Tax Classification Process - City of Lawrence - 2011

8/8/2019 Tax Classification Process - City of Lawrence - 2011

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CITY COUNCIL

BUDGET & FINANCE SUB-COMMITTEE

TAX CLASSIFICATION PRESENTATIONNovember 9, 2010

Presented ByThe Board Of Assessors


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FY 11 TAX CLASSIFICATION

Purpose Of The Tax Classification To Determine How The TaxLevy Is Shared

Background Levy & New Growth FY 2011 Values Current Status Whats Next? Classification- The Process

Overview Of The Values Various Options of Factors and Tax Rate Average Tax Bill Impact Per Class Discussion Residential Factor Vote

NOVEMBER 9, 2010 BOARD OF ASSESSORS CLASSIFICATION HEARING 2


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The Classification Act Requires Municipalities To Classify Real Property IntoOne Of Four Classes, According To Use: Residential, Commercial, Industrial,And Personal Property.

Cities That Are Certified as Assessing Property at Full And Fair Cash Value May

Elect to Shift Tax Burden Among The Major Property Classes Within CertainLimits Established By Law.

The Bureau Of Local Assessment Have Certified Lawrence as AssessingProperty at Full And Fair Cash Value.

The Adoption Of Different Rates DOES NOT CHANGE the Total Property Tax

Levy. Rather it Determines The Share Of The Total Levy To Be Borne By EachClass.

The Minimum Residential Factor Established By The Commissioner OfRevenue Ensures That the shift of the tax burden complies with theClassification Act.

BACKGROUND



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Levy is the amount the City raises each year through Property Taxes .

The Levy Limit is the Maximum amount the City can levy in a given year.

The levy limit can grow each year by 2 percent of the priors year levy limit plusnew growth and any overrides.

Excess Levy capacity is the difference between the Levy Limit and the ActualLevy.

LEVY, LEVY LIMIT & EXCESS LEVY CAPACITY

Levy Summary

FY 2009 Levy $46,642,3514

Prop 2 1/2 Increase $1,184,266

Growth $1,087,456

Overrides $0

FY 2010 Levy Limit $49,642,351

FY 2010 Proposed Levy $49,642,351

Excess Capacity $0



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New Growth is a calculation of the net increase in municipal property valuesbecause of new construction, improvements to properties, subdivisions, condoconversions, the return of exempt property to the tax rolls or new personalproperty accounts as well as new personal property equipment at existing

locations. New Growth is added to the Citys Levy Limit, thereby increasing the Citys

taxing capacity.

Assessors must submit documentation of New Growth to the Bureau of LocalAssessment annually and receive approval prior to setting the tax rate.

The assessed value of real estate and personal property New Growth during thetwelve-month period January 1, 2009 to December 31, 2009 is $50,854,170.

This Growth translates into $1,087,456 of increased tax levy capacity over thebasic limits of Proposition 2 .

WHAT IS NEW GROWTH?



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Values are based on Sales in Calendar Year 2009

The residential values decreased by 5.9% and commercial/industrial increasedby 4.4%.

The City of Lawrence Total Property value is $2.8 Billion. This is a 4.1%decrease from FY 2010.

The average single family home assessed value in FY 2011 is $178,249. This is a$10,651 decrease from FY 2010 average assessed value of $188,900.

Based on property values submitted to the Department of Revenue, the LowestPossible Residential Factor for FY 2011 is 88.8611 % under Chapter 200.

Continuing with a Factor of 1.75, the residential tax rate for FY 2011 would be$13.43, a $0.86 increase over FY 2010. The correspondent C.I.P. tax rate for FY2011 would be $30.40, a $2.60 increase over FY 2010.

FY 2011 VALUES



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PROPERTY VALUE CHANGE 2011 VS. 2010


Total Real Property Value FY2010 $2,835,958,600.00Total Real Property Value FY2011 $2,708,093,100.00

Real Property Value Change ($127,865,500.00) -4.51%

Residential Property Value FY2010 $2,331,181,389.00Residential Property Value FY2011 $2,193,228,846.00

Residential Value Change ($137,952,543.00) -5.92%

Commercial Property Value FY2010 $309,899,311.00Commercial Property Value FY2011 $311,487,554.00

Commercial Value Change $1,588,243.00 0.51%

Industrial Property Value FY2010 $194,877,900.00Industrial Property Value FY2011 $203,376,700.00

Industrial Value Change $8,498,800.00 4.36%

Personal Property Value FY2010 $143,970,790.00

Personal Property Value FY2011 $149,199,370.00Personal Property Value Change $5,228,580.00 3.63%

Total Value FY 2010 $2,979,929,390.00Total Value FY 2011 $2,857,292,470.00

($122,636,920.00) -4.12%


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LARGEST TAXPAYERS


$34,683,900$28,865,000

$28,527,850

$24,645,820

$19,393,700

$18,103,900

$13,743,140

$11,886,400

$11,334,100$10,039,800

$9,405,300$9,146,200

$219,775,110

Total Assessed Valued

Verizon New England Inc

Jefferson at Den Rock

Mass Electric

Bay State Gas

Lincoln Andover LLCHampton on Beacon

Chi Energy Inc

Princeton Andover

Lawrence/Methuen Props

Jackson St Housing

New Balance Athletic Shoe

HJ Brooks LLC

Total


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Step 1: The Bureau of Local Assessment have certified Lawrence as assessing property at full and

fair cash value

Step 2: The Board of Assessors will provide the councilors with information to select the

residential factor toward the determination of the rate for each class of property.

A limited set of possible choices will be provided by the Board of Assessors, but CityCouncilors may, if desired, explore other tax rate combinations that meet their needs.

Step 3: City Councilors are required to determine the percentage of the tax levy to be borne by

each class of real property: residential, commercial, and by personal property. Thedecision is made after holding a public hearing.

The Conclusion of the hearing MUST result in a vote of required choices

Step 4: The split tax rates for Fiscal Year 2011 are certified by the Department of Revenue

Step 5: Mail 3rd quarter actual bills January 1, 2011

CLASSIFICATION/ TAX RATE PROCESS



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Lawrence Completed the Interim year valuation adjustments and valuesreflect changes in the tax base due to new construction, alterations,demolition, etc. Sales analysis for calendar year 2009 and adjustments toassessments reflect changes in market conditions as of January 1, 2010.

CURRENT STATUS



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Full Council Vote on the Classification Factor

Upon the Commissioners determination that the percentages meet statutoryrequirements and the public hearing has been held, the assessors will submitto the Bureau of Accounts the local tax rates for final approval.

Councilors certify the excess levy capacity on recap. (Form LA5). This willhappen after full Council Meeting.

WHATS NEXT?



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Tax Levy

FY 2011 Maximum Allowable Levy = $49,642,351

FY 2011 Estimated Levy = $49,642,351

FY 2011 Estimated Excess Capacity= $0 Total Value

FY 2011 Total Value = $2,857,292,470

FY 2011 Residential Value = $2,193,228,846

FY 2011 C.I.P. Value = $664,063,624

FY 2011 Residential Value Percent = 76.7590% FY 2011 C.I.P. Percent = 23.2410%

Uniform tax rate (tax levy/total value)

$49,642,351/ $2,857,292,470 = $17.37 / $1,000

TAX LEVY-UNIFORM TAX RATE



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Total Levy FY 2011

$49,642,351.49

Shift Determined Based on (1.75)

C.I.P. Tax Share =40.6717%

New C.I.P. Levy amount $20,187,534

Residential Tax Share = 59.3283%

Residential Levy Amount = $29,455,063

Residential Tax Rate

$13.43 / $1,000 C.I.P Tax Rate

$30.40 / $1,000

THE FACTOR- SUMMARY



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SINGLERATE

YES

NO

RESIDENTIAL &CIP RATE THE

SAME

PREVIOUS YEAR LEVY

LIMIT

+

2-1/2 %

+

GROWTH

+OVERRIDES

DECISIONS BELOW

DO NOT CHANGE

LEVY

LOWERRESIDENTIAL RATE

&HIGHER CIP RATE

HIGHER

RESIDENTIAL RATE&

LOWER CIP RATE

MAXIMUM SHIFT OF TAXBURDEN TO CIP & LOWEST

RESIDENTIAL TAX RATE

1.75

VERY HIGHRESIDENTIAL

TAX RATE

HIGHLOW

CITY OF LAWRENCE - BOARD OF ASSESSORS CLASSIFICATION HEARING

DETERMINE

LEVY

FACTOR

(1.00- 1.75)

14


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Shifting allows the City to reduce the Residential Classes (R.O.) tax burdenwhile increasing the C.I.P. tax share.

The increase in tax share brought in by Commercial Industrial and PersonalProperty (C.I.P.) is used to lower the residential tax share.

The combination of the two tax classification amounts must equal the totalproperty tax levy and cannot change it in any way.

The classification shift is a common practice. According to the Bureau of Local Assessments about 30% of cities and towns in

Massachusetts have classified tax rate.

In Accordance With The Classification Act of 1978, Tax Levy from CIP May Be

Increased By 50% (A Factor of 1.5), Chapter 200 allows communities such as Lawrence the ability to use a Factor

Up to 1.75

The chosen Factor for FY2010 Was 1.75,Which provided for maximum TaxShifting, as allowed by law, from Residential to C.I.P.

THE FACTOR - SHIFTING DEFINITION



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THE FACTOR- VARIOUS OPTIONS

Factor RO Rate RO Change $From 2010

C.I.P Rate C.I.P. Change $From 2010

1.75 $13.43 $0.86 $30.40 $2.60

1.74 $13.48 $0.91 $30.23 $2.43

1.73 $13.53 $0.96 $30.06 $2.26

1.72 $13.59 $1.02 $29.88 $2.08

* All $ are per $1,000 of Assessed Value



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FY 2011 TAX LEVY BREAKDOWN

Factor= 1.75 Valuation % Tax Share %

FY 2011

Residential $2,193,227,846 76.7590% $29,451,930 59.3282%

Commercial $311,487,554 10.9015% $9,470,575 19.0776%

Industrial $203,376,700 7.1178% $6,183,536 12.4562%

Personal $149,199,370 5.2217% $4,536,310 9.1380%

Total $2,857,292,470 100.0000% $49,642,351 100.0000%



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Last years (Factor) chosen was 1.75 Maximum allowable factor

This year the choices are shown below

Other choices are possible and can be shown if the councilors wish to advocate

such alternatives. As a reminder, a factor below 1.75 will increase theresidential tax bill.

The FY 2011 Tax Levy Limit increased by $2,271,722

CHOICE OF TAX RATES


ResidentialFactor

Res.Rate

Avg. SFHBill

Dif. From2010

Change$/1000

C.I.PRate

C.I.P.Incr

1.75 13.43 $2,393.88 $19.33 $0.87 30.40 2.60

1.74 13.48 $2,402.80 $28.25 $0.91 30.23 2.43

1.73 13.53 $2,411.71 $37.16 $0.96 30.06 2.26

1.72 13.59 $2,422.40 $47.85 $1.02 29.88 2.08


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Below is a comparison of a factor of 1.75 and 1.72

FACTOR COMPARISON


Factor of 1.75 Factor of 1.75

FY 2010 FY 2011

Class Avg Value Tax

Rate

Avg Tax Avg Value Tax

Rate

Avg Tax Delta $ Delta %

Res $198,869 $12.57 $2,500 $186,769 $13.43 $2,508 $9 0.34%

Com $317,363 $27.80 $8,823 $354,366 $30.40 $10,773 $1,950 22.10%

Ind $964,742 $27.80 $26,820 $1,001,856 $30.40 $30,456 $3,637 13.56%

FY 2010 FY 2011


Res $198,869 $12.57 $2,500 $186,769 $13.59 $2,538 $38 1.54%

Com $317,363 $27.80 $8,823 $354,366 $29.88 $10,588 $1,766 20.01%

Ind $964,742 $27.80 $26,820 $1,001,856 $29.88 $29,935 $3,116 11.62%


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OTHER FACTORS IMPACT


FY 2010 FY 2011Factor of 1.75 Factor of 1.70

Class Avg Value Tax Rate Avg Tax Avg Value Tax Rate Avg Tax Delta $ Delta %

Res $198,869 $12.57 $2,500 $186,769 $13.69 $2,557 $57 2.28%

Com $317,363 $27.80 $8,823 $354,366 $29.54 $10,468 $1,645 18.65%

Ind $964,742 $27.80 $26,820 $1,001,856 $29.54 $29,595 $2,775 10.35%

FY 2010 FY 2011


Res $198,869 $12.57 $2,500 $186,769 $13.95 $2,605 $106 4.23%

Com $317,363 $27.80 $8,823 $354,366 $28.67 $10,160 $1,337 15.15%

Ind $964,742 $27.80 $26,820 $1,001,856 $28.67 $28,723 $1,903 7.10%

FY 2010 FY 2011


Res $198,869 $12.57 $2,500 $186,769 $14.74 $2,753 $253 10.13%

Com $317,363 $27.80 $8,823 $354,366 $26.06 $9,235 $412 4.67%

Ind $964,742 $27.80 $26,820 $1,001,856 $26.06 $26,108 ($711) -2.65%


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AVERAGE TAX BILL IMPACT ANALYSIS

FISCAL YEAR 2010 VS. 2011


FY 2010 Tax

Rate

R/O $12.57 FY 2011 Tax Rate R/O $13.43

CIP $27.80 CIP $30.40FY 2010 Average Value FY 2011 AverageValue

SingleResidential

Tax Amount Single Residential Tax Amount Tax Amt.Change

188,906 $12.57 $2,374.55 178,249 $13.43 $2,393.88 $19.34Condo Units Condo Units

129,500 $12.57 $1,627.82 115,200 $13.43 $1,547.14 ($80.68)Two Family Two Family

268,200 $12.57 $3,371.27 182,579 $13.43 $2,452.04 ($919.24)Three Family Three Family

199,300 $12.57 $2,505.20 184,293 $13.43 $2,475.05 ($30.15)Commercial Commercial

317,400 $27.80 $8,823.72 354,366 $30.40 $10,772.73 $1,949.01

Industrial Industrial

964,700 $27.80 $26,818.66 1,001,856 $30.40 $30,456.42 $3,637.76

Note: Values and taxes are averages perclassification.


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AVERAGE TAX BILL IMPACT ANALYSIS

FISCAL YEAR 2010 VS. 2011 (CONT.)


Factor Res.Rate

Avg. SFHBill

Dif.From2010

Change%

1.75 13.43 $2,394 $19 0.81%

1.74 13.48 $2,403 $28 1.19%

1.73 13.53 $2,412 $37 1.56%

1.72 13.59 $2,422 $48 2.02%1.71 13.64 $2,431 $57 2.39%

1.70 13.69 $2,440 $66 2.77%

1.68 13.80 $2,460 $85 3.59%

1.65 13.95 $2,487 $112 4.72%

1.60 14.22 $2,535 $160 6.74%

1.55 14.48 $2,581 $206 8.70%

1.50 14.74 $2,627 $253 10.65%

Factor Res.Rate

Avg.Condo Bill

Dif.From2010

Change%

1.75 13.43 $1,547 ($81) -4.96%

1.74 13.48 $1,553 ($75) -4.60%

1.73 13.53 $1,559 ($69) -4.25%

1.72 13.59 $1,566 ($62) -3.82%1.71 13.64 $1,571 ($56) -3.47%

1.70 13.69 $1,577 ($51) -3.12%

1.68 13.80 $1,590 ($38) -2.34%

1.65 13.95 $1,607 ($21) -1.28%

1.60 14.22 $1,638 $10 0.63%

1.55 14.48 $1,668 $40 2.47%

1.50 14.74 $1,698 $70 4.31%


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DISCUSSION



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Documents

Tax Classification Process - City of Lawrence - 2011