Tisbury selectmen end 25-year commercial tax burden shift
File photo by Nelson Sigelman
The Tisbury selectmen put an end this week to a longstanding practice relentlessly criticized by the business community. At a tax classification hearing March 19, selectmen agreed to eliminate a tax shift, implemented in 1986, that collects a larger share of the town's tax levy from commercial and industrial real estate and personal property owners than they would otherwise pay, if they were taxed at the rate applied to residential property.
The selectmen's decision followed a frank discussion with several Tisbury business owners who protested that the bigger tax bite affecting them is burdensome, unfair, and unsustainable.
"Businesses have been carrying an extra burden for 25 years," Martha's Vineyard Shipyard owner Phil Hale said.
Although the selectmen did away with the tax shift, they voted to continue the town's residential valuation exemption at 20 percent of the average residential property value. The residential exemption results in a portion of the tax levy being shifted from qualifying taxpayers domiciled in Tisbury to the tax bills for non-resident property owners. It has been in place since 1988.
At the hearing's start, selectmen Geoghan Cooghan and Jeff Kristal, both commercial property owners in Vineyard Haven, made their property interests clear. Mr. Coogan practices law in offices on Causeway Road. Mr. Kristal and his wife Jynell own and operate the Crocker House Inn on Crocker Avenue.
In the selectmen's discussion preceding a public comment session, Mr. Coogan and Mr. Kristal favored eliminating the tax shift for commercial properties. Selectman Tristan Israel said he preferred to reduce the shift from 130 now to 120 percent, rather than end it.
Taxable property in Massachusetts falls under one or more classifications — residential, open space, commercial, industrial, and personal property. Massachusetts communities may shift some of the residential tax burden onto the commercial, industrial, and personal properties by adopting a residential factor which creates a split tax rate. Tisbury is the only Island town with a split rate, and one of 106 among the state's 351 towns and cities, according to the Massachusetts Department of Revenue website.
Angela Cywinski, an elected member of Tisbury's board of assessors, explained that Tisbury's 130-percent tax shift to commercial property translates into an additional four percent, or $1.2 million of the tax levy falling to the commercial class parcels.
And, for residential property
Assistant assessor Ann Marie Cywinski prepared a chart that showed how a zero-percent shift to business property and the 20-percent residential exemption would affect sample tax bills for FY12.
For example, with the shift eliminated, the tax would be $1,561 less on a $700,000 commercial property taxed at the proposed rate of $7.44 per $1,000 of assessed valuation. It's actual bill would be $5,208. The tax would be $203 more for a non-exempt residential property of the same value, taxed at the proposed rate of $8.01 per $1,000 of assessed valuation. That bill would be $5,607. A residential property with the 20 percent valuation exemption, paying also at the $8.01 rate, would be taxed $158.29 more. The bill would be $4,351.
The selectmen agreed to keep the residential exemption at 20 percent, although Angela Cywinski recommended they reduce it to 15 percent. With almost half of the town's 2,900 residential properties benefitting from the exemption, she said a 15-percent residential exemption would actually result in a lower tax rate than 20, because the commercial shift used to subsidize it.
"The increase in the residential tax rate is the result of the residential exemption," Ann Marie Cywinski further explained. "When we apply the residential exemption, we have to recoup that amount through the residential tax rate; it can't be raised through the commercial tax rate. Commercial properties only make up 10 percent of our assessments."
"It's all relative," Mr. Israel said. "Two hundred, three hundred dollars more on somebody's tax bill is significant to some residents, as $2,000 can be significant to a business. The dollars may be different because property valuations differ, but whoever's bill is going up gets hurt."
Shift causes rift
About a dozen Tisbury business owners attended the hearing at town hall. In opening the floor to public comment selectman, chairman Coogan noted that the board received a letter from Mansion House owners Sherm and Susan Goldstein, who were unable to attend.
The Goldsteins wrote that they were in a difficult financial situation this past winter, in default on their mortgage to Sovereign Bank due to a loss in health club revenue when the YMCA opened and a drop in guest patronage and diners because of the national economy. And in 2011, they paid the town of Tisbury more than $261,000, between various property taxes, room taxes, licensing, and betterment fees.
"Given our situation and the very weak economy, we cannot continue to be a viable year-round business with such a tax burden," the Goldsteins said. "A significant part of that number is a result of the vastly disproportionate inequity between the commercial and the residential tax rate."
The Goldsteins' son, Josh, who attended the hearing with his sister, Nili, said they are converting first-floor retail space that sat vacant for the last three years into more hotel rooms, to generate income. "We're doing that so we can hopefully survive," he said.
Mike Fontes, owner of the building in which Rainy Day is located, said he has never seen three worse business years in a row than 2009 through 2011. He said his lease prices are back to "year one." For example, one space he rents out brought in $450 more a month four years ago.
Chris Cottrell, an Oak Bluffs resident who owns two commercial properties in Vineyard Haven, said eliminating the tax shift would give him some extra money to make improvements to his properties, instead of having to work overtime to afford them.
Sam Dunn, Tisbury Marketplace's developer and co-owner of Saltwater Restaurant, said the tax shift is "tricky" in terms of public opinion. "It's hard to judge the impact it may have on the town being perceived as unfriendly to business," he said.
Mr. Kristal bristled at that notion. "I fought for years to get beer and wine to give business people a leg up; we rolled back the betterment fee to the state level, changed parking limits from one to two hours, and upgraded sidewalks, benches, light poles and the hardscape downtown," he said. "For people to say Tisbury is unfriendly to business, they don't read the papers, and they're not here."
Finance and Advisory Committee (FinCom) chairman Larry Gomez noted that the selectmen had already decreased the shift percentage for commercial properties over the last few years, from 140 to 130 percent in 2009.
George Balco, Tisbury's port council representative and long-time former FinCom member, took a different approach. He suggested that the commercial and residential property tax rates should be equal.
As the discussion wrapped up, Mr. Kristal reminded everyone that saying yes to every spending request at town meeting is what affects tax rates the most.
Mr. Israel said at first that he was not prepared to eliminate the commercial tax shift altogether. "Times could change again, and I think there's a benefit to having this in place," he said. "Ten years from now, the town may be booming."
Mr. Coogan disagreed. He noted that his father, Edmond G. Coogan, a former Tisbury selectman until his death in 2001, had voted for a 175-percent tax shift.
"I asked him why, and it never really made sense," he said. "Nobody has ever really told me what the benefit of the shift is, other than at one time commercial properties were more valuable. Today, that's not there. I don't agree that if you get rid of it, you can't get it back."
"I'll go along with the board on this, but I'm reserving the right on a yearly basis to bring this up," Mr. Israel conceded.