Modest Tax Increases Expected; Tax Rate Set as Council OK’s Residential Tax Credit

November 17, 2011
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The City Council voted unanimously Monday night to adopt two key motions that will keep residential tax bills among the lowest in the state.

“I think we all take great pride in knowing we’re doing everything we can to give residential taxpayers a real break here in Chelsea,” said Councillor Brian Hatleberg.  “And that break doesn’t come at the expense of a reduction in the high quality of service we’re offering as well.”

The unanimous Council action means that the average owner-occupant will save $1,701 for a single-family, $1,523 for a condominium, $1,862 for a two-family and $1,935 for a three-family property.

“We’re again providing real tax relief,” added Councillor Calvin Brown, noting that the Council has taken similar action as a regular course of its work to support those who own and live in the city.

“Very few communities are so aggressive in providing such deep property tax relief to their residents,” added Councillor Dan Cortell.

The motions, one to shift a portion of the residential tax burden onto business payers and the other to adopt a residential exemption, or credit, for owner-occupants, were part of the Council’s deliberation on the annual tax rate setting process.  As a result of the Council actions, the residential tax rate for the current tax year, FY’12, will be $13.82 per thousand, $5.00 per thousand less than the $18.82 the tax rate would have been if there was a single rate for all types of properties in the city.  With the shift, the commercial/industrial tax rate for FY’12 will be $32.93.

“The Council is to be congratulated for adopting the motions that provide substantial tax relief over what the residential tax bills could otherwise be,” said City Manager Jay Ash.

Overall, the City is allowed to increase property taxes by 2 ½ percent a year – known as Proposition 2 1/2.  How that 2 ½ percent and the existing tax levy gets assigned to residential and commercial taxpayers is based upon a State formula that takes into account property valuation changes, the amount of taxes that are shifted from residential to commercial properties and the size of the residential exemption. With the residential housing market still showing valuation decreases, the average residential tax bill is expect to go up less than 2 percent.

Changes in individual tax bills will be shown on the 3rd quarter tax bills to be mailed at the end of December.  Because of the State’s rate setting process, tax bills for the first two quarters are estimates based upon the previous year’s tax bills.  Any changes in taxes for the year are therefore made up in the 3rd and 4th quarter billings.

Councillor Leo Robinson encourages owner-occupants to check their 3rd quarter bill to be sure they are receiving the residential exemption, which this year increased by $26, up to $686.

“The savings is great news, but owner-occupants need to make sure they’re getting that benefit by checking their next tax bill,” advised Robinson, who noted that the residential exemption is not found on the 1st and 2nd quarter bills.

Meanwhile, the average commercial bill will rise by just over 4 percent.

“Property valuation differences from year to year influence which classification will rise greater than others,” explained Ash.  “Several years ago, commercial and industrial bills actually went down during a period when residential values were skyrocketing.  Now that residential values are still dropping some, commercial/industrial taxpayers are picking up a bit more of the slack.

“Overall, though, we’re trying to keep the tax burden down by managing our finances and not seeking overrides to increase taxes,” continued Ash. “That’s a commitment the Council wishes for me to continue to make and one that I will continue to do my best to honor.”

Ash concluded by noting that he performs an annual survey of municipal tax burden on single-family owner occupants, which looks at both average property tax and water & sewer bills.

“On that measure, we have the lowest burden on owner-occupants, and, in some cases, by a substantial amount,” he said. “Again, I would suggest that indicates that City government is living within its means while managing to offer both efficient and effective services. We all remain quite proud of these and our many other accomplishments.”


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