Small business owners in Somerville were sucker-punched this year by their commercial property tax bills. They were expecting up to a 15 percent increase; some are seeing their bills doubled. This could cause small businesses to flee the City, to be replaced by deep-pocketed chains.
First, a little tax 101: Property taxes are made up of two factors, the assessment of the property value and the rate of the tax per thousand dollars or assessed value. The rate is set, then it is set in stone. There is no negotiating that. In Somerville, the rates are: $12.66 Residential and $21.51 commercial and industrial.
What happened this winter is that assessed values of commercial properties went up dramatically. Business owners in “hot” squares found their tax bill doubled because their assessments doubled. The first they heard of it was when the bill arrived. As I said, sucker-punched. Here’s what Mayor Joe said about it. Public forums are going on, if you have more questions for City officials.
What is a property owner to do?
Abatement applications are due February 3, 2014. Things that will help your chances of getting abatement are fight them with facts. Note if an assessor has not been into the property (especially if the property is not recently renovated.) Note sales in the area or businesses in the area that demonstrate that your value is too high.
Then, the wait begins. In Somerville, 80 percent of abatement applications are denied, directly or by no answer. If you get no answer within three months, that means you have been denied.
The next step is the Appellate Tax Board. There you will get your day in court. You will be able to see how the City justified your current assessment. The more data you can amass to prove your point, the better it will go for you. But be ready to wait. Appellate Tax Board hearings can be backed up a year or more.
Meanwhile, your tax bill is your tax bill. You have to pay it. If you win, your bill will be modified until your overpayment is covered.
- Commercial tenants frequently have net-net-net leases. These leases allow the landlord to pass the tax increase onto the tenant businesses.
- The tax assessments are based on the “highest and best use” of the property, so low-profit businesses will suffer. They are most likely to leave. Businesses that have a higher profit margin will feel this less.
- The cost of doing business in Somerville has gone up, this will deter small businesses who attempt to finance improvement, expansion, or simply refinance the existing loans on the business.
- Businesses that are squeezed by this will tighten their belts. This could hurt not only the businesses, but the consumers, and non-profits that are often supported by local businesses.