Financial Impact: Tax Increases on Two-and Three-Family Homes Prompts Relief Program

The City will use almost $5 million in Rainy Day Funds to shore up a budget deficit, and City Manager Tom Ambrosino is still requesting the Council use another $750,000 to help homeowners about to be hit with large property tax increases in the midst of the COVID-19 public health and economic crisis.

Ambrosino gave his annual report to the Council on the potential tax rate setting process, which also reveals the City’s standing on the tax bill and just how much residents can look forward (or maybe not so forward) to paying in the coming year. The tax rate for all properties is slated to be voted on by the Council Nov. 30.

“There is a large increase in values for two- and three-family homes,” said Ambrosino. “We will try to ameliorate it somewhat…but there will be significant tax increases on these two classes of property owners. There is a small increase for singe-families and condo owners will get a decrease in tax bills. It is the two-family and three-family homeowners that will be impacted the most.”

Under the proposed rates, the average tax bill for a two-family will be $4,629, which is an increase of $442 over last year. Three-family homes would have an average tax bill of $6,315, which is an increase of $767 over last year.

Single-family homes would see an increase of $63 over last year, with an average bill of $2,705, while condo owners would see a reduction of $237 from last year with an average bill of $1,935.

That is happening because property values have skyrocketed in Chelsea and the surrounding communities – with the values used reflected the 2019 calendar year when sales of homes were on fire.

The average value of a three-family home increased by 12.9 percent in the time assessed, and two-families increased by 11.2 percent. Single-families increased by 8.9 percent, and condos by 6.6 percent. Meanwhile, larger apartment buildings – which had increased in the double digits last year – were up only 4.1 percent. While such increases in values are wonderful if one is selling or borrowing money on their equity, they aren’t such good news when one is staying put and trying to pay increasing bills in a COVID-19 pandemic.

To combat those values and increases, Ambrosino suggested the Council approve the full 35 percent of the owner-occupant residential exemption that is available. Up to now, the City has been slowly increasing the percentage from 25 percent over a five-year period. It wasn’t to hit 35 percent until next year. However, Ambrosino said now is the time to unleash all available help to taxpayers.

“This year, given COVID-19, we should take the maximum exemption and that means taking the remaining 4 percent that is left and using it all this year,” he said.

Typically, tax increases have been approached with sympathy, but an understanding that taxes have been going up for a long time. However, with the economic distress put on the City by COVID-19 – from job loss to tenants not paying rent – Ambrosino said there had to be a different approach.

Ambrosino recommended the Council use more Rainy Day Funds to help all homeowners dispel the increase in taxes through the new Homeowner Stabilization Fund. He said that Fund has $250,000 in it, but an addition of $750,000 would put it at $1 million and would allow a great amount of help.

Other forms of help, he said, would end up helping absentee landlords and industrial property owners, and spread thin the help for those most affected. With the Fund, they can target the help.

“The other ways are not the most effective way in my opinion to assist the two- and three-family homeowners who will suffer from these large tax increases in COVID-19 times,” he said. “What I suggest is we add funds to the existing Homeowner Stabilization Fund.

On Tuesday, the City announced the Homeowner Stabilization Program application period had been extended to November 30.

The City’s finances which had been strong for some time, have suffered greatly under COVID-19. First, excise taxes that are mostly paid in Chelsea by Enterprise Car Rental for its airport activities has plummeted. Last year, the City collected $12 million in excise tax, but that has been reduced to $5.4 million as airport activity has decreased by 90 percent, Ambrosino said.

Hotel/Motel Room Taxes also decreased significantly, going from $1.95 million to $700,000 this year. In all, receipts across the board were down, and previously they had been growing steadily each year.

Councilor Giovanni Recupero said he felt there was a problem with valuations, and with some changes in the Assessor’s Office, he asked for a meeting to talk about the values with them.

“Apartment buildings didn’t go up substantially,” he said. “The last couple of years they didn’t increase as significantly as the two- and three-families. It doesn’t make sense. They’re the ones making all the money and they didn’t raise as significantly.”

Council President Roy Avellaneda agreed that there seemed to be some issues with the values, and he echoed that he wanted to speak with the Assessors.

“I want to echo some of the concerns that my colleague has,” he said.

“There are a number of inconsistencies in the property values I saw,” he said. “I don’t think enough work was done to update the values from a couple of years ago to now. Values in certain spots went up, but not in the larger buildings. I don’t see the larger building values going up and I think they should…The best thing we can do is make sure the values are fair to everyone and I want to say the values I saw posted weren’t fair.”

Todd Taylor asked about the Fund and how people would qualify for it, as many people with high incomes on documents have lost their jobs or significant parts of their income. He said a lot of people who have recently been hit with economic pain might be missed with traditional documentation.

Ambrosino said for most of the COVID programs, they have allowed people to self-certify, and they have had no problems.

“Our experience is people have been honest about it,” he said.

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