How is Swampscott’s 2018 Property Tax Rate calculated?
In my Swampscott’s tax rate goes down – and so do tax bills!! post this week I promised to write another article explaining exactly how the tax rate was calculated. This is it.
The formula is actually very simple: take the $ amount of the previous year’s tax levy, add 2.5% for Proposition 2 1/2, and also add any new growth (such as new construction or a condo conversion). This figure is the new maximum tax levy. To this figure is added debt service – the Principal and Interest payable on the town’s debt. Note that in recent years, Swampscott has not assessed the maximum allowed under this formula, a decision that has reduced the tax bill for residents. And in fact the average tax bill will decline in FY 2018 for the first time since FY 1994!
Here are the numbers for FY 2016, 2017 and 2018, remembering that the FY runs from July to June.
The Tax Levy calculation
The maximum $ amount that can be raised by the property tax will increase year by year. That is because of the formula: last year’s number plus 2.5% plus new growth. In the table above you can see how the FY 2017 maximum tax levy of $46,604,909 becomes the base for FY 2018. Add 2.5% and new growth and the new figure is $48,386,446. To both these numbers is added the debt service – Principal and Interest on the town’s debt, much as homeowners pay P&I on their mortgage. Note that the actual tax levy was less than the maximum allowed by just over $1 million in FY 2017 and by just over $2 million in FY 2018. In other words, the amount of taxes raised was reduced by these amounts each year. Note also that the debt service figure for FY 2018 has dropped by over $0.8 million.
The Tax Rate
The actual tax rate depends upon the total Assessed Value of all property: residential, and commercial, industrial and personal (CIP). The tax rate is calculated by dividing the total dollar amount to be raised from each class by the Assessed Value of each class. Thus, the headline tax rate will also fluctuate depending upon the direction of Assessed Values.
In simplistic terms, if we assume that the $ amount to be raised increases by a little more than 2 1/2% each year, then if the average Assessed Value also increases by a little more than 2 1/2% the tax rate will be unchanged. If the increase in Assessed Values is less than 2 1/2%, then the tax rate will rise. And if the increase in Assessed Values is more than 2 1/2% then the tax rate will fall.
Looking at the Swampscott residential tax rate, in FY 2017 it was $17.45, achieved by dividing $42.7 million by the residential AV of $2,447 million. In FY 2018 the amount to be raised from residential taxpayers is due to drop slightly to $42.4 million, but because the total residential AV increased by 8.3%, the headline tax rate dropped sharply to just $16.00, the lowest figure since 2009.
How does debt service affect the tax rate?
The announced property tax rate announced each year includes the cost of debt service. One of the factors cited for the decline in the tax rate for FY 2018 is the reduction in the cost of debt service, something which the Town warns may be temporary. The impact on the tax rate can be seen in the table below:
Comment
The residential real estate market in Swampscott has been very strong in 2017 (and the 2017 median price will be the basis for the FY 2019 tax rate). At this stage it looks as though the median price will be around $525,000 (a new high), an increase of over 7% from 2016’s $488,000. But bear in mind this is the median price of the SFHs that will actually sell this year, so does not imply that the Town’s residential Assessed Value will increase by 7%.
As to the tax rate for FY 2019, that depends on a number of factors: the amount of debt service, how much of the maximum tax levy is assessed, and the shift to the CIP class being three of them. But he continuing increase in the average Assessed Value will moderate any increases in other areas.
From a real estate perspective, the substantial decline in the tax rate and the reduced shift to the commercial sector are both very welcome news and should encourage more people to decide both to work and live in Swampscott.
If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, please contact Andrew Oliver on 617.834.8205 or Kathleen Murphy on 603.498.6817.
If you are looking to buy, we will contact you immediately when a house that meets your needs is available. In this market you need to have somebody looking after your interests.
Are you thinking about selling? Read Which broker should I choose to sell my house?
Andrew Oliver and Kathleen Murphy are Realtors with Harborside Sotheby’s International Realty. Each Office Is Independently Owned and Operated
@OliverReports
How is Marblehead’s 2018 Property Tax rate calculated?
(Click here to download a pdf of this report.)
In my Marblehead announces 2018 Property Tax rate post this week I promised to write another article explaining exactly how the tax rate was calculated. This is it.
The formula is actually very simple: take the $ amount of the previous year’s tax levy, add 2.5% for Proposition 2 1/2, and also add any new growth (such as new construction or a condo conversion). This figure is the new tax levy. To this figure is added debt service – the Principal and Interest payable on the town’s debt.
Here are the numbers for FY 2017 and 2018, remembering that the FY runs from July to June.
The Tax Levy calculation
The $ amount raised by the property tax will increase year by year. That is because of the formula: last year’s number plus 2.5% plus new growth. In the table above you can see how the FY 2017 tax levy of $57,779,806 becomes the base for FY 2018. Add 2.5% and new growth and the new figure is $59,592,925. To both these numbers is added the debt service – Principal and Interest on the town’s debt, much as homeowners pay P&I on their mortgage.
The Tax Rate
The actual tax rate depends upon the total Assessed Value of all property: residential, commercial and personal. The tax rate is calculated by dividing the total dollar amount to be raised by the total Assessed value of all property. Thus, while the $ amount raised by the tax (and therefore the average tax bill) will increase each year, the headline tax rate will fluctuate depending upon the direction of Assessed Values.
In simplistic terms, the $ amount raised before debt service will increase by a little more than 2 1/2% each year, so if the median Assessed Value also increases by a little more than 2 1/2% the tax rate will be unchanged. If the increase in Assessed Values is less than 2 1/2%, then the tax rate will rise. And if the increase in Assessed Values is more than 2 1/2% then the tax rate will rise.
In FY 2017 the tax rate was $11.02, achieved by dividing the almost $64 million to be raised by the $5.8 billion of Assessed value. And in FY 2018 the calcualtion is $66.3 million divided by $6 billion.
How does debt service affect the tax rate?
The announced property tax rate announced each year includes the cost of debt service. As can be seen in the table below, while the tax rate from the levy to pay for town services has declined in recent years as property prices have increased, the cost of debt service has increased steadily, as we are paying for large ticket items such as the Glover School and Transfer Station.
What is the outlook for FY 2019?
The residential real estate market in Marblehead has been very strong in 2017 (and the 2017 median price will be the basis for the FY 2019 tax rate). At this stage it looks as though the median price will be around $660,000, an increase of over 6% from 2016’s $620,000. But bear in mind this is the median price of the roughly 230 SFHs that will sell this year out of the more than 6,200 SFHs in Marblehead, so does not imply that the Town’s Assessed Value will increase by 6%.
Nevertheless, with debt service at this time forecast to be similar to the FY 2018 level, it seems reasonable to expect a modest decline in the tax rate for FY 2019. But tax bills will continue to go up!
If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, please contact Andrew Oliver on 617.834.8205 or Kathleen Murphy on 603.498.6817.
If you are looking to buy, we will contact you immediately when a house that meets your needs is available. In this market you need to have somebody looking after your interests.
Are you thinking about selling? Read Which broker should I choose to sell my house?
Andrew Oliver and Kathleen Murphy are Realtors with Harborside Sotheby’s International Realty. Each Office Is Independently Owned and Operated
@OliverReports
Marblehead announces 2018 Property Tax Rate
(Click here to download a pdf of this report.)
The property tax rate for Fiscal Year 2018 (July 2017-June 2018) will be $11.02, just a penny higher than 2017’s $11.01.
Here is a breakdown in recent years showing the impact of debt exclusions (for items such as schools and the new transfer station):
Source: Marblehead Board of Assessors
As usual, the Board of Selectmen voted to maintain the commercial rate at the same level as the residential rate.
The median Single Family Home assessment for FY 2018 increased 4.3% to $603,000 and the median tax bill for FY 2018 will increase 4.4%, or by $281, to $6,645.
I will provide more details, including a breakdown of how the rate was calculated, in a report this coming weekend.
Meanwhile, may we all have something for which we can be grateful this Thanksgiving.
If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, please contact Andrew Oliver on 617.834.8205 or Kathleen Murphy on 603.498.6817.
If you are looking to buy, we will contact you immediately when a house that meets your needs is available. In this market you need to have somebody looking after your interests.
Are you thinking about selling? Read Which broker should I choose to sell my house?
Andrew Oliver and Kathleen Murphy are Realtors with Harborside Sotheby’s International Realty. Each Office Is Independently Owned and Operated
@OliverReports
Commercial property tax rates: wide variations in Essex County
While most of us look at residential tax rates, far fewer are concerned with commercial tax rates. Yet a healthy commercial business environment can contribute significantly to the attractiveness of a town. The map below shows commercial rates in each of Essex County’s 34 cities and towns, followed by a table comparing residential and commercial rates.
Source: Mass Dept of Revenue
Commercial vs Residential rates
This table shows the residential and commercial rates and the percentage by which the commercial rate exceeds the residential one:
Source: Mass Dept of Revenue
There is a bigger variation in commercial rates than in residential rates
The lowest rate for both residential and commercial rates is Nahant’s $10.46, but while the highest residential rate is Amesbury’s $19.95, there are 12 towns with commercial rates over $20, with the highest being $33.59 in Lawrence. 20 towns set the same rate for both residential and commercial, while in 3 towns the commercial rate is more than double the residential one.
Why do some towns have different residential and commercial tax rates?
Cities and towns have the ability to increase the percentage of the total tax bill paid by commercial (and industrial and personal) property owners. The percentage of the value of property classified as commercial varies enormously from town to town. In Marblehead, for example, where residential property is almost 95% of the total, a 50% tax shift to commercial would increase the average commercial tax bill by $3,179 while reducing the average residential tax bill by only $179. Towns with a higher percentage of commercial property are more likely to shift an increased share of the tax bill to commercial owners.
Are you thinking of selling your home? If so please contact me on 617.834.8205 or [email protected] for a free market analysis and explanation of the outstanding marketing program I offer.
Not sure which broker to use to sell your home? Read Which broker should I choose to sell my house?
If you are looking to buy, I will contact you immediately when a house that meets your needs is available. In this market you need to have somebody looking after your interests.
Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty. Each Office Is Independently Owned and Operated
@OliverReports
Property tax rates: 2017 Essex County town by town guide
(Click here to download a pdf of the 2018 report.)
Essex County property tax rates for FY 2017 for all 34 cities and towns have been announced and the bills will be arriving in the mail any day now. (Spoiler warning – your taxes are going up!) Below is a map (so that you can compare tax rates in neighboring towns) followed by an alphabetical list of tax rates for the last three years. After that I explain how taxes are calculated and give an early look at the likely outcome for 2018.
You can download a pdf of this report by clicking here.
Source: Mass Dep of Revenue
Median and Average Tax Rates
The median and average tax rates are both $14.41. The highest taxed town, Amesbury, is therefore 38% higher than the average, while the lowest, Nahant, is 27% below the average. Or put another way, the highest tax rate in Essex County is 90% higher than the lowest.
Tax Rates of Neighboring Towns
Where taxes become interesting is when one can compare tax rates in neighboring towns. Many people, especially those moving to the area, whether from Boston or elsewhere, are willing to consider more than one town.There are many factors in the decision about where to live, but tax rates can be a significant influence on the decision.
Note, for example, that Marblehead’s rate is much lower than Swampscott’s; Newbury’s is significantly lower than the surrounding towns’; and that Manchester’s is a lot lower than Hamilton’s or Wenham’s. Some – normally the officials of higher-taxed towns – argue that their lower property values offset higher taxes. Frequently, however, residents of highly taxed towns cite taxes as a reason for wanting to move.
Tax rate changes in 2017
Of the 34 cities and towns in Essex County, 22 have announced decreases in their tax rate while 12 have had increases approved.The median change was a decrease of just 0.7%.
Of the 22 decreases 13 were 2% or less, while the largest decrease was the 6.9% in Newbury.
7 of the 12 increases were 2% or less. The largest increase by far was the 8% in Wenham, where the removal of Penguin Hall from tax rolls impacted the total valuation.
How property tax rates are calculated
There are two main points to understand:
The dollar amount raised by property taxes is based on a simple formula: the dollar levy for the previous year plus 2 1/2% (Prop 2 1/2), plus any new growth (e.g. new construction), plus any voter-approved overrides or debt exclusions.
The tax rate is then calculated by dividing the dollar amount by the Assessed Value of all property. For FY 2017 (July 2016-June 2017) Assessed Values are based upon sales during 2015.
Thus, the dollar amount (and tax bills) will always increase from year to year, but the tax rate depends upon what happens to Assessed Values (AV). Here are examples. All assume a 4% increase in the dollar amount to be raised from taxes.The variable is the change in the AV. In the years when AVs were declining, tax rates rose. As AVs are now increasing we should expect to see tax rates flat to down.
Outlook for FY 2018
As we approach the year end the median price of a Single Family Home in Essex County will increase about 5% in 2016, and it is 2016 sales which will be used in calculating FY 2018 tax rates. Since the dollar amount to be raised from property taxes will naturally continue to increase, at this stage it seems reasonable to expect a modest decline in tax rates for FY 2018, but there will, as always, be fluctuations from town to town.
If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 617.834.8205 or [email protected].
Read Which broker will find the buyer for my house?
Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty. Each Office Is Independently Owned and Operated
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