government

(Editor’s note: click here for the complete set of slides and explanatory notes discussed at the Property Tax Study Committee forum.)

By Alice Waugh

To soften the blow of the imminent property tax increase, a town committee has suggested two options: a means-tested circuit breaker program and a residential exemption for certain properties.

The Property Tax Study Committee was formed last winter amid worries that some homeowners will not be able to afford the tax increase that was approved to pay for the $93 million school project. Figures released in February projected an average increase of 12.7% for fiscal 2020. The group has been gathering information for several months on the financial demographics of property owners, what tax mitigation programs currently exist, and what other towns and the state have done to help squeezed taxpayers.

As it tried to gauge financial need in town, the group found that about 25% of Lincoln households are defined as “cost-burdened” when it comes to housing costs, meaning they pay more than 30% of their income for housing. The town’s stock of affordable housing will increase once Oriole Landing opens, but there is currently a three-year waiting list for affordable rental units in Lincoln Woods, Selectman Jennifer Glass said at the committee’s June 18 public forum.

The most heavily used tax relief program in Lincoln is the senior/veterans work-off program whereby qualified residents can earn reductions of up to $1,500 by working for the town, Glass said. Homeowners and renters 65 and older can also qualify for the state’s Senior Circuit Breaker Tax Credit program. Residents can also receive financial, food assistance, and social services from other town programs. The St. Vincent de Paul/St. Joseph food pantry is serving about four times as many clients as in 2011, and the Parks & Recreation Department has also seen an increase in demand for financial aid, Glass said.

Expanded circuit breaker

One option is for the town to expand on the state circuit-breaker program, which aims to ensure that residents over 65 do not pay more than 10% of their income on property taxes. That program, which is available to both renters and homeowners who meet income, asset and property value limits, has a benefit limit of $1,100. However, in towns like Lincoln with high property values and taxes, that benefit is often not enough to bring the tax bill down to 10% of income.

Three area towns — Sudbury, Concord, and Wayland — have applied for permission from the Commonwealth to create extension programs to bridge that gap. Such programs require approval from the legislature as well as Town Meeting. (Click here for a comparison of state and town programs.)

In Lincoln, 577 of the 1,940 single-family residences qualify for the existing state circuit breaker by virtue of having owners 65 or older who have lived in town for at least 10 years. The property tax committee estimated that anywhere from 224 to 466 properties might qualify under a circuit-breaker extension program, depending on income and assets.

Residential exemption

The second option, a residential tax exemption would make property taxes more progressive and to try to preserve moderate-income housing by providing tax relief regardless of age or income. In this scenario, the Board of Selectmen would set an exemption of zero to 35% of the town’s average property value. That exemption would be translated into a dollar amount and become a fixed deduction from the assessment of every owner-occupied residential property.

The effect would be to reduce taxes on eligible properties with valuations below a given “break even” point. For 2019 in Lincoln, anyone with a home value under $1.14 million would pay less and the rest would pay more. It would not apply to commercial properties or to developments, such as Lincoln Woods, that are not owner-occupied.

Unlike the circuit-breaker extension programs, a residential exemption would not require new revenue, but it would shift the tax burden to more expensive properties. “As you go up to the more expensive homes, it goes up quite dramatically,” Glass noted.

Because the deduction would reduce the amount that can be taxed, the tax rate would have to increase on the remaining property value in order to raise the total levy amount needed to fund the town budget. For example, with a 5% exemption, the tax rate per $1,000 of property value would need to increase to $16.50; with a 35% exemption, it would have to rise to $22.20 per $1,000 (for fiscal 2019, it’s currently $14.03 per $1,000).

Sixteen cities and towns in Massachusetts have residential tax exemptions ranging from 10% to 35%. They include cities with a large commercial tax base (Boston and close suburbs) as well as several towns on Cape Cod and Martha’s Vineyard with expensive vacation homes that are not owner-occupied year round.

Lexington studied the residential exemption idea but decided against it. There is often resistance to the fact that it is not means-tested, and that there can be significant additional tax burden on higher value properties, Glass said. It might also hurt renters when their landlords pass on the tax increase in the form of higher rents for market-rate units.

Other possibilities for tax relief include prioritizing and funding other supports such as social services and rental assistance, Glass said. (Click here to see a comparison between the circuit breaker and residential exemption concepts.)

The committee will give another report at the State of the Town meeting on November 2 and may recommend a measure for voters at the Annual Town Meeting in spring 2020. In the meantime, the group urged residents to share thoughts and reactions by taking this online survey. The feedback form will stay open until the next forum in the fall on a date to be announced.