Gov. signs property tax rate stabilization bill

January 20, 2004

Showing concern about skyrocketing property tax bills for homeowners, the Legislature opened the new session by taking quick action on a measure to give cities and towns temporary authority to limit tax increases that would have hit owners of residential properties this year.

Legislation signed by Gov. Mitt Romney on Jan. 16 grants cities and towns that use separate residential and business tax rates more flexibility to shift a portion of the property tax levy from residential to business properties.

For fiscal 2004, the new law increases the cap on the business tax rate from 175 percent to 200 percent of the single tax rate amount, and increases the residential discount from 50 percent to 45 percent of the single tax rate. The cap will return to 175 percent, and the discount to 50 percent, by fiscal 2008. For cities and towns that adopt the expanded limits, the business cap will drop permanently to 170 percent in fiscal 2009.

The legislation reflected the recommendations of a special commission formed by the Legislature to address the tax classification issue. Medford Mayor and former MMA President Michael McGlynn served on the commission representing the interests of localities seeking tools to protect residential property tax payers.

Residential tax burden emerged as a major issue for local officials and state lawmakers during the recent economic recession, when the value of residential properties continued to grow while business property values generally stagnated or declined. This unusual divergence in values has resulted in residential properties assuming a steadily greater share of the local levy while the business share was falling.

The impact on tax bills has been particularly severe in cities and towns that use split tax rates. In some municipalities, residential tax bills were expected to grow at double-digit rates and cause severe financial hardship for homeowners and renters.

• Link to Legislature’s Web site for text of law

Written by MMA Deputy Legislative Director John Robertson