DLS City & Town

A Look at FY2021 Tax Levies, Assessed Values and Tax Rates

Tom Guilfoyle - Bureau of Accounts Supervisor

This article reviews property tax levies and assessed values for all 351 communities from FY2010 to FY2020. For 339 communities with FY2021 tax rates approved by the Bureau of Accounts as of December 31, 2020, it compares FY2020 and FY2021 tax levies and assessed values and then provides some quick FY2021 stats. This article then updates the status of several communities that hit their levy ceilings in FY2016 and of several that are close to their levy ceilings in FY2021. Finally, it will report on tax rates and shifts between property classes.

Tax Levies

The property tax levy is the annual amount of taxes assessed upon real and personal property in the community. For most communities, the property tax levy is the largest revenue source. Along with other revenue sources such as estimated receipts and available reserves, these revenues balance the spending needs voted in the omnibus budget. Since FY1982, the property tax levy has been subject to the limits of Prop 2½.

The graph below shows property tax levies for residential and open space (RO) classes as well as commercial, industrial and personal property (CIP) classes for FY2010 to FY2020. Tax levies grew by 50.8% or by $6.1 billion, from $12.0 billion to $18.1 billion, over this time period.

The graph below shows that in total for the 339 communities with certified FY2021 tax rates, tax levies increased from FY2020 to FY2021 by about 4.5%, or by about $800 million, from $17.9 billion to $18.7 billion. FY2021 statistics do not include the City of Framingham, by far the largest of the 12 communities yet to set an FY2021 tax rate.

Quick FY2021 Tax Levy Stats

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 review the assessors’ estimates to ensure that they comply with these proper standards. This review is conducted every fifth fiscal year.

The next graph shows total assessed values from FY2010 to FY2020. 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 FY2020 by 44.9% or by about $405.9 billion from $904.1 billion to $1,310.0 trillion. In FY2016, assessed values first grew to over $1 trillion.

This next graph shows that in total for the 339 communities, assessed values increased from FY2020 to FY2021 by 4.8% ($62 billion) from $1.298.0 trillion to $1.360.3 trillion.

Assessed Values and the Pandemic

Massachusetts locally assessed property values for FY2021 were based on calendar 2019 data and were determined as of January 1, 2020. However, the first case of the virus in Massachusetts was not confirmed until after January 1. FY2022 values are based on calendar 2020 data and are determined as of January 1, 2021. These values will reflect market conditions during the first year of the pandemic and how the pandemic has affected the real estate market.

Quick FY2021 Assessed Value Stats

The Levy Limit

Proposition 2½ places limits on the amount of property taxes a community can levy. One limit is a tax levy ceiling where the incremental limit cannot exceed 2.5% of the full and fair cash value of all taxable real and personal property in the community without specific further community action. Once the 2.5% level has been reached, the levy limit is said to have “hit the ceiling.” In FY2016, six communities “hit the ceiling” and the following chart reports on their progress.

The above chart shows that in FY2021, 5 of the six communities continue to find their levy limits at or very close to their levy ceilings (Levy Limit %). However, in only 3 of the 6 communities are their tax levies very close to their levy ceilings (Levy %). For the others, there is more room for the tax levy to increase if needed before the ceiling could be met again.

As seen in the following chart, 15 additional communities “approached the ceiling” in FY2021 (were within 90% to 99% of levy ceiling).

The above chart shows that although the levy limits are near or at their ceiling for these communities, in only seven cases are their tax levies at or about 90% of their levy ceiling (Levy %).

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 either of the above charts 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. Generally, the communities that do so have done so for many years. The chart below shows that among the 339 communities, this multiple tax rate pattern has continued. For the 12 tax rates yet to be certified, 3 have 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.

Quick FY2021 Tax Rate Stats

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

Ask DLS: Community Preservation Act - Part 8

This month's Ask DLS features Part 8 of frequently asked questions concerning the Community Preservation Act (CPA) and CPA funding for eligible open space projects. Additional questions about the CPA will be featured in future editions of City & Town. For Part 7 of the series, see the January 7, 2021 edition of City & Town. For additional information on the Community Preservation Act see Informational Guideline Release (IGR) 19-14. Please let us know if you have other areas of interest or send a question to cityandtown@dor.state.ma.us. We would like to hear from you.

In general, what community preservation projects are eligible for funding under the CPA?

There are three community preservation project or asset categories: (1) open space (including land for recreational use); (2) historic resources; and (3) community housing. These FAQs will discuss CPA funding for projects relating to open space.

What is the definition of “open space?”

“Open space” is defined in G.L. c. 44B, § 2 to “include, but not be limited to, land to protect existing and future well fields, aquifers and recharge areas, watershed land, agricultural land, grasslands, fields, forest land, fresh and salt water marshes and other wetlands, ocean, river, stream, lake and pond frontage, beaches, dunes and other coastal lands, lands to protect scenic vistas, land for wildlife or nature preserve and land for recreational use.”

For what purposes may CPA funds be spent regarding open space?

The CPA clarifies allowable community preservation project expenditures through its definitions which are found in G.L. c. 44B, § 2. As a result, the CPA definitions should always be reviewed when determining if an expenditure is allowable.

Acquisition, creation, and preservation - CPA funds may be spent for the acquisition, creation, and preservation of open space.

“Acquisition” is defined in G.L. c. 44B, § 2 as “obtain[ing] by gift, purchase, devise, grant, rental, rental purchase, lease or otherwise.” ''Acquire'' does not include a taking by eminent domain, except as provided under c. 44B.

“Creation” - There is not a specific definition of “creation” under the CPA; however, “creation” was defined by the court for CPA purposes in the case of Seideman v. City of Newton, 452 Mass. 472 (2008) to mean “to bring into being or to cause to exist.”

“Preservation” is defined under G.L. c. 44B, § 2 as “protection of personal or real property from injury, harm or destruction.”

Rehabilitation or restoration of open space - CPA funds may also be spent for the rehabilitation or restoration of open space; provided the open space was acquired or created with community preservation funds.

''Rehabilitation'' is defined under G.L. c. 44B, § 2 as “capital improvements, or the making of extraordinary repairs, to historic resources, open spaces, lands for recreational use and community housing for the purpose of making such historic resources, open spaces, lands for recreational use and community housing functional for their intended uses including, but not limited to, improvements to comply with the Americans with Disabilities Act and other federal, state or local building or access codes; provided, that with respect to historic resources, ''rehabilitation'' shall comply with the Standards for Rehabilitation stated in the United States Secretary of the Interior's Standards for the Treatment of Historic Properties codified in 36 C.P.R. Part 68; and provided further, that with respect to land for recreational use, ''rehabilitation'' shall include the replacement of playground equipment and other capital improvements to the land or the facilities thereon which make the land or the related facilities more functional for the intended recreational use.

“Restoration” is not defined under the CPA and we are not aware of any cases defining "restoration" in the CPA context. In the absence of such an interpretation, we look to the usual and generally understood meaning of words from sources known to the legislature, such as use in other legal contexts and dictionary definitions. See Seideman v. Newton, 452 Mass. 472, 477-478 (2008). At webster-dictionary.org, "restoration" is defined as "the act of restoring or bringing back to a former place, station, or condition."

What are some examples of allowable CPA open space projects?

Acquisition of open space - Acquisition of real property or an interest in real property is allowable for open space purposes, including the acquisition of agricultural land, grasslands, fields, forest land, watershed land, fresh and salt water marshes and other wetlands, ocean, river, stream, lake and pond frontage, beaches, dunes and other coastal lands, land to protect scenic vistas, land for wildlife or a nature preserve, land for recreational use and land to protect existing and future well fields, aquifers and recharge areas. Again, one must look to G.L. c. 44B, § 2, to determine the definitions of “real property” and “real property interest” for CPA expenditure purposes. Under G.L. c. 44B, § 5(f), the price of an acquisition must not exceed the value of the property as determined through “procedures customarily accepted by the appraising profession as valid.” And, under G.L. c. 44B, § 12, real property interests financed in whole or in part with CP Fund monies must be bound by a permanent restriction which conforms to the requirements of G.L. c. 184, §§ 31-34 and the city or town must own any real property interest acquired with community preservation monies. Management of the properties may be delegated by the legislative body to the conservation commission, park commission or to a nonprofit corporation created under G.L. c. 180 or nonprofit trust created under G.L. c. 203.

Acquisition of open space - Appropriation of CP funds to a conservation fund established by G.L. c. 40 § 8C is allowable; however, any expenditure of such funds remains subject to the restrictions imposed by the CPA, including the requirement that any land acquired must be bound by the restriction described in G.L. c. 44B, § 12. Therefore, the conservation commission may spend CPA funds only for those purposes that are authorized by both G.L. c. 40 § 8C and the CPA, for example, acquisition of land for open space purposes. To ensure that these requirements are carried out, the CPC recommendation and any legislative body appropriation vote should expressly include these conditions.

Rehabilitation of open space - Expenditures for rehabilitation and restoration of open space (not including lands for recreational use) are not allowable unless the open space was acquired or created using CPA funds pursuant to G.L. c. 44B, § 5(b)(2). For example, funding is allowable for “rehabilitation” of municipal forest land only if the forest land was acquired with community preservation funds. CP funds cannot be used, however, to fund any expenditure that would fall within the CPA definition of “maintenance,” even if the expenditure is required by a forest management plan. G.L. c. 44B, §§ 2 and 5(b)(2). See Part 6 of these FAQs for more information on prohibited CPA expenditures, published in the December 3, 2020 edition of City & Town.

Stay tuned for next month’s City & Town for Part 9 in our FAQ series on the CPA when we will discuss allowable CPA land for recreational use projects. For more information, see Informational Guideline Release (IGR) 19-14.