The amounts that Island property owners pay in annual real estate taxes result from the workings of a tax assessment process that results in a sum of all town real estate value. Then, taking into account annual town spending and the amount to be raised by taxation – the tax levy – to pay the bill, a tax rate will be determined and applied to the assessed value of a taxpayer’s property. There are several moving parts to arriving at your bill, but the assessor’s goal is fixed.
“Our job in the assessor’s office is to equalize value so that everyone pays their fair share of spending approved at annual town meeting, paying for a new fire truck, for example,” Angela Cywinski, Aquinnah’s professional town assessor, said in an interview recently.
After annual town meeting (ATM) finishes each spring, assessors in each of the six Island towns divide the amount of money voters agreed to spend – less reimbursements from state and federal funding and often cash that happens to be on hand – by the value of the private property in town. For example, if town A votes to spend $10 million after reimbursements and has town-wide property values of $2 billion, the tax rate is $50 per thousand of real property value. The town then applies the tax rate to individual property values to create a tax bill for each property owner. Five towns bill quarterly. Chilmark bills semi-annually.
If ATM voters spend the same or less than they spent last year and real estate values don’t change, taxes remain unchanged or fall. If they vote to spend more than the prior year, then the tax rate rises to generate the spending approved at ATM. That’s the big, simple picture.
In fact, it’s a moving target affected by several variables. For example, by state law, ATM voters cannot approve spending that will result in more than a two and one-half percent increase in real estate taxes, without a special vote overriding the two and one half per cent tax increase ceiling. Also, if a town has free cash on hand, voters can agree to use the cash to defray next year’s tax bill. Individual property owners’ real estate tax assessments are also affected by real estate market conditions and by changes in the assessed valuation of their property.
The process of property valuation is largely governed by state rules, but at the local level the process can become a highly charged issue, as has been the case in Oak Bluffs, Edgartown, and Chilmark in recent years.
The Massachusetts Department of Revenue (DOR) oversees the real estate valuation process in each of the Commonwealth’s 351 cities and towns. DOR requires a new valuation every three years and also requires that every property be personally visited by an evaluator within a specific nine-year period. The state allows communities to do interim valuation adjustments, as market conditions warrant.
DOR requires the town or its consulting assessing contractor to analyze a benchmark two per cent sample of houses and land that have sold in the past year or two under normal buyer-seller transactions called “arms-length agreements.” These sales determine a value range to be applied to all properties in a town for the triennial valuation. While towns also levy commercial real estate and personal property taxes, well over 90 per cent of municipal revenues raised on the Island come from real estate tax assessments.
Ms. Cywinski has spent 16 years as an assessor, first in Tisbury and now in Aquinnah. She is familiar with homeowner complaints about their real estate assessments, but she says that ATM spending is the primary driver.
“Revenues on this Island are driven by real estate taxes. It’s not like life across the bridge where there is typically a larger commercial real estate tax base and greater dependence on state and federal aid,” she said. “The process is the same for every town, although every town has its own particular quirks. Oak Bluffs has a special category for Victorian houses, Edgartown has different categories for docks, but the process is the same. Actually the Massachusetts’ plan is the model, not just for the U.S, but for other countries. It’s not perfect but it works.”
In the turbulent real estate world of declining property values, interim valuations can be helpful. West Tisbury, for example, is preparing an interim valuation.
“Valuations trail market prices by a year or two because they are based on sales from a prior year or two,” assessor Kristina West said, noting that the more current valuations are, the fewer surprises for towns and their taxpayers.
Ms. Cywinski estimates that Island-wide, valuations are down three to five per cent, much healthier than in many communities. Beset by foreclosures, short sales (less than the mortgage amount owed) and drastically reduced state and federal aid, many communities have experienced a 25 to 30 percent drop in real estate valuations on which tax rates are based, she said. Communities are then forced to decide whether to raise the tax rate 25 to 30 percent or forego services, she said.
“When you sign the deed, you are also accepting whatever goes on in that community. Services come with a cost. If voters don’t approve anything, you are still looking at 20 or 25 additional cents on the tax rate. It doesn’t take much spending to add a buck to the rate,” she said. “If taxpayers don’t want that, they need to go to ATM and say so.”