Transcript Document

Boston’s Property Tax Crisis
EXEMPTIONS
ABATEMENTS
DIF’s
IF’s
TIF’s and WHAT
BOSTON’S Property Tax Crisis –
EXEMPTIONS – or How the Other Half
Lives.

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More than half of Boston property is exempt
from the payment of real and personal property
taxes (53%).
In 2002 the mix was:
Residential Land:
 Commercial Land:
 Tax Exempt

10, 228 Acres
4,269 Acres
14,688 Acres
35%
15%
50%
ASSESSMENTS: MAJOR CATEGORIES
FY 2004
RESIDENTIAL
67.0%
COMMERCIAL
26.9%
INDUSTRIAL
1.0%
PERSONAL
5.2%
PROPERTY TYPE
TOTALVALUE
RESIDENTIAL
$ 44,313,799,040
COMMERCIAL
$ 17,761,725,236
INDUSTRIAL
$ 642,200,851
PERSONAL PROPERTY
$3,424,004,600
Assessments: Major Categories
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Property Type
Total Value
Residential
$44,313,799,040
Commercial
$17,761,725,236
Industrial
$ 642,200,851
Personal Property
$ 3,424,004,600
EXEMPT
$18,903,847,924
EXEMPT IS MORE THAN COMMERCIAL
AND INDUSTRIAL COMBINED
EXEMPTIONS
“A privilege allowed by the General
Court of the Commonwealth.”
Over 50 exemption provisions are permitted.
Releases an owner from the obligation to pay
all or a portion of the taxes assessed on a
parcel of property.
Recognized only where property use or
individual status clearly falls within the terms
of the exemption.
Types of Exemptions
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.Personal Exemptions:
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1.Elderly
17D or 41C
2.Veteran/Surviving Spouse
22 A-E
Full
3. Blind
37A
4. Surviving Spouse(Police/Fire) 42
5. Surviving Spouse/Minor Child 17D
6. Hardship
18
$ 175 - $ 500
$ 175 - $875 -
$ 500
Full
$ 175
Partial to Full
Types of Exemptions

Miscellaneous:
Cemeteries
 Solar&Wind Powered Energy Systems – 20YRS
 Pollution Control Structures


See Mass G.L 59, Chapter 5 for a complete list.
Types of Exemptions

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Government Property
Federal property
State Property
Government Authorities: Port Authority;
MBTA; Turnpike Authority
Charitable; Religious Organizations
Chapter 121A Exemptions
Boston’s Property Tax Crisis:
Exemptions

Tax Exempt Property Ownership
Commonwealth of Mass: 7,519 Acres 26%
 City of Boston:
4,212 Acres 14%


Includes 331 acres – Property Tax Foreclosures
Medical & Educational:
 Other Charitable

661 Acres 2%
2,296 Acres 8%
Exempt Property Owners

Commonwealth of Mass:
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Massport 2,580 A
MDC
1,652 A
MBTA
702 A
Turnpike 207 A
Other MA 2,377 A
Total:
7,519 Acres
25.8% of Total City Land
51.2% of Total Tax Exempt

City of Boston

Parks and Playgrounds 2,023 A

BRA/EDIC 406 A 1.4%
of Total City Land

BHA 375 A 1.3% of Total
City Land
Other City uses: 1,407 A
14.4% of Total City Land
28.7% of Total Tax Exempt
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Exempt Property Owners
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Colleges & Universities
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Medical & Scientific
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445 Acres; 1.5% of Total City Land;3% of Tax
Exempt
216 Acres; .7% of Total City Land; 1.5% of Tax
Exempt
Cultural, Museums, Private Elementary
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410 Acres; 1.4% of Total City Land; 2.8% of Tax
Exempt
Exempt Property Owners
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Cemeteries
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Religious
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285 Acres; 1% of Total City Land; 1.9% of Tax Exempt
Benevolent
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768 Acres; 2.6% of Total City Land; 5.2% of Tax Exempt
86 acres; .3% of Total City Land; .6% of tax exempt
Other: 121 A Contracts
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747 Acres; 2.6% of Total City Land; 5.1% of tax exempt
How Do Exemptions Affect Our
Tax Bills?
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Personal Exemptions
Reduce the tax bill if we
meet certain
qualifications.
Must apply annually
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All Other Exemptions
Increase the tax burden
by reducing the tax base
PILOT and 121A
payments do not
approach tax
assessments.
Property Tax Revenue – Critical

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Cities and towns in Massachusetts are primarily
dependent on property tax revenues to fund the
delivery of services.
FY 2002 Boston Budget Revenues:
State Aid
27.7%
 Fees/Local Option Taxes 12.6%
 Investments/Non-recurring 7.9%
 PROPERTY TAXES
51.8%

Property Tax Revenue - Critical
 For
FY 2004, Boston’s dependency
on property tax has risen from
51.8% in 2002 to 59.9%.
Boston’s Property Tax Crisis
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100% of the Property Tax Revenue comes from
less than half of the city’s property.
The cost of providing services for all of the City
falls primarily on the tax-paying owners of only
half of it.
More than half of the Boston property that is
exempt is dedicated to public uses for people
throughout the region, i.e. property owned by
the Commonwealth.
Exemptions: Funding &
Reimbursement
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Massachusetts: Cities and Towns receive no
financial reimbursement from the state for
real property which is exempt.
Connecticut: Cities and towns are partially
reimbursed by the state, depending on tax
exempt use. Requires an annual appropriation.
Rhode Island: Similar provisions to Connecticut
Boston’s Property Tax
Crisis: Potential Revenue
Sources
PILOT – Payment In
Lieu Of Taxes
PILOT: Payment in Lieu of
Taxes

Exempt Institutions Utilize City Services:
Police
Public Works
 Fire
Public Health
 PILOT encourages tax-exempt institutions to
contribute to defraying the public expense associated
with the institution.
 PILOT is a moral obligation, not a statutory one.
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Municipal Demand for PILOT
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Dependent upon:
The amount of tax involved
 Level of existing municipal fiscal distress
 Degree of purely local benefit from non-profit
activities
 The nature of the non-profit service
 The lobbying power of those adversely affected.
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Non-Profit Resistance to PILOT
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Factors affecting tax exempt owner resistance:
The dollar amount at issue
 Potential for erosion of exemption
 Public relations
 Fear of future, worse treatment
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The Effects of Exemptions for
Institutions
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Rent vs. Own decision
No incentive to avoid high tax jurisdictions
Financial incentive to expand; acquire property
PILOT IN MASSACHUSETTS
FY 2003
TOTAL
STATEWIDE
Charitable& Educational
Value
$ 22,098,752,575.00
% of Total Exempt Property
26.01%
Projected Tax Payments
$
505,863,999.00
Actual PILOT
$
17,894,347.00
Percentage: PILOT to Taxes
3.54%
$
LOST TAX REVENUE: 487,969,652.00
Payment in
Lieu of Taxes
FY 98
FY00
FY 02
FY03
Boston Housing Authority
$410,984
$595,145
$390,358
$509,113
Boston Symphony Orchestra
$0
$30,199
$35,557
$36,306
EDIC
$0
$157,000
$329,000
$400,000
Harvard University
$1,287,534
$1,465,197
$1,479,398
$1,567,193
Marriott Custom House Twr Timeshare
$90,705
$242,656
$250,806
$253,286
Museum of Fine Arts
$42,000
$40,682
$42,709
$42,805
Northeastern University
$580,350
$140,107
$136,021
$136,020
Massport
$10,253,847
$10,501,526
$7,306,186
$10,903,054
PILOT in BOSTON
FY 2003
Boston
Charitable& Educational Value
$ 4,816,894,343.00
% of Total Exempt Property
26.21%
Projected Tax Payments
$ 159,728,216.00
Actual PILOT from 904&905
Percentage: PILOT to Taxes
LOST TAX REVENUE:
$
10,383,022.00
6.50%
$ 149,345,194.00
FY 2004 Boston City Budget
Expenditures
Library
Health Ins.
State Assessment
Fire
Police
Election
Parks
Public Works
Public Health
Debt Service
Pension
23 M
125 M
67 M
131M
210 M
2.6 M
12 M
7.7 M
58 M
126 M
135 M
Revenues
Property tax
59.9%
State aid
20.6%
Licenses, fees,
Fines, permits, 121A
payments
Excises
Pension
reimbursement
Remainder
Boston’s Property Tax
Crisis: Other Exemptions
Chapter 121 A
Chapter 40 Q – “DIF”
Chapter 40 R – Housing “TIF”
Chapter 121 A
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M.G.L. Ch 121A Provides for the creation of:
Single purpose, project specific, private URBAN
RENEWAL CORPORATIONS.
Undertake residential, commercial, civic, recreational,
historic or industrial projects in decadent, substandard
or blighted open areas.
Exemption from real and personal property taxes,
betterments and special assessments.
Allows private developers to exercise EMINENT
DOMAIN in specified circumstances.
Chapter 121 A

121 A Agreements are used to encourage:
Development in places with high property tax rates
 Development in areas that are minimally marketable
as locations for private investment
 Development of housing for low and moderate
income families
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Chapter 121 A
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Duration of 121 A Agreements:
Minimum of 15 years
 Subsidized low-mod income housing – 40 years
 May be extended up to an additional 25 years if
developer offers “amenities”

Handicapped Facilities
 Employment of minorities or neighborhood residents
 Preservation of open space
 Rehabilitation of historic building

Chapter 121 A

SUBSTITUTE PAYMENTS IN LIEU OF
TAXES: 3 TYPES REQUIRED
Minimum Statutory Payment – Paid to MASS DOR
 Negotiated Payments – Paid to MUNICIPALITY
(“Section 6A Agreements”)
 Excess Income Payment – Excess profits, after
payment of 8% ROI and all eligible expenses. Paid
to MUNICIPALITY, up to property tax level.
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Chapter 121 A
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PROPERTY THAT IS UNDER A
121A AGREEMENT DOES NOT
HAVE ITS VALUE COUNTED IN
ASSESSMENTS OF MUNICIPAL
LAND.
Chapter 121 A
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CHANGES and TERMINATIONS
Material Changes require written amendments to
agreements
 Change in ownership: Permitted. Requires
assumption agreement by new owner. Not
automatic.
 Terminations:

Foreclosure
 In accordance with the terms of the 6A Agreement
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Chapter 121 A Developments
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WORLD TRADE CENTER EXPANSION 1996
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SOUTH BOSTON WATERFRONT HOTEL 2002
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SEAPORT HOTEL
Two Office Towers
Marriott Hotel
FLEET CENTER 1992
LANDMARK CENTER 1996
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Cinema, office, retail, parking
Chapter 121 A Developments
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Paine Furniture Building – Arlington St. 1998
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Lafayette Mall – Downtown Crossing 1997
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New office tower and redevelopment of Paine
Redevelopment for office and commercial
Macy’s – Downtown Crossing 1999
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Combined retail and other commercial use
Chapter 121 A Developments
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Allston Landing/Genzyme Corp. 1992
One Beacon Street/Prudential 1969
Egleston Center, J.P. 1995
Brigham & Women's Parking garage,
commercial and office space, materials handling
center, pedestrian park 1979
MATEP, Inc. – Longwood Medical Area energy
plant and related offices. Harvard/Advanced
Energy - 1977
Chapter 121 A Developments
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POST OFFICE SQUARE 1984
Multi-level below grade parking facility
 Surface park
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NEW BOSTON FOOD MARKET 1967
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Relocation of meat and food vendors from Quincy
Market
Chapter 121 A HOUSING
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88 Properties in Boston
11,297 Apartments
Many with Section 8 Project-based Assistance
Housing Developments assisted with 121A
sometimes pay MORE than they would
otherwise due to formula.
CHAPTER 40Q –
“District Improvement
Financing”
Eminent Domain; Tax
Expenditure and Urban
Renewal
Chapter 40 Q - DIF

DISTRICT IMPROVEMENT FINANCE
PROGRAM
 Enables municipalities to finance public works and
infrastructure by pledging future incremental taxes
resulting from growth within a designated area.
 The incremental growth (“TAX INCREMENT”) in
taxes is set aside to pay the debt or bonds used to
finance the new construction.
Chapter 40 Q DIF
KEY HIGHLIGHTS
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DIF creates a district as small as one parcel, or
AS LARGE AS 25% OF THE
MUNICIPALITY.
DIF allows eminent domain to acquire private
property for resale to a developer.
DIF is NOT exempt from Prop 2 ½ levy limits
The bonds issued to support construction in a
DIF district may be secured by all of the city
revenue!
Chapter 40 Q DIF
KEY HIGHLIGHTS
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DIF does not increase taxes, but it freezes the
assessment of the designated district for up to
THIRTY YEARS.
Any increase in value is “captured” and utilized
to pay off the district debt. DIF is a “Tax
expenditure”.
If the costs to operate the city rise over 30
years, the DIF district will only contribute at the
“frozen” level – the original assessment..
Chapter 40Q - DIF
The Pittsburgh Experience:
$138 MN tax increment financing project to
renovate a department store and create office
space.
The resulting increase in value: Only $38MN.

TAX PAYERS HAD TO PAY THE $100MN
DIFFERENCE FROM GENERAL
REVENUES.
Chapter 40R – Urban Ctr Housing
Zones – Tax Increment Financing
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Regulations are currently being drafted.
As with District Improvement Financing – the
district tax base will be frozen and the revenue
resulting from increases in value will be diverted
to pay bonds.
Another form of tax expenditure.
SOLUTIONS?
Residential vs. Commercial – Only half
the story
 Residential + Commercial + Industrial
vs. EXEMPT – The real story.

SOLUTIONS?
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Issue of Fairness in Payments from the
Commonwealth
Issue of Fairness in Payments from Users of
Services
Increased scrutiny of tax exempt holdings and
their relation to the mission of the exempt
owner.
Repeal of DIF, TIF