Tax rate showdown
Council, mayor at odds over levy burden placed on businesses
The City Council has backed a move that would ease the city's property tax burden for Gloucester businesses while asking local homeowners to shoulder a bit more.
The pending change in the city's tax classification shift has triggered Mayor Sefatia Romeo Theken's first veto, setting the stage for a Tuesday night hearing to consider both.
The council's tweak of the longstanding property tax rate ratio came on a 5-4 vote earlier this week.
The city has charged businesses for the past 11 years at a 1.06 to 1 levy ratio, compared to a 0.94 to 1 shift for residences. Romeo Theken had submitted those figures as her proposed tax classification rates for this year.
But the council's Budget and Finance Subcommittee, comprised of City Council President Joe Ciolino, Ward 1's Scott Memhard and Councilor at-Large Joseph Orlando Jr., recommended last week to change the ratio to an even levy for both residential and commercial properties, reversing a shift that has charged businesses at a higher rate than homeowners for three decades, records indicate.
The new shift was then approved Tuesday by the full council, with Ciolino, Orlando and Memhard joined in backing the change by Jamie O'Hara and Val Gilman. Councilor at-Large Paul Lundberg, Ward 3's Steve LeBlanc, Ward 2's Melissa Cox and Ward 5's Sean Nolan voted to keep the lower residential rate.
That vote drew a rebuke Wednesday, and notice of a veto, from the mayor.
"I had hoped the classification would maintain the same 1.06 percent shift which the city has maintained for 11 years," she said in a letter sent to all councilors. "In maintaining the current ratio during an economically uncertain time, I wanted to reassure our homeowners, families and the elderly this administration's goal is to help provide stability for their household budgets. Knowing our financial future gives us all a sense of security."
With that, she issued the first veto of her nearly two full years in office. She also called for a special council meeting to address the veto, and that is set for Tuesday at 7 p.m. in City Hall's Kyrouz Auditorium. The council will need to muster six votes from the nine members to override the mayor's veto.
John Dunn, the city's chief financial officer, said that, either way, the city's property tax rates will be lower this year, fiscal 2017. But he said that would be tempered by a new round of citywide property assessments that will raise many residents' and businesses property's values, bringing higher tax bills.
The current city tax rates, from fiscal 2016, which ended June 30, are pegged at $13.61 per $1,000 valuation for residential and $14.53 per $1,000 for commercial and industrial. The new rates — if the council's decision holds — would be $13.24 for all, according to Dunn's calculations.
If the rates, however, were kept at the same split, residential taxpayers would pay $13.16 per $1,000, while businesses would pay $14.04, Dunn said.
LeBlanc, who backed the mayor's stand to maintain the status quo, acknowledged that the change would not, on its own, be a back-breaker for homeowners.
"My concern is that we've already taxed people higher with the (2014) water and sewer (debt shift)," he said. "We just gave a (tax increment financing break, or TIF) to a company (National Fish and Seafood), a lot of assessments are going up, and a lot of people are going to get slammed. Businesses can offset rising costs by raising prices; how can the elderly and people on fixed incomes keep offsetting rising costs if we keep doing this?"
Making the shift
Orlando, however, said the leveled tax levy share would not be a windfall for local businesses, but would send "an important message."
"I've always believed Gloucester needs to be more business-friendly," he said. "My vote to even the tax ratio was intended to encourage business development, which expands the tax base and benefits every person and business in the community.
"A rising tide raises all ships," he added, explaining that new businesses would generate more tax revenue and ease the burden on residents over the long term.
A leveling of the tax rates also drew support from Ken Riehl, CEO of the Cape Ann Chamber of Commerce.
"It's not a lot of money, but it really is the message," Riehl said. "We're working hard to not only encourage our businesses to expand, but to bring in new business, and it would be good to be able to say that we're a city that doesn't tax businesses at a higher rate than other properties."
LeBlanc and Romeo Theken, however, dispute that a .06 shift in the tax classification will generate new growth for the city.
"To claim that we become more business-friendly by placing additional taxes on citizens while lowering our taxes on businesses is simply not true," the mayor said. "Any prospective business owner is not enticed by a slightly lower tax rate. Instead, we know that businesses are attracted to the community as a whole ... they look at housing, access to top job candidates, schools, transportation and other variables found within the community."
Romeo Theken said she would, at the upcoming Tuesday hearing, be willing to accept a 1.03 shift — a compromise that was offered by Cox but shot down by the rest of the council.
"While this is my first veto as mayor ...," Romeo Theken said, "I cast it in the name of our citizens and with the optimism that we will continue to work and solve problems together as leaders."
Staff writer Ray Lamont can be reached at 978-675-2705, or via email at firstname.lastname@example.org.
Calculate your taxes
Current and proposed Gloucester property tax rates, as the City Council and Mayor Sefatia Romeo Theken debate a change in the classification rate. City chief financial officer John Dunn notes any new rates will be subject to new property assessments, many at increased values.
Current (FY '16 / 1.06 to 1 business shift)
Residential: $13.61 per $1,000 valuation.
Commercial/industrial: $14.53 per $1,000.
Proposed by council (FY '17 / 1-to-1 shift)
All properties: $13.24 per $1,000.
Proposed by mayor (FY '17 / 1.06 to 1 business shift)
Residential: $13.16 per $1,000.
Commercial/industrial: $14.04 per $1,000.
Tax rate veto hearing
What: Special meeting of City Council
When: Tuesday, Nov. 29, 7 p.m.
Where: Kyrouz Auditorium, Gloucester City Hall, 9 Dale Ave.