This is #101 in the series for Franklin Matters. This covers tax rate information to prepare for the hearing set for the Town Council meeting on Weds Nov 30, 2011.
Time: 11 minutes, 15 seconds
Audio file -> https://player.captivate.fm/episode/0b02d48e-eb09-4412-8eb1-f82cc308a8da
The presentation to view along with the audio:
This internet radio show or podcast is number 101 in the series for Franklin Matters.
In this session, you give me about ten minutes and I'll fill you in on what matters in Franklin.
In particular, we'll prepare for the Town Council meeting Wednesday, Nov 30th, where the big item on the agenda will be the annual tax classification hearing beginning at 7:10 PM.
This is the time and place where the Town Council determines (1) to keep a single tax rate or decides to implement a split tax rate and (2) sets the actual rate.
I have reviewed the data provided by the Board of Assessors for this hearing. I have also spent some time on the Dept of Revenue website updating my files with historical data on Franklin's budget, tax rate, etc.
I have updated the slides to share information that I think will help us all understand the overall situation.
Page 2 shows how the tax rate is calculated. Starting with the levy limit from 2011, 2.5% is added. Based upon Prop 2.5%, up to this amount can be added without a special override vote. The growth from last year is added. This provides a subtotal. Any prior debt exclusions are added and this provides the maximum levy limit. We can technically achieve this due to rounding factors on the rates. So we have what they call an “excess levy capacity” of $9,341. This leaves us with the tax levy, the amount that Franklin is authorized to raise this year. The amount is divided by the total assessed values of all the residential, commercial, industrial and personal property.
The tax assessors package for the Town Council meeting has a number of pages devoted to the property analysis of the residential, commercial/industrial (CIP) to get to this value. The major factor to remember is that due to the overall economic conditions, property values are declining. Divide any number by a declining number and the percent will increase.
Page 3 shows the tax rate as it has varied throughout the years from 1988 to 2012. I really shouldn't use a line to depict the point in time number for each year, but it is much easier to view the data this way. The tax rate high point was in 1997 when it was 14.21% and the low point (in the period shown) was 8.86% in 2007. I find it interesting that the tax rate dropped for ten years in a row (from its peak in 1997), has gone up for the past 5 years, and yet all you hear about is our tax problem?
There are many reasons for the increases shown. I don't have all the information to explain nor do I have the time this week to do so. What I can show on Page 4 is how the assessed value effects the tax rate. The blue bars in this case depict the NET change in assessed total value of all the properties in Franklin. From 1997, the peak tax rate, the overall assessed values rose and the tax rate dropped each year until the values peaked in 2007 (when the tax rate hit its low point). Since 2007, the assessed values have dropped and the rate has risen. With less of a tax base upon which to levy the expected tax revenue, guess what, the tax rate will increase. Simple math.
Well, Page 5 more clearly shows what our 'tax problem” is. The numbers on this chart depict the average tax bill for the period 1988 through 2012. As you can see from the red bars, in no year did the average tax bill decrease. The tax rate line from Page 4 is also shown here. Clearly, the tax rate whether it goes up or down seems to have little effect on the tax bill. It is always going up.
One alternative to increasing the single tax rate is to consider a split tax rate. On Page 6 - the table depicts the residential vs. commercial/industrial property mix since 1999. It has varied a little each year but generally around 80% residential and 20% commercial/industrial. The high point for residential was 82.12 in 1988 and the low point was 77.04 in 1993.
Page 7 shows the same numbers in a chart format. As there is so little variance, I think this more clearly depicts the small range that the commercial/industrial and residential split has had over the years.
Why did I spend time on the CI vs Residential split? I can hear some folks now saying “let's go with a split tax rate”. With kind of property mix we have, a split tax does not solve our problem. See, the split tax does not increase overall tax revenues, it only shifts the proportion of the pie that each party pays as shown on Page 8. For a single dollar decrease in residential property tax, the CI increase would need to be $4. I have said it before and it bears repeating again: We don't need to shift the tax burden from one class to another. We need to grow the overall tax base. We need a bigger pie.
The best opportunities for grow come from the underutilized CI space we have. You should be aware of the efforts of Bryan Taberner and others in the Department of Planning and Community Development. There are scheduled additional bylaw proposals to increase the zoning for biotechnology. This would be one potential area for good growth. We don't need additional residential properties which would further burden the school system. In particular, the residential growth we have seen recently has been mostly in the rental unit arena and that is even worse for Franklin than a single family home. We need healthy growth in CI properties to provide tax revenues and provide some jobs for local residents.
Page 9 provides information on the sources of the data that I used to prepare this.
Page 10 provides my contact information if you have any questions or would like to review this further.
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For additional information, please visit Franklinmatters.org/
If you have questions or comments you can reach me directly at shersteve @ gmail dot com
The music for the intro and exit was provided by Michael Clark and the group "East of Shirley". The piece is titled "Ernesto, manana" c. Michael Clark &Tintype Tunes, 2008 and used with their permission
I hope you enjoy!