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BOSTONŐS TAX CRISIS
STEVE WINTERMEIER
BY DAY
Midtown Office Worker

BOSTONŐS TAX CRISIS
STEVE WINTERMEIER
BY DAY
Midtown Office Worker
BY NIGHT
The Taxman

BOSTONŐS TAX CRISIS
PRAYER OF SERENITY
Lord,
grant me the serenity to accept the things I cannot change,
the courage to change the things I can,
and wisdom to know the difference

BOSTONŐS TAX CRISIS
RESIDENTIAL PROPERTY TAXES ARE LIKELY TO DOUBLE OVER THE NEXT 5 YEARS
WHY?  HOW IS IT POSSIBLE FOR MY TAXES TO GO UP 15% EVERY YEAR?
WHAT IS BEING DONE?
IS THERE ANYTHING WE CAN DO?

BOSTONŐS TAX CRISIS
BOSTONŐS TAX CRISIS
WHERE DOES THE MONEY GO?
Schools $865 million
Public Safety $400 million
Public works/parks $175 million
Health/Human Services $100 million
Other $360 million
TOTAL $1.9 Billion

BOSTONŐS TAX CRISIS
BOSTONŐS TAX CRISIS
BOSTONŐS TAX CRISIS
BOSTONŐS TAX CRISIS
BOSTONŐS TAX CRISIS
WHY IS THIS HAPPENING?
Taxes are a zero-sum game between residential and commercial properties and the residents of Boston are losing the game
As commercial values stagnate and residential prices skyrocket, our Ňpiece of the pieÓ increases.
As a greater and greater percentage of property is owned by tax exempt organizations, taxpaying property owners have to pay more

"HOW ARE TAXES CALCULATED?"
HOW ARE TAXES CALCULATED?
3 STEP PROCESS

BOSTONŐS TAX CRISIS
STEP 1
DETERMINE THE LEVY
1) Fiscal Ô04 Levy = $1.092 Billion
2) Multiply by 2.5% = $1.119 Billion
3) Add new development = $25 million
Real estate and personal property
4) Total Levy = $1.144 Billion

BOSTONŐS TAX CRISIS
STEP 2
CALCULATE THE BASE RATE
4) Total Levy = $1.144 Billion
5) Total Property Value = $66 Billion
6) $66 Billion/1.144 Billion = $16.88

BOSTONŐS TAX CRISIS
TIME OUT
CLASSIFICATION
CLASSIFICATION IS A PREMIUM PLACED ON COMMERCIAL PROPERTY ASSESSMENTS THAT EFFECTIVELY ŇSHIFTSÓ THE PROPERTY TAX BURDEN ONTO COMMERCIAL PROPERTIES
TRADITIONALLY  175%

BOSTONŐS TAX CRISIS
Classification Schedule
2004 200%
2005 197%
2006 190%
2007 183%
2008 175%
2009 170%

BOSTONŐS TAX CRISIS
STEP 3
APPLY CLASSIFICATION
2005 classification rate of 1.97
$16.88 x 1.97 = $33.26
Commercial Liability
$21.8 billion x $33.26 = $744 million
The residents pay the balance of $400 million

BOSTONŐS TAX CRISIS
Even if property values stabilized right now, the change in classification alone would push residential taxes up over 60% by 2009

BOSTONŐS TAX CRISIS
CONCLUSION
Commercial property assessments will at best be stable over the next 5 years and could likely decline based on current market trends
Residential property assessments will increase over the next several years by over 20%
The shift of the burden is magnified by the decline in the classification rate
Result will be increased taxes of 85-125%

BOSTONŐS TAX CRISIS
WILL ANYTHING STOP THIS?
Rise in commercial values
Commercial values have to rise substantially to offset the classification rate drop
We have 9 million sf of empty office space that in the best of times would take 6 years to ŇabsorbÓ
Decline in residential values
Housing prices would have to decline by over 30% to keep tax increases to 5% per year

BOSTONŐS TAX CRISIS
WHAT IS BEING DONE?
CAP RATE IS THE LAST BULLET
Cap rate decreases - lowering the value of commercial property and their share of taxes

BOSTONŐS TAX CRISIS
WHAT CANŐT WE DO?
Increase the classification rate
Tax non-profits
Increase the residential exemption

BOSTONŐS TAX CRISIS
WHAT CAN WE DO?
Any changes in the system must be granted by Beacon Hill.  Property tax systems are established by the state and only enforced by the municipality.

BOSTONŐS TAX CRISIS
SOLUTIONS
1) Property taxes for ALL properties should be based on sale price with an option to ŇrecaptureÓ gains at the time of sale
2) Property taxes should be based on a reasonable escalation from taxes at purchase
3) Personal property assessments should not be permanent additions to tax base
4) Split classes or put floors and ceilings on levels of commercial and residential taxes

BOSTONŐS TAX CRISIS
SOLUTIONS
5) Increased PILOT participation
6) Statutory limit on amount of tax-exempt property
7) Use of non-profit facilities and personnel
classrooms and student tutors (SILOTS)
8) 100% gains tax on capital gains of sales of tax exempt property

BOSTONŐS TAX CRISIS
There will always be death and taxes; however, death doesn't get worse every year.
--Unknown