BOSTONS TAX CRISIS

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BOSTONS TAX CRISIS

• STEVE WINTERMEIER
• BY DAY
• Midtown Office Worker

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BOSTONS TAX CRISIS

• STEVE WINTERMEIER
• BY DAY
• Midtown Office Worker
• BY NIGHT
• The Taxman

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BOSTONS 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

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BOSTONS 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?

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BOSTONS TAX CRISIS
TOTAL BUDGET 1.9 BILLION
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BOSTONS 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

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BOSTONS TAX CRISIS
Where does the money come from?
OTHER 15
PROPERTY LEVY 60
STATE AID 25
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BOSTONS TAX CRISIS
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BOSTONS TAX CRISIS
RESIDENTIAL TAXES 34
COMMERCIAL TAXES 66
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BOSTONS TAX CRISIS
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BOSTONS 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 piece of the pie
  increases.
• As a greater and greater percentage of property
  is owned by tax exempt organizations, taxpaying
  property owners have to pay more

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• HOW ARE TAXES CALCULATED?
• 3 STEP PROCESS

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BOSTONS TAX CRISIS

• STEP 1
• DETERMINE THE LEVY
• 1) Fiscal 04 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

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BOSTONS 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

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BOSTONS TAX CRISIS

• TIME OUT
• CLASSIFICATION
• CLASSIFICATION IS A PREMIUM PLACED ON COMMERCIAL
  PROPERTY ASSESSMENTS THAT EFFECTIVELY SHIFTS
  THE PROPERTY TAX BURDEN ONTO COMMERCIAL
  PROPERTIES
• TRADITIONALLY 175

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BOSTONS TAX CRISIS

• Classification Schedule
• 2004 200
• 2005 197
• 2006 190
• 2007 183
• 2008 175
• 2009 170

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BOSTONS 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

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BOSTONS TAX CRISIS

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

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BOSTONS 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

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BOSTONS 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
  absorb
• Decline in residential values
• Housing prices would have to decline by over 30
  to keep tax increases to 5 per year

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BOSTONS 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

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BOSTONS TAX CRISIS

• WHAT CANT WE DO?
• Increase the classification rate
• Tax non-profits
• Increase the residential exemption

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BOSTONS 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.

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BOSTONS TAX CRISIS

• SOLUTIONS
• 1) Property taxes for ALL properties should be
  based on sale price with an option to recapture
  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

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BOSTONS 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

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BOSTONS TAX CRISIS

• There will always be death and taxes however,
  death doesn't get worse every year. --Unknown