Taxes and Growth in Williamstown by Pat Dunlavey.

Taxes and Growthin Williamstown

Taxes and Growthin Williamstown

by Pat Dunlavey

• We pay too much property tax

Conventional Wisdom

• We pay too much property tax

• Local government and school spending are out of line

Conventional Wisdom

• We pay too much property tax

• Local government and school spending are out of line

• We get too little state aid

Conventional Wisdom

• We pay too much property tax

• Local government and school spending are out of line

• We get too little state aid

• The best option to avoid tax increases is new growth

Conventional Wisdom

• We pay too much property tax• Local government and school spending are

out of line• We get too little state aid• The best option to avoid tax increases is new

growth• But protected land and onerous regulations

stifle growth

Conventional Wisdom

How do our property tax bills compare?

Measurement Amount Rank

Avg. household property tax bill (2008) $4,635 87/3361

1 – In 1988 we ranked 21 places higher

Among towns with populations between 4,000 and 12,000, we ranked 31st out of 97

Source: Massachusetts Department of Revenue bill08.xls

• One-in-six Williamstown property tax payers spent 30% or more of their household income on housing costs in 1999

Source: 2000 US Census H97

For how many of us are property taxes a hardship?

For how many of us are property taxes a hardship?

• One-in-six Williamstown property tax payers spent 30% or more of their household income on housing costs in 1999

• Surprisingly, we ranked near the bottom – 329th out of 351 towns in Massachusetts – in this measure

Source: 2000 US Census H97

Property Taxes as Percentage of Household Income for Williamstown

0%

1%

2%

3%

4%

5%

1990 1999

$1,799 $42,926

$2,826$75,366

Sources Average Household Income 1999: US CensusAverage Household Income 1990: Estimated from US Census household income distribution dataAverage Household Property Tax Bills: Massachusetts Department of Revenue (no median tax bill data available)

Has there been any trend in property tax affordability?

Is spending for local government and schools out of line?

Measurement* Amount Rank

Municipal spending/resident (2007) $2,466 150/351

* Values do not count Williams students in population figures

Do we get too little state aid?

Measurement* Amount Rank

State aid/resident (2007) $432 122/351

* Values do not count Williams students in population figures

• We pay too much property tax …In absolute terms - Yes

…But relative to our income – No

• Local government and school spending are out of line - No

• We get too little state aid - No

Conventional Wisdom Revisited

“…The best option to avoid tax increases is new growth, but protected land and

onerous regulations stifle growth”

“…The best option to avoid tax increases is new growth, but protected land and

onerous regulations stifle growth”

• From a fiscal standpoint, how important is new growth? – What kind of new growth are we talking about?

“…The best option to avoid tax increases is new growth, but protected land and

onerous regulations stifle growth”

• From a fiscal standpoint, how important is new growth? – What kind of new growth are we talking about?

• Do local regulations and our fondness for open space inhibit new growth (and thereby have a negative fiscal impact)?

New Growth and the BudgetBudget is initially proposed as revenue limited, not expense

driven. – Peter Fohlin

• Yearly expectation is that total municipal revenues will increase by about 3.5% - based in part on an annual increase in revenue from taxes on existing property that is at or near Proposition 2½ limits, and in part on an annual property tax revenue boost from “new growth”

New Growth and the BudgetBudget is initially proposed as revenue limited, not expense

driven. – Peter Fohlin

• Yearly expectation is that total municipal revenues will increase by about 3.5% - based in part on an annual increase in revenue from taxes on existing property that is at or near Proposition 2½ limits, and in part on an annual property tax revenue boost from “new growth”

• In recent years, the revenue from property taxes has been approaching $12M, increasing by around $480K per year. About $260K of that comes from what is allowed by Prop 2½, and another $220K comes from tax revenue on “new growth”

New Growth and the BudgetBudget is initially proposed as revenue limited, not expense

driven. – Peter Fohlin

• Yearly expectation is that total municipal revenues will increase by about 3.5% - based in part on an annual increase in revenue from taxes on existing property that is at or near Proposition 2½ limits, and in part on an annual property tax revenue boost from “new growth”

• In recent years, the revenue from property taxes has been approaching $12M, increasing by around $480K per year. About $260K of that comes from what is allowed by Prop 2½, and another $220K comes from tax revenue on “new growth”

• To get that $220K boost from “new growth” requires around $15-19M of “new growth”, depending on tax rate

New growth revenue break-down

Personalproperty:

$20K

Improvements to existing homes:

$94KSubdivision of

land: $27K

Construction of new homes:

$71K

Commercial & industrial: $9K

Condominium conversion: $2K

Source: Assessor’s new growth data and building permit data 2004-2008

Σ = $220K

Is subdivision and new home construction important?

Personalproperty:

$20K

Improvements to existing homes:

$94KSubdivision of

land: $27K

Construction of new homes: $71K

Commercial & industrial: $9K

Condominium conversion: $2K

If all subdivision and new home construction ceased…

The annual increase in our average household property tax bill would go from ~$190 to ~$224

(assuming we increased taxes to compensate for lost revenue)

“… protected land and onerous regulations stifle growth”

• How much land do we have available for growth?

Open Space – NumbersTotal Williamstown acreage: 30,005

Protected Open Space: 11,6731

Upland Conservation District: 4,254 exclusive of the above2

15,927 acres, or 53% of land is formally or practically protected from development

1 - From MassGIS Open Space 2/08 data layer. This includes but is not limited to: Mount Greylock Reservation (3,518); Other State-Owned Land (2,730); Hopkins Forest (1,990); Conservation Commission (515); Rural Lands Foundation (454); Trustees of Reservations (430)

2 - The total area of the Upland Conservation District is 11,571 acres, but much of it overlaps with protected open space

Chapter 61, 61A and 61B lands not included

Chapter 61 forestry

2,870 acres

Chapter 61A agricultural

4,243 acres

Chapter 61B recreation lands

543 acres

Between 1997 and 2008, the fraction of the tax base shielded by Chapter 61 increased from 3.0% to 4.9%

Source: Assessor’s Chapter Land data

Not to be confused with…

With all that Open Space, is there any land left for people (and development)?

With all that Open Space, is there any land left for people (and development)?

• We have ~9,000 developable acres1

• Williamstown ranks 116th out of 351 towns in the amount of non-protected land per-capita: 2.2 acres2

1 Updated net usable land area analysis by Pat Dunlavey, July 20082 MassGIS OpenSpace datalayer, February 2008; Williams College student population excluded

Are regulations stifling growth?

Are regulations stifling growth?

• You need to ask: In comparison to what?– Williamstown’s regulations and enforcement

don’t seem to be unusual (with the possible exception of the Upland Conservation District)

Are regulations stifling growth?

• You need to ask: In comparison to what?– Williamstown’s regulations and enforcement

don’t seem to be unusual (with the possible exception of the Upland Conservation District)

• One investigation* suggests that…– Regulations may inhibit subdivision of land– Found no evidence that they inhibit home

building

* Patrick Dunlavey, Presented to the Williamstown Planning Board, July 2008

Constraints (Cost) Surface:1. Slopes (25% = 1)2. Water Resources Districts 1 & 2

(minus sewer buffer)3. Wellhead Protection District4. RPA 200’ buffer

+ Stream 100’ buffers

The constraint cost model correlates with where new subdivision happened

Average modeled cost on 22 new subdivided parcels compared with all other parcels in NULA

New Construction None

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

Avg Modeled Cost

Subdivided Not

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

Avg Modeled Cost

Modeled cost on parcels experiencing new home construction between 1998 and 2007

It does not correlate with where new home construction happened

Unanswered: Why do we rank high on average household tax bill?

Measurement* Amount RankAvg. household property tax bill (2008) $4,635 86/3011

1 – In 1988 we ranked 20 places higher

* Values do not count Williams students in population figures

Commercial pulls its weight

Williamstown 88% vs. 12%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50% 55% 60% 65% 70% 75% 80% 85% 90% 95%

Residential

Com

merc

ial

Source: Massachusetts Department of Revenue lvcl08.xls

• Williamstown ranks 148th out of 313 towns in proportion of revenue contributed by commercial, industrial and personal property taxes

• Among small towns (>4,000 & <12,000 population), we rank 34/97

Tax-Exempt Stands Out

Williamstown62.1% vs. 8.5%

29.4% tax-exempt

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50% 55% 60% 65% 70% 75% 80% 85% 90% 95%

Residential

Com

merc

ial

Source: Massachusetts Department of Revenue propertyvalues08.xls

With 29.4% tax-exempt property, Williamstown ranks 3rd highest out of 313 towns

Top Ten Tax-Exempt Valuations

Municipality % of TotalHUNTINGTON 42.0%MOUNT WASHINGTON 32.9%WILLIAMSTOWN 29.4%DEERFIELD 25.9%PETERSHAM 25.5%CHELSEA 24.0%BOSTON 23.9%CAMBRIDGE 22.5%LINCOLN 22.1%NEW SALEM 21.1%

Summing up

• Our taxes are somewhat higher than expected– they’re not affordable to a significant minority– but still more affordable for us than most towns

• ‘Growth Imperative’ may be overrated

• Regulation and protected land are probably not significantly inhibiting growth

• Tax-exempt property may explain high tax bills– increase in commercial tax base could correct

imbalance

It’s not all about money

• Demographics– We’re moving to an older, less diverse population– Declining school enrollments could continue

• Community Values & Vision– See Williamstown Master Plan, Open Space Plan,

etc.

For a copy of this slide show

www.pdplan.org