Real Estate Tax Reality
January 30, 2019
It is said that taxes are one of life’s two certainties. The other one isn’t so welcome, either.
While the following explanation may not change anyone’s tax bill, I hope it goes some way to educating the public about how taxes are determined. Truth is, Revere’s tax rate, as well as our average single-family tax bill, are among the lower in the region and among comparable municipalities.
Misunderstanding and misconception about how real estate taxes are determined fuels anger. A frequent complaint that comes to any Mayor’s Office suggests that a particular neighborhood was singled out for a substantial increase. Some blame me, or the assessors, or the City Council, as if one of us unilaterally chose to impose substantial burdens on individuals. Those criticisms are simply incorrect.
Property taxes are a product of a comprehensive formula set by Massachusetts law. Property taxes are based solely on the value of a home and the land around it. The tax rate is multiplied for each thousand-dollars of a property’s assessed market value. The recent, rapid, and substantial increase in property values in some parts of Revere triggered, for some, a tax bill increase even though our tax rate dropped to $12.11 in 2019 from $12.96 in 2018. In fact, our current tax rate reflects a dramatic decrease since 2014, when it was $15.55.
I have heard some people complain that real estate taxes are based on real estate values. But Massachusetts law, like that in most every state in the country, requires that property values form the basis of municipal real estate taxes. Quite frankly, real estate values are the most objective measure one can devise to set real estate taxes. A property’s market value is derived from independent market forces, free from government decree or political motivation.
Massachusetts law also requires that tax rates are applied to 100 per cent of a property’s assessed market value, which is determined annually. Revere employs the services of an independent real estate assessment company to compile property market value data.
Once a municipality’s tax rate is set, it is applied uniformly across the entire city, as required by state law. In other words, there is no tax rate for one section of a city and another for another section of the city. Massachusetts law permits only two classifications of real estate tax rates: one for residential property and another for commercial property. Every residential property owner pays the same rate, and every commercial property owner pays the same rate. The total amount of the tax is based on the assessed value of the property.
Property taxes are the most significant source of the revenue needed to fund the city’s operation. What do they pay for? Think of every aspect of municipal government: our public schools, our police and fire departments, maintaining our streets and sidewalks and parks, maintaining our public buildings, libraries, providing social services, recreation opportunities, trash removal, snow removal, keeping vital records, making health and safety inspections and enforcing state regulations—all of it, along with the cost to administer and equip every aspect of it.
Before the start of a fiscal year, a municipal budget process projects the cost to run the city. The budget I submitted to the Revere City Council for the current fiscal year was created after lengthy and careful deliberation with every municipal department. The City Council, which holds the final say on municipal spending, concurred with practically every bit of my budgetary estimates.
Massachusetts law limits a city to raising total the total tax levy by no more than 2.5 per cent each year. Revere’s total tax levy for FY 2019 was $86,416,689. Using that figure, our Assessors take the total assessed value of all commercial and residential real estate in the city, based on market data, and establish a single base tax rate to raise the amount of the total tax levy. Commercial property is then assessed at 1.75 per cent of the base tax rate, the maximum allowed by law. That amount, the commercial tax levy, is applied to the total tax levy, and the remainder determines the residential tax levy.
While this is a very fundamental illustration of how taxes are determined, it largely explains the process. Revere allows exemptions for widows, elderly, veterans, and blind property owners. Revere is one of only two cities in Massachusetts to offer the senior exemption that gives seniors the chance to receive an owner-occupied exemption. Revere also offers the Senior Work-off program which gives seniors another avenue to earning money off their taxes. In addition, my administration remains committed to instituting a tax exemption for all owner-occupied properties.
This will happen only through stringent budgetary practices. In Revere, property taxes will pay approximately 41 per cent of the total city expenditures. But our residential property taxes pay some 78 per cent of the total tax levy. This is why I am committed to expanding Revere’s commercial real estate tax base, which will alleviate some of the burden on residential taxpayers. One example of this commitment is the redevelopment of Suffolk Downs, which is projected to generate over $40 million in tax revenue for our city.
The remaining amount of money collected to run our City derives from state-sourced funding nicknamed the “Cherry Sheet” revenue, the water and sewer enterprise fund, local receipts of fees, excise taxes, room tax, meal tax, and state and federal grants. We vigorously pursue all sources of revenue to minimize our municipal tax burden.
When all is said and done, Revere’s 2019 residential tax rate of $12.11 is lower than our neighboring communities such as Winthrop ($13.18), Saugus ($12.18), Salem ($15.10), Malden ($13.27), Chelsea ($14.25) and Everett ($12.38). Revere’s 2019 average single family tax bill of $4,581 is lower than nearby communities such as Lynn, Medford, Salem and Saugus.
The increase in property values in Revere is a good thing. It proves that our city is thriving. Our fiscal policies, our financial stability, and the prospects for our city’s future all point in a positive direction. When the value of a single family house in a section of our city jumps by 20 or 30 per cent, it is an indication that people want to live in Revere.
I agree with them. And I will continue to run our city on as lean a budget as possible, and keep our taxes as low as necessary to run a strong city.