Public Hearings Cont. 8:00 PM

Transcript (~32 min @ 22:05)

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▶ 22:06 Speaker 9: hearing for, um,

▶ 22:09 Leila Migliorelli: classification of pro property, but that begins at 8:00 PM and it is now 7:49 PM Um,

▶ 22:18 Speaker 9: so let's, I will entertain a motion to, um, recess.

▶ 22:23 Robb Stewart: Madam Chair. Make a motion to recess. Second. Second.

▶ 22:26 Leila Migliorelli: Motion to recess made by Councillor Stewart. Seconded by Councillor Jamine. All in favor? A. Aye. Any opposed? We are now recessed until 8:00 PM Thank you.

▶ 22:38 Speaker 8: We are back from recess.

▶ 22:41 Leila Migliorelli: And moving on in our agenda is the, uh, public hearing for the classification of property. So I will motion by unanimous consent to open the public hearing. Seeing no objections, the public hearing is now open. Um, tonight we ha and I will also, um, entertain a motion to suspend Rule 37 b.

▶ 23:02 Robb Stewart: Madam, make a motion to suspend rule 37 B. Second

▶ 23:07 Leila Migliorelli: Motion, um, to suspend Rule 37 B is made by Councillor Stewart, seconded by Councillor Repe. All in favor? Aye. Any opposed? Um, we have tonight with us, uh, Sarah McClellan, our Chief Assessor Assessor here to go over the classification of property, um, tax for 2025.

▶ 23:26 Speaker 9: Welcome.

▶ 23:27 Speaker 10: Thank you both of these at the same time.

▶ 23:32 Speaker 10: So be patient with me. Good evening, president Elli, city counselors and members of the public. For those of you who don't know me, I'm Sarah McClellan, chief Assessor and Chair of the Board of Assessors. I'm presenting information tonight for the property tax classification hearing for fiscal year 2025. This presentation is posted with the meeting agenda packet this evening, and it's also accessible on the assessor's page of the City of Melrose website. Under the heading fiscal year 25 Property tax classification hearing.

▶ 24:08 Speaker 10: Each year, the assessor's department is responsible for developing values of all real and personal property in the city. For fiscal year 25, Melrose has a total of 9,500 real estate parcels. I wanna recognize the staff in the assessing office for not only providing consistently excellent service to our residents and taxpayers, but also for working diligently to streamline office operations and create efficiencies in the department over this past year. So the purpose of this hearing and subsequent vote by city council is to adopt the tax policy of the city by allocating the tax levy amongst the five classes of property. The classes are residential, open space, commercial, industrial, and personal property.

▶ 24:55 Speaker 10: Uh, after the classification hearing, the city council with the approval of the mayor must select a residential factor or tax shift. This factor governs the percentage of the tax levy to be paid by residential properties, properties in the city. The difference is then shifted to the commercial, industrial, and personal property classes. Adoption of the residential factor is the only required vote this evening for property tax classification. However, there are three other classification options. These options are, one, the residential exemption, two, the small commercial exemption, and three, the open space discount. Melrose does not currently have any property that meets the state's de definition of open space in a city government. These three items are options of the mayor. With the approval of the city council, Melrose has never historically implemented any of these classification options, and the mayor has also decided against adopting them for fiscal year 2025.

▶ 25:58 Speaker 10: So before discussing the residential factor and the tax shift, it's important to review the senior circuit breaker exemption program. This exemption program is a home rule petition that initially required approval by the state legislature. It was passed for Melrose at the state level in July of 2022. The act contains a provision that causes its automatic repeal three years after its implementation, which will be in fiscal year 2026. So there will be orders before you on that on this matter at the start of the new year. Um, please feel free to contact me at that time if you'd like more information on the program. Um, this legislation allows the board of assessors to qualify senior applicants for tax relief by a state income tax credit referred to as the circuit breaker credit qualified applicants receive a property tax exemption equal to 150% of their state circuit breaker income tax credit. The total amount of exempted value is to be allocated within the tax levy or shifted to the non-eligible residential taxpayers. Uh, this year the board of assessors received 113 circuit breaker exemption applications. And of those 107 exemptions were granted by the board. The primary reasons for application denials were an applicant not receiving the circuit breaker credit on their mass state personal income tax return and an applicant's lack of ownership interest in in property. Uh, the cost of the program this year is $284,574, which again, is born only by the residential class. This adds 4 cents to the residential tax rate, which is 4 cents per thousand dollars of assessed value, or about $33 on the average single family tax bill.

▶ 27:53 Speaker 10: Um, So just as a reminder, the total amount that can be raised in taxes remains the same, whether or not we have a tax shift. Uh, the shift does not raise more revenue. It simply changes the allocation of the tax burden amongst the classes of taxpayers. For fiscal 25, adopting a factor of one would result in a residential tax rate of $10 30 cents per thousand dollars of property value. Um, adopting a factor of less than one to as low as the minimum residential factor result in an increasingly greater tax burden shift from the residential class to the commercial, industrial and personal property classes. The minimum residential factor is determined annually by the Department of Revenue, and this year again, allows for 175% shift, which means that the CIP classes would pay 175% of their full and fair cash value, um, share of the levy. So with the senior this, with the senior circuit breaker exemption in place, Melrose no longer has an option of having that single tax rate as the cost of funding that exemption is shifted only into the residential rate.

▶ 29:06 Speaker 10: Um, this slide shows the percentage of the levy by class before any shift. Um, 95% of the property value in Melrose is residential. There's also a breakdown of the number of parcels by property type. And the total taxable value in Melrose is now at about 7.7 billion.

▶ 29:28 Speaker 10: Um, on November 18th, the Department of Revenue certified fiscal 25 new growth for Melrose at $770,138. This graphic shows the breakdown of new growth over the past five years. In fiscal 2023, we had a large increase in new growth due to completion of utilities projects within the city. I wanna point out that construction projects in the commercial, industrial, and personal pro properties sectors, sectors add levy growth at a much faster rate than residential projects because they're calculated at the CIP rate tax rate, which last year was 1771 compared to the residential rate of 9 93 for fiscal year 2025. We didn't have the commercial industrial growth that we did in fiscal year 2024, but we had considerably more residential permits. So our total new growth was able to remain relatively even. Um, I, our assistant assessor, Tina Erno, was instrumental this year in helping to analyze and capture that residential growth, um, with me. So I wanna recognize her for her work on that. Um, as a reminder, um, other than prop two and a half in the absence of an override, um, or another debt exclusion, new growth is the only means of increasing the tax levy this year. It's a little over 1% that we added to the tax levy with growth. For reference here I listed some of the top contributors to growth this year. About 25% of this growth is from four utilities and telecommunications personal property accounts For residential, we had the 4 53 Franklin Street apartment building. We had new condos, including the ones here on Myrtle Street. And we had new homes like those, um, at Patrick's Place.

▶ 31:35 Speaker 10: Let's see. Um, so this next slide here, uh, shows how we arrive at the tax rate for the fiscal year. Um, on the left is a form that shows the values in Melrose by property type. It's a little bit difficult to see here, but, um, uh, the numbers in each class. But at the bottom, it shows the sum of the total taxable valuation at roughly 7.7 billion. Uh, to calculate the tax rate, we start with the fiscal year 2024 levy limit. We add the two point a half percent as allowed through Massachusetts law for up two point a half. We add the certified new growth. We subtract any amended growth from the previous year, and then we add the fiscal year 2025 debt service. And we arrive at the max allowable levee, which is $79,298,968. We take that number, we divide it by the fiscal year 25 total taxable value in the city to arrive at the single tax rate of 10 26 per thousand dollars of assessed value for the residential rate. We add that 4%, or sorry, 4 cents to the single rate to cover the cost of the circuit breaker exemption to get the 10 30. If there's no further shift, the commercial rate would still remain at that 10 26. Um, as a note, the debt exclusion that is showing on this slide here is primarily from the bond that was issued in 2005 for the construction of the middle school. The final year of payments for that debt exclusion is fiscal year 2029. Um, and this year, 56,375 was added in the, um, the debt service for the public safety buildings project.

▶ 33:19 Speaker 10: Um, as I mentioned earlier, the assessors determined the full and fair cash value of all real and personal property in the city. As of January 1st, the market values for the fiscal year 2025 are determined using the arms length sales from the calendar year 2023. The average assessed value of a single family home for this fiscal year 25 is $821,716, which is a 3.8% increase from last year. I do expect the number to decrease slightly the average single family, um, because once the final tax rate is set, we have to factor in the exempted value, um, from the senior circuit breaker exemption to determine the, uh, final average single family value. It's like weighted, weighted with the, um, exempted value. Uh, this next slide shows the changes for the year in total assessed value by property type. Um, I just wanted to point the point out here that there haven't been any significant value increases in any of the property classes, uh, this year. In comparison, last year, the single family value increase, like increase was 8.2%. Overall, uh, the apartments were 19% increase in the industrial sector saw a 33% increase in overall value.

▶ 34:42 Speaker 10: Um, this slide is showing the assessed values by class over the last six years. The residential class was around fi 5.6 billion in 2020 versus now for fiscal 25. The value is now at 7.3 billion. And then this next slide is showing a comparison of Melrose and some of its surrounding communities. Fiscal year 24, average single family assessed values, tax bills and residential tax rates.

▶ 35:14 Speaker 10: Just a comparison. Uh,

▶ 35:18 Speaker 10: the next slide is showing the residential to CIP percentage of total value in Melrose versus its surrounding communities.

▶ 35:31 Speaker 10: And then we have the historical le levy percentage paid by the residential and CIP classes after the shift. The levy allocation has remained relatively steady over the last decade. Um, basically in almost every year, um, the residential class has made up 95% of the property value. Um, historically, the city council has chosen a shift each year so that the residential class is paying 91 to 92% of the levy.

▶ 36:02 Speaker 10: Um, and these are the shifts that have been chosen for the past 10 years. The average single family tax bill and the average impact year over year. Last year, a shift of 1.72 was chosen, which increased the average single family tax bill by 2.8% or $214 year over year. It's not shown here,

▶ 36:22 Speaker 11: but the last, last year,

▶ 36:24 Speaker 10: the average commercial bill increased seven point 0.4% or $929 from 2023 to 2024.

▶ 36:35 Speaker 10: So this graphic demonstrates the effect of the shift. Um, we're looking at the tax rate options applied to the average single family value. In the average commercial value. It's just the commercial class. Um, with no shift, um, or choosing the residential factor of one, the single family bill would increase by about $607 and the commercial bill would decrease by 40% by 55 78. Um, with the max shift of 1.75, the average single family bill would increase $270 and the commercial bill would increase $657 or 4.7%.

▶ 37:21 Speaker 10: And then that brings us to the shift options. Um, I've included the, a complete list of the shift options on the next slide, but here I've listed only the range that the council has considered and chosen from in the past several years. On the left and green, you see the residential ta uh, rate the corresponding average single family tax bill. The dollar increase in the percent increase from last year on the right in blue is the corresponding CIP rate, the average commercial bill at that rate. And the dollar increase and the percent increase. As a reminder, the fiscal 24 residential rate was 9 93 and the commercial rate was 1771.

▶ 38:06 Speaker 10: So this here is the complete list of all the shift options available and the effect at each interv interval. And finally, I included, um, for reference definitions of the terms that we use during the, uh, property tax classification hearing. Um, again, as a reminder, you select the residential factor this evening, not the shift number. Um, and I can go back to the slide with those options so that you can review. And otherwise, that concludes my presentation and I'm happy to answer any questions that you have.

▶ 38:40 Speaker 8: Thank you, Ms. McClellan. Um, any questions from counselors? Councilor Williams?

▶ 38:47 Ryan Williams: I, I have a few clarifying questions for you that I, um, help, need help refreshing my memory on. I think it might be helpful for the public too. Are, uh, multi-family housing units like apartments and condos taxed as commercial or residential? Residential At any size? Yes. Okay. Um, can you give me a rundown of the categories of property classifications? Numbers 1 0 5, 1 0 6, things like that is the 100 residential and then 300 is something else.

▶ 39:19 Speaker 10: Um, yes. So lemme just expand this a little so I can go over them. So the 1 0 1 is like single family. The 1 0 2 2 is condos. Um, the 1 0 3, um, and 1 0 9. It's, it's, those are, um, having, uh, just multi buildings on one, um, on one parcel. Mm-Hmm. Um, so it could just be more than one kind of unit on one parcel. Okay. Um, the 1 0 4 is two family, 1 0 5 is three. Family one 11 to 1 25 is apartments four to eight.

▶ 40:03 Speaker 10: Um, and then, um, well, sorry, apartments, those are, um, apartments like residential, multi multifamily. Um, and then, uh, then there's like the mixed use are, um,

▶ 40:22 Speaker 10: in the next categories. Uh, the three hundreds are the commercial. That's just straight commercial class, all different types of commercial. The four hundreds is industrial. Um, and then, um,

▶ 40:44 Speaker 10: oh one two to oh four three is the mixed use, which is residential and commercial and industrial. And then the five hundreds are, um, all the personal property accounts, utilities and all, everything like that.

▶ 40:58 Ryan Williams: Thanks. I have one more question. Um, when we are determining the increase in property value types that we saw, um, somewhere in here, oh, the FY 25 value change by property type, how do we make that determination?

▶ 41:13 Speaker 10: Um, so this is the whole value. Like, so it's last year's one oh ones mm-Hmm. Versus the whole class versus this year's one oh ones. And like the previously year, we had huge changes because we had that warehouse come online on 99. You know, so that was the industrial, um, class making a huge, um, change. The apartments simply had a, a value change, like a market value change. Um, and then the actual, the single families were, they were also having a value change too. They were increasing in value, but we just didn't have as significant of a value change, um, in single family this year.

▶ 41:53 Speaker 5: Okay. Thank you. Yeah.

▶ 41:56 Speaker 8: Any other counselors? Councillor Jamine, then Councillor Vanderberg.

▶ 42:00 Maya Jamaleddine: Thank you. Um, thank you for that presentation. Uh, appreciate it. It's very thorough. Um, you mentioned that there is, um, uh, out of 120 application, uh, for taxpayer there is, uh, a payer. There is only 107 granted. Mm-Hmm. Do you know, and and please feel free to say not sure if this is a question for you, but do you know the reasons why the others were rejected?

▶ 42:28 Speaker 10: Yes. So, um, what happens with that particular legislation is that the

▶ 42:34 Speaker 11: real estate tax qual, it's, it's cyclical.

▶ 42:37 Speaker 10: Like it's circular. Um,

▶ 42:41 Speaker 11: because the real estate tax that they pay, um,

▶ 42:44 Speaker 10: qualifies them for the circuit breaker, the state credit. So when they don't, um, when they have an exemption at the local level, then it, then they can't, they haven't paid enough to qualify at the state level. So for some applicants, their income and their other, um, eligibility limits, I guess are low enough that they get it every year. But there are some applicants who will get it one year and then the next year they won't. And then the next, the third year they will. So it's just like, uh, it will go back and forth a seesaw effect because it's dependent on each other. It's at the state circuit breaker credit on the, uh, personal income tax is dependent on how much real estate tax they're paying. And then like half the water, um, bill, it's just, there's a, um, the actual, um, it's on, um, mass.gov if you look it up. Yes. The, um, yes.

▶ 43:47 Maya Jamaleddine: And, and, um, for those who apply, do we have a certain, um, system to reach out to them every year? Or is it like, as a reminder Yes. To renew their application?

▶ 44:01 Speaker 10: So whether or not people got it, we have like a circuit breaker list. Mm-Hmm. So for those people who didn't get it in the middle year, we still send the, the reminder to them every year. 'cause we had that list and we've identified them. It was the first year we had less applicants than the second year we had the most applicants. So now we've identified them. It was, it was, it's kind of difficult because there's, it also includes renters circuit breakers. But if you, if you don't, um, own real estate, you can't get the, um, local exemption. Mm-Hmm. So basically it was, it was good to identify them. So now we have them on the list and we send out, um, the packet every year for them to apply. Okay. Yeah.

▶ 44:50 Maya Jamaleddine: And what about the new, uh, residents that are coming that, you know, they, they move to Melrose and they're not notified about, or they're not aware about this system. Um, is there any way, um,

▶ 45:07 Speaker 3: Not really To target this population.

▶ 45:08 Speaker 10: We try to do like, um, kind of website releases and press releases and that kind of thing. But, um, like annually when it, when it's time to come out, we did a, um, presentation at the, um, council on Aging this year. So that was kind of like, um, like a timely for this program. Um, and other, and about other exemption programs that we do too. So, um, that's kind of like we, we try to do as much Yeah. Um, release of the information as we can. But yeah.

▶ 45:38 Maya Jamaleddine: Thank you so much. Appreciate it.

▶ 45:39 Speaker 8: Councillor Vandiver and then Councillor Repe.

▶ 45:42 Kimberly Vandiver: Um, thank you. I had a few questions. Um, thank you for the, the very informative presentation. And I just wanted to, um, uh, ask a few questions about the top, the information you covered. Um, you mentioned, uh, the method of assessing residential values. You mentioned something about an arms reach or arms length Oh yes. Assessment. Could you explain how that

▶ 46:04 Speaker 10: Works? Sure. So, um, in Massachusetts we do like, um, basically ed valorem taxation based on, um, market value. So we use the calendar year sales from the previous, um, year, calendar year to assess for the fiscal year of that. So we use, um, arms length sales means, um, not related, like people who are not related, like I didn't sell it to my brother, or, you know, that kind of, so we disqualify all the sales that are, um, that type of sale. Mm-Hmm. And, um, and then we do like statistical kind of extraction, I guess, to get the, to get the market, um, data from it. Okay.

▶ 46:54 Kimberly Vandiver: So, so then every residential parcel would have an updated number based on that process?

▶ 46:59 Speaker 10: Yes. And it's all data. It's all, um, so we use the, um, database they call it. Um, so it's like all of the data points in the database are kind of like hitting up against all the data points from the market. And so they're, um, and that's how the assessments are, are derived.

▶ 47:22 Kimberly Vandiver: Okay, great. And, um, you mentioned something, um, on one of the early slides about, um, commercial compared to residential, there's a higher factor applied.

▶ 47:33 Speaker 10: Yes. So that is basically what, um, the decision is tonight. Okay.

▶ 47:39 Speaker 6: Yeah. Based on that factor on.

▶ 47:44 Speaker 10: Got it. Yeah. So, um, if you don't choose to shift the, um, tax rate that's applied to those assessments to create the tax bill will only, will, the residential tax rate will be 4 cents higher than that, um, commercial rate. Right. But then you can choose any shift between them right. This evening.

▶ 48:05 Kimberly Vandiver: And then, uh, you, when we're looking at the classes of, of property, um, the personal property, you mentioned utilities. Can you, can you give a specific example? What does it mean to have a, is that when you say utilities, what does, what does that exactly?

▶ 48:22 Speaker 10: Sure. So, um, back, I guess way back on this slide, I used to have something about personal property here. Um, so here on the different types of property, um, commercial, industrial, personal property, um, so utilities, so personal property accounts are basically like business, personal property. It sounds like it's personal, personal property, but it's, um, so, um, utilities are, you know, we have four major utilities in Melrose and they make up like most of the, um, personal property. So like, for example, Eversource I think is the biggest one. Mm-Hmm. Um, so when they, um, put new, um, assets into Melrose, which is was what happened in fiscal 23 to get such high growth and they finished construction on it, then, um, that creates the growth in Melrose and then they report it to us, and then we essentially tax it at the commercial rate. Okay. So then that's how the growth comes to us that way. Great. Does that answer your question? Yes,

▶ 49:32 Kimberly Vandiver: Yes. That's helpful. Um, then we, so we typically shift more of the tax burden percentage wise onto, um, on, onto the businesses. Do we have any, um, either qualitative feedback from businesses or, um, or anything data backed about the impact that has on them or, or on the rents that they pass on to anyone using commercial space or anything like that?

▶ 49:59 Speaker 10: That's not data that I have, no. Okay.

▶ 50:01 Kimberly Vandiver: Um, it, and what, with the business value, if we have a storefront that's, um, that's not currently occupied, is that, is the assessed value of that business the same regardless of whether there's a store occupying that location or not?

▶ 50:18 Speaker 10: Um, usually no. It's, um, we use, like for the, um, commercial industrial personal property, we, and any kind of, um, income producing properties, like we use the income approach to, um, value them usually. So it's like a mixture of like market value, but it's derived from that. So it's usually like what rents they're getting, their leases, that kind of thing. Okay.

▶ 50:45 Kimberly Vandiver: So if, if something becomes vacant, like, um, then that drops the value that's available to tax. Yeah. And if, and if a new business moves in that increases the value.

▶ 50:55 Speaker 10: Yeah, it's usually like their leases, like how, and like also, um, if something's like coming online and being built and it's not similar, similar, um, idea with the, um, um, like an investment property, like an apartment, which is, it is a residential property, but it's like it's being built, it's not fully leased out, so that's valued using the income approach. So there's, it's not fully, um, occupied yet, so it would have like a lower value until it's like fully, um, occupied and the rents are. So it's like basically based on rents. Yeah. But it could be, it's kind of what, what the market is doing. Like if they're turning over and vacancy rate, that kind of thing. Um, like if they're, if it's quickly turning over and that kind of thing.

▶ 51:43 Kimberly Vandiver: Mm-Hmm mm-Hmm. Okay. So if there were, if there were businesses that are, if business spaces that are unoccupied that there's not a tax bill that's getting paid until, until that's filled with something, there's not, um,

▶ 51:57 Speaker 10: Well, the tax bill's always do. Yeah. Yeah. I mean the tax bills, um, yeah, I mean it's, it's just like the assessment is the value as of like, if something's vacant for, for a while, it's like it's, um, still has like value. It still has land value and you know, like in, in Melrose especially, it still has a value of, of something, you know. Okay. It's never a value zero.

▶ 52:24 Kimberly Vandiver: Okay. Right. But it's lower, it's lower than if it was occupied by, yeah. Yeah. Okay. Okay. Um, great. That's helpful. Thank you.

▶ 52:32 Speaker 9: Councillor Repe.

▶ 52:33 Mark Garipay: Thank you. Uh, Madam President. Um, uh, at this time I'd like to make a motion that we go with a residential factor of 0.9612. I think it's consistent where we've been, um, over the last number of years. Um, and it's, uh, percentage wise, it's, uh, it's just about the same between commercial and and residential. And it's a tough, it's tough to figure out which, which way to go. 'cause one, one side's gonna get more or the other. So, uh, I think three, or we don't wanna talk percentages, but 0.9612, um, is my motion for a residential

▶ 53:09 Speaker 5: factor second. So

▶ 53:12 Speaker 9: Point of order, um, the, we will do that. We have to close the hearing and then we'll vote on the, um, the shift on per the agenda.

▶ 53:22 Speaker 8: Um, so if there's no other questions, is that,

▶ 53:27 Speaker 8: um, Ms. McClellan, did you, were you shaking your head? That's not correct. Feel free to chime in, correct me.

▶ 53:33 Speaker 10: No, that's fine. That's fine. Yeah.

▶ 53:36 Speaker 9: Um, so if any,

▶ 53:39 Leila Migliorelli: does anyone have any other questions for Ms. McClellan, Ellen? Okay.

▶ 53:44 Speaker 9: Since we're still in the public hearing, is there anyone from, or do you have a question? Councillor Stewart? No.

▶ 53:50 Leila Migliorelli: Anyone from the public who has questions, um, or wants to, uh, share their opinions on this order. And is there anyone online? Okay. Seeing no one online, I will motion to, by unanimous consent to close the public hearing and moving on, we will now take up the order, um, the request to, to set the property tax classification. So that's, right now Id, 1 2, 2 14 is before us. Um, and, uh, Councillor ga. Okay.