Dual Tax Rate is Killing Worcester
Yesterday's T&G had an open letter from Alex Guardiola to the City Council asking them to abolish the dual tax rate and I can't agree more. In the 30+ years I have spent in the city, I see what it is doing to the long-term prospects of businesses and their incentives.
Here is the article:
This provides me an opportunity to repost an email I sent to my buyers on 4.2.2021 just 5 months ago. This is a huge deal and it is important for investors to realize what is going on here. Too bad that the city council is elected by the people who vote with their wallets in the short term, and not the longer-term thinkers who employ them.
4.2.2021 STATE OF THE MARKET
Please see these 3 articles from the paper:
As an avid reader of the physical paper, I provide these links to you.
Article Summaries
Article 1 Summary
Assessed values of properties in Worcester are going up:
Single Family: 8.23% (25,428) $6.8 Billion
Condos: 13.15% (4,918) $832.88 Million
2 Family: 12.46% (3,595) $1 Billion
3 Family: 18.94% (4,914) $1.6 Billion
Apartment Buildings: 16.52% (1,437) $1.5 Billion
Commercial Properties: 1.15% (2,157) $2.25 Billion
Industrial: -0.56% (528) $533.5 Million
Total assessed value: $15.824 BILLION
2020 Tax Rates: Residential $17/1000, Commercial/Industrial $35.16/1000
Article 2 Summary
TAXES ARE GOING UP—Worcester votes each year to reset the tax rates for both residential and commercial. This is done by the City Councilors who are elected by the people.
Article 3 Summary
Mixed use doesn't make sense for the old Greendale Mall. They are looking to put in a warehouse due to the location adjacent to I290 and I190! Does that mean that AMAZON IS COMING TO WORCESTER? What a perfect location.
MY TAKE
As everyone knows, the multi-market in Worcester is super hot. Taxes are going up.
BUT
Everyone should be voting to get a single tax rate in Worcester. I know that this is contrary to what would be considered your self-interest, which would be to have the lowest possible residential tax rate. But over the past couple of decades since the split tax rate was implemented in 1984, businesses have been moving out of Worcester. This has been raising the percentage of taxes that falls on the residents.
For those paying attention to local activities, nothing has been built in Worcester recently without a TIF (Tax Increment Financing), where the City reduces the tax rate for a period of time to incentivize businesses to come to the City. In theory, these work, but it would work much better if the market forces of supply and demand were able to create this equilibrium.
Notable TIFs
Table Talk Pie - Cleaning up old industrial land
Homewood Suites (Washington Square) - City created a parcel by reducing the size of the rotary
Polar Park - Cleaning up old industrial land
2 housing projects with Polar Park - Cleaning up old industrial land
WuXi Biologics - Creating something new
100 Wall St - Change from a long-defunct restaurant to residential housing
154-156 Main St - Switch from office to residential
6 Chatham St - Switch from a school to residential
205 Summer St - Switch from a church to residential
TIFs that Sort of Worked
Unum - Built a building, tried to bring jobs, then announced they are having all of their employees work remotely, so they will lease the building.
I posit that the split tax rate of $35/1000 is driving companies out of Worcester and many can only stay or create a financially viable project with the help of a TIF.
Companies That Chose to Leave Worcester
Primetals Technologies (Morgan Construction) to Sutton - $28mm building (275 jobs). Morgan was in Worcester for over 100 years.
Allegro MicroSystems to Marlboro
Curtis Industries to West Boylston (200 JOBS)
Worcester is going to have some issues when restaurants and bars, which have been mostly closed for almost 9 months, have to pay their taxes with reduced revenues.
Worcester also has a ton of non-profit entities that have huge economic impact on the city but do not pay property taxes.
All of this puts more strain on the homeowner and small landlord. The best way to fix this is to encourage more commercial development by reducing the commercial tax rate.
Current Property Values
Let's take our numbers from above:
Residential Value: $11.73 Billion
Commercial Industrial: $2.78 Billion
How is this even possible? Worcester has been known as an INDUSTRIAL CITY, NOT A RESIDENTIAL CITY.
The city is working hard to grow the commercial/industrial tax base, but the tax rate is a killer and needs to be changed.
Please reach out to your city councilors and ask them to vote for a more equitable tax rate on commercial/industrial properties. It may not look like it is in your financial best interest, but as we know, if Worcester becomes a bedroom community to Marlboro and Natick, we will be in real trouble.
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