Proposed legislation would increase exemption on principal residences to 35 percent, City to explore additional exemption increases

Somerville homeowners would receive the highest property tax exemption in the state under a proposal submitted by Mayor Joseph A. Curtatone to the Board of Aldermen this week, and the city continues to explore increasing exemptions for seniors, veterans, widows and those with disabilities that are already double the state limits.

The proposed home rule petition, which requires approval by the state, would boost Somerville’s residential property tax exemption from 30 percent to 35 percent. Homes in Somerville with a residential exemption this year account for 58 percent of the homes in the city. The average effect the 35 percent exemption would have had this year on residences receiving the exemption by category, compared to the current 30 percent exemption, is as follows:

This year, two-thirds of the properties in the city saw modest tax bill increases between 1 and 9 percent. However, even while the property tax bill on the average $400,000 home in Somerville remains third lowest among 15 of the city’s neighboring urban communities, the state’s required triennial revaluation resulted in more substantial increases in assessed values for the first time since pre-Great Recession FY2007, which led to some homeowners seeing larger increases. The approximate breakdown of Somerville residential properties and the change in their property tax bill from FY13 to FY14 is:

• 180 properties had a decrease of 5 percent or more
• 270 properties had a decrease between 1 and 5 percent
• 10,500 properties had an increase between 1 and 9 percent
• 4,000 properties had an increase between 10 and 24 percent
• 530 properties had an increase between 25 and 49 percent
• 110 properties had an increase of 50 percent or more

“This is no different than investing in any of the programs we have to help people in our community who are vulnerable. The property tax is perhaps the most regressive tax, levied without taking into account a taxpayer’s income or ability to pay the tax and disproportionately affecting the middle class, retirees and small businesses,” said Mayor Joseph A. Curtatone. “Cities and towns across Massachusetts have been forced to increasingly rely on the property tax as state aid has been severely cut since 2000. Residential property tax bills in Somerville are still lower than in most neighboring towns, but our families and seniors could face greater burdens in the future without action. I said last month that we would act decisively, and increasing the residential exemption is one of several steps we can take, along with all that we are already doing and while continuing to explore more options for relief.”

“I am pleased that the city has undertaken the analysis of increasing the residential exemption as I requested at the Board’s recent public hearing on taxes and that the mayor is putting forth a proposal for discussion among the aldermen,” said Board of Alderman President Bill White. “When I authored the legislation that increased the exemption from 17 to 30 percent, I sought to protect the families and residents who, without this exemption, might have been forced to sell their home years ago. The great progress that Somerville has made over the past decade has made our city ripe for real estate speculation. An increase in the residential exemption is one tool that should help us in our efforts to keep Somerville affordable for our residents who wish to stay here.”

Mayor Curtatone is also reconvening the Financial Advisory Committee (FAC) to explore additional options for relief, including for small business owners, as well as increased exemptions for seniors, veterans, widows and those with disabilities. The FAC will develop recommendations seeking to balance an equitable tax burden with preserving investments in schools, public safety and city services.

The city also examined increasing the residential exemption to 40 percent. However, because exemptions do not drive down the tax burden but only shift it from one group of taxpayers to another, increasing the exemption to 40 percent would lead to larger tax bill increases for ineligible residences and those higher costs would be passed on to renters living in those buildings.

For example, there are 136 nine-plus family residences in Somerville that were ineligible for the residential exemption this year. The average nine-plus family residence has a value of $2.8 million and saw a $1,383 tax bill increase this year. If the residential exemption were 40 percent this year, the tax bill on the average nine-plus family home would have increased an additional $2,634; if it were the proposed 35 percent, it would have increased an additional $1,289.

“Today’s Somerville renters are tomorrow’s two-bedroom condo owners and two-family home owners, who will settle in the community and raise a family here. Neighborhoods should have a variety of housing types for a variety of people, and we need to strike the right balance between supporting homeowners and renters,” said Mayor Curtatone. “Increasing the exemption to 35 percent instead of 40 percent means that we can still provide relief to the middle class and retirees, while mitigating the burden Somerville renters could face in the form of higher rents due to the building owner seeing a larger tax increase.”

The proposed residential property tax increase is one of several strategies addressing affordability in Somerville:

• The share of total taxes paid by residential property owners decreased by 3 percent this year, more than three times the decrease in any previous year as the city continues to expand its commercial tax base through strategic community-driven development.
• Seeking new efficiencies have reduced discretionary spending in the city’s budget. Somerville spends less per capita than most cities and towns in Massachusetts while maintaining nationally lauded services.
• The city’s inclusionary zoning requires that affordable units be built alongside new units at rates far above the state’s benchmark.
• The recently increased affordable housing linkage fee and passage of the Community Preservation Act bring in funds that are used to build more affordable housing through our Affordable Housing Trust Fund.
• Mayor Curtatone has also announced the city is pursuing the creation of a new affordable housing program specifically for working middle class families, and an overhaul of the city’s zoning ordinance will create new fabrication and arts districts that preserve artist and maker spaces and live-work buildings.
• The community-developed 20-year comprehensive plan SomerVision sets a goal of creating 6,000 new homes in Somerville, with 1,200 permanently affordable, putting downward pressure on both rents and property costs by increasing supply.

— City of Somerville