[Ed note: My Southborough accepts signed letters to the editor submitted by Southborough residents. Letters may be emailed to mysouthborough@gmail.com.]
To the Editor:
When the new Southborough Development Committee convenes I am hopeful they will look to the accumulated experience of 351 municipalities in Massachusetts in their quest for tax relief. If they do, they will find their mission a daunting task as outlined here.
Of these 351 municipalities in Massachusetts, only 49 municipalities have average home values above $500,000. Southborough is one of these 49 municipalities with an average home value of $516,361 in 2012. Of this select group of 49 municipalities, eighteen (18) have less than 5% of their tax base identified as commercial and industrial property (CIP). Increasing the CIP threshold to 10% expands the group to 37 municipalities of the 49. Expressed in another fashion, 75% of the municipalities in Massachusetts with average home values greater than $500,000 have a CIP less than 10%. Southborough, with a CIP of 19.4%, has twice to three times the CIP of the majority of these mainly residential towns and is actually one of only six municipalities in this group of 49 with a CIP above 15%.
If you look more deeply into the data relative to the mission of the new committee, a truly surprising circumstance becomes evident. In 2012 there were only two of the 49 municipalities with a CIP greater than Southborough’s and a lower residential tax rate. They are Andover and Bedford. Although this may at first seem to be the desired goal of the committee, both of these municipalities accomplish this by charging industrial and commercial tax rates significantly higher than their residential rate. Southborough does not do this; we charge the same tax rate for residential, commercial and industrial property. Southborough recently defeated a warrant article at the town meeting proposing this change. Andover and Bedford charge their commercial and industrial property owners one and a half (1.5) and two (2.0) times the residential rates, respectively, in order to provide tax relief to home owners. Other than the rate bias Andover and Bedford employ, there are no municipalities with a CIP greater than Southborough’s that have achieved a tax rate lower than Southborough’s while maintaining average home values above $500,000. The data clearly points out that achieving lower residential tax rates at a CIP level above Southborough’s current 19.4% is going to be a difficult task. There are of course many municipalities with lower tax rates than Southborough’s and CIP values greater than Southborough’s, but they have lower to significantly lower home assessments.
If the above information does not already paint a daunting mission for this new committee, there are no municipalities in Massachusetts with average home values equal to or greater than Southborough’s and a CIP above 21 %. There are also no municipalities in the state with average property values above $ 410,000 and CIP above 25 %. The highest average property value for a town with a CIP above 25% is $405,503 and that belongs to our friends in Westborough who had a tax rate in 2012 of $19.21 (CIP 37.4%). With Southborough’s current CIP of 19.4% and average property value of $516,361, you can begin to see the chilling effect commercial and industrial development could have on Southborough’s residential property values.
If you are interested in becoming a member of this committee be warned you are being asked to accomplish something that does not exist in Massachusetts.
In conclusion I would recommend that if Southborough wishes to buffer homeowners from an increasing tax rate then it look to the success seen in Andover and Bedford. Increasing the CIP of Southborough presents a significant risk to the financial net worth of the residential property owners.
All of the information in this article is based on data from the Massachusetts Department of Revenue. This data and much more can be found at: http://www.mass.gov/dor/local-officials/municipal-data-and-financial-management/data-bank-reports/.
Any individual or group wishing to learn more about this information and similar data can contact me at carl.guyer@gmail.com.
Carl Guyer
Southborough, MA
“There are of course many municipalities with lower tax rates than Southborough’s and CIP values greater than Southborough’s, but they have lower to significantly lower home assessments.”
Carl,
You’ve demonstrated a statewide correlation between low CIP and higher average home values. But what evidence do you have of causation?
Certainly, commercial overdevelopment in a town can negatively affect average home values. But I’m not sure that relationship is linear as you suggest. A single imprudent development, commercial or residential, can have the same negative effect on average home values or town quality of life as the next ten.
I suspect that towns with higher average home values tend to have fewer locations amenable to commercial development in the first place. I’m not sure those average home values are necessarily higher BECAUSE of those lower CIP percentages.
Perhaps market forces simply favor residential development in most of the higher average home value towns. My assumption would be that average home values depend upon a host of factors including the age and composition of the existing housing stock, location, zoning, town services and amenities, available real estate as well as the ability to absorb the use without negatively affecting residential home values. There’s also the NIMBY factor in litigious, high-income communities.
But if a town has space amenable to commercial use, and the CIP is wisely concentrated in low impact, high-assessment commercial uses (or for that matter commercial uses that actually enhance the residential quality of life), why should a higher CIP necessarily result in lower average home values? I’d think in some ways it could make the tax base stronger and the town more attractive.
Do you have any numbers correlating average commercial valuations relative to both the town CIP and average home values? It’d be useful to know the number of commercial properties in Southborough and the modal distribution of their assessed values compared with other towns.
There may be some planning benefit to attracting certain uses. But using wise zoning as a check on negative effects, I would generally trust the market to decide the best use for property development.
Witness the most immediate threat to home values and quality of life in the Flagg Road area: A state government-imposed 40B mandate that overrides local zoning, attempting a convoluted redistribution of income rich to poor using non-market property values while in the meantime enriching a few developers.
Dean
You ask me for causation, I cannot answer that question, it is a complexity of economic forces worthy a life time of study (and probably more). To help you visualize how forceful CIP is with respect to home values, I have included a link to a graph showing the relationship between CIP and average home assessments. There is also commentary on the data included to help with understanding the graph. Explaining why this happens is similar to explaining gravity. There are equations that can exactly predict the effects of gravity, but the causation is a very difficult undertaking. You don’t need to understand the causation of gravity to apply its principals.
All you other comments poke at the causation issue.
My offer to meet and discuss all of this is still there.
Link to graph :
https://docs.google.com/file/d/0B5bwgQxnXEokVmw5R2JRZU0xc3M/edit?usp=sharing