollar increase from FY2022 in a residential tax rate is Petersham ($2.25), while the greatest dollar decrease from FY2022 in a residential tax rate is Shutesbury (3.39). Commercial tax rates increased in 20 communities and decreased in 315 communities. The highest FY2023 commercial tax rate is Holyoke ($40.17) and the lowest FY2023 commercial tax rate is Edgartown ($2.52). The greatest dollar increase from FY2022 in a commercial tax rate is Petersham ($2.25) while the greatest dollar decrease from FY2022 in a commercial tax rate is Chicopee ($4.57).
We hope that you found this article informative. Data compiled for all the charts and graphs in this article can be found on the DLS website by clicking here. Additional information, trainings and resources on this and a variety of other municipal finance subjects can be found here.
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Editor: Dan Bertrand
Editorial Board: Marcia Bohinc, Linda Bradley, Sean Cronin, Emily Izzo, Lisa Krzywicki and Tony Rassias
| Date published: | January 5, 2023 |
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