DLS City & Town

In proportion, as seen in the chart below, property taxes owed by the respective class groupings remained about the same from FY2010 to FY2019.

The graph below shows that in total for the 345 communities with certified FY2020 tax rates, tax levies increased from FY2019 to FY2020 by about 4.7%, or by $808.3 million, from $17.3 billion to $18.1 billion.

Assessed Values

The tax levy is distributed among taxpayers based on the assessed value of their properties as determined by the local assessors using proper standards of appraisal and assessment. DLS Bureau of Local Assessment staff reviews the assessors’ estimates to ensure that they comply with these proper standards. This review is conducted every fifth fiscal year.

The next graphic shows total assessed values from FY2010 to FY2019. Values from FY2010 to FY2013 fell by 3.3% or by about $30.6 billion from $934.7 billion to $904.1 billion. Values then rose from FY2013 to FY2019 by 36.2% or by about $327.4 billion from $904.1 billion to $1.231.5 trillion. In FY2016, assessed values first grew to over $1 trillion.

In proportion, as seen in the chart below, total assessed value of the CIP classes gained more share of the total over the time period shown and has remained about stable since FY2014.

This next graph shows that in total for the 345 communities, assessed values increased from FY2019 to FY2020 by about 6.4% ($78.5 billion) from $1.229 trillion to $1.308 trillion.

The Levy Limit

In FY2016, six communities “hit the ceiling” of Prop 2½. (As part of Prop 2½’s levy limit, when a community has lost all override capacity, its incremental levy limit equals its levy ceiling of 2.5% of assessed value.) To follow their progress, the next chart presents levy limits and levies as percentages of their levy ceilings for these communities in FY2016 and in the two most recent fiscal years.

The above chart shows that in FY2020, five of the six communities continue to find their levy limits at or very close to their levy ceilings (Levy Limit %). However, in only three of the six communities are their tax levies very close to their levy ceilings (Levy %). For the others, there is some room for the tax levy to increase if needed before the ceiling could be met again.

In FY2016, nine communities “approached the ceiling” of Prop 2½ (were within 90% to 99% of levy ceiling). To follow their progress, the next chart presents levy limits and levies as percentages of their levy ceilings for these communities in FY2016 and in the two most recent fiscal years.

The following chart presents levy limits and levies as percentages of their levy ceilings for an additional 11 communities that have “approached the ceiling” since FY2016.

As the incremental lower limit of Prop 2½ continues to increase, the extent to which future changes to the real estate market, either locally or statewide, add to or subtract from the number of communities found in any of these categories remains to be seen.

Tax Shift

At the annual classification hearing, mayors, city/town councils and boards of selectmen decide how to further distribute the tax levy. These boards may decide within certain legal limits upon:

• a single tax rate structure which distributes the tax levy in proportion to the share that their property class bears to the total assessed valuation of the community; or

• a multiple tax rate structure which shifts some of the taxes that would be paid by RO taxpayers under a single tax rate structure onto CIP taxpayers.

These boards and councils may also decide to grant:

• a residential exemption;

• an open space class discount;

• a small commercial exemption.

By the Percentages

Most communities do not shift the tax burden from the Residential and Open Space classes to the other classes of Real and Personal property. The communities that do, however, have done so for many years. The chart below shows that among the 345 communities, this multiple tax rate pattern has generally continued. For the six tax rates yet to be certified, one has traditionally shifted the burden.

Tax Rates

The calculation of the annual tax rate involves the efforts of many local officials as well as the citizenry who, in some cases, assemble data and in other cases vote financial policy. Timely tax rate setting is an important key to a successful financial operation and helps avert a cash shortfall, temporary borrowing costs and work flow disruption in city and town hall financial offices.

For more information on tax rates, assessed values, shifts and levy limits, please visit the DLS Municipal Databank.

Data Highlight of the Month: Certified Tax Rates

Linda P. Bradley – DLS Data Analytics & Research Bureau Data Analyst

Property tax related reports can be found on the DLS Data Analytics website. Specifics on communities and their tax rate shifts can be found in the Tax Rate by Class report. Definitions as to what specific types of properties these tax classes consist of can be found in Bureau of Local Assessment’s Property Classification Code.

We hope to better acquaint you with the data the DLS has to offer through this Data Highlight of the Month. For additional information please contact us directly at databank@dor.state.ma.us or (617)-626-2384.

An Update on Short-Term Rentals

Donnette Benvenuto – Data Analytics & Research Bureau Data Analyst

In December of 2018, Governor Baker expanded the definition Room Occupancy to include Short-term Rentals. A Short-term Rental is defined as a property that is rented for more than 14 days in a calendar year. The legislation added a new local option Community Impact Fee (CIF) to assess an additional 3% on professionally managed units and on two- and three-family owner-occupied properties. FAQ’s on Short-term Rentals can be found here and here.

Changes to local option rates and fees require a vote by the legislative body of the city or town. In order to adopt the CIF, a community must have already adopted the Local Option Room tax and notified the Division of Local Services (DLS) of the adoption. The community must include two separate questions on their warrant article. They must first vote to accept option one on professionally managed units, then they may vote to accept option two related to owner occupied two- and three-family units. The Data Analytics and Resources Bureau (DARB) must be notified within 48 hours of this vote. Notification of Acceptance forms can be found here.

Since December 2019, nine communities have adopted the local option tax for the first time and 14 have increased their rate to the 6%. The local option tax provides a special allowance for the City of Boston to increase its rate to 6.5%. So far, 14 communities have accepted the CIF.

The Short-term Rental legislation also created a new Water Protection fund made up of all municipalities within Barnstable County. The additional 2.75% for the fund is collected by Department of Revenue (DOR) at the same time as other local option taxes are collected. Membership in the fund is administered by the Department of Environmental Protection. Communities in Dukes and Nantucket may vote to join the fund, however, to date, no communities of Dukes and Nantucket have pursued this option.

From September to December of 2019, DOR distributed $113,924,396 in Local Room Occupancy. For the same time period in 2020, DOR distributed $256,574,900, an increase of 125.2%. To view a report with all Room, CIF and Meals Tax distribution amounts, click here.

At this time, DLS is unable to segregate distribution amounts by Short-term Rentals and traditional lodgings. However, estimates based on assessments are available to local officials upon request. Please note that DOR cannot provide details by establishment due to taxpayer confidentiality. DLS encourages local officials to request a list of properties registered as short-term operators to ensure local rules on short-term rentals are being followed. To request this list, please email us at databank@dor.state.ma.us.

FY2021 Preliminary Cherry Sheet Estimates

DLS Data Analytics and Resource Bureau

The Division of Local Services has posted on its website preliminary cherry sheet estimates based on Governor Baker's FY2021 budget recommendation (House 2), which was released today.

Municipal estimates receipts and charges

Regional school estimated receipts and charges

House 2 recommends funding FY2021 Chapter 70 at $5.480 billion, or $303.5 million higher than the FY2020 GAA; increases Unrestricted General Government Aid (UGGA) by $31.6 million to $1.160 billion and increases Charter Tuition Assessment Reimbursements to $138.2 million, a $18.2 million increase over the FY2020 GAA; and level funding most other cherry sheet accounts at the FY2020 amounts.

More detailed information regarding Chapter 70 and other school finance related initiatives contained in H.2 and the accompanying legislation can be found on the Department of Elementary and Secondary Education (DESE) website at http://www.doe.mass.edu/finance/chapter70. Information includes the Chapter 70 aid calculations, minimum contributions and net school spending requirements.

Cherry sheet estimates for charter school tuition and reimbursements are based on estimated tuition rates and projected enrollments under charters previously issued by the Board of Elementary and Secondary Education. Please be advised that charter school assessments and reimbursements will change as updated tuition rates and enrollments become available. Estimates for the school choice assessments may also change significantly when updated to reflect final tuition rates and enrollments.

It is important for local officials to remember that these estimates are preliminary and are subject to change as the legislative process unfolds.

Please contact the DLS Data Analytics and Resources Bureau at databank@dor.state.ma.us or (617) 626-2384 with any questions.