Is Worcester in danger of an Urban Doom Loop?
Who wants office space in Worcester? Apparently not the investors. Here is an interesting article about vacant office space in Philly. Read here.
Basically here is the scenario. No one wants office space. This causes the value of office buildings to drop. Here is case and point with the 2 tallest buildings in the City:
Case Study: Tallest Buildings in Worcester
600 Main St - White Residential Building
Sold for $28.8 million in September 2019.
City Assessed Value:
2018: $17.9 million
2019: $18.5 million
2020: $19.8 million
2021: $24.6 million
2022: $28.8 million
446 Main St - Blue Worcester Plaza Office Tower
Sold for $16.5 million in November 2019.
Assessed Value:
2018: $24.3 million
2019: $15.1 million
2020: $25.8 million
2021: $17.7 million
2022: $14.8 million
For these 2 buildings, you have an increase of $9.9 million on the residential building and a decrease of $9.5 million on the commercial building in 4 years!
Trends in Property Usage
Now consider another thing that is happening. Owners are changing office or commercial space into housing. Isn't that great?
Worcester's Dual Tax Rate System
Residential: $15.21 per $1,000
Commercial: $33.33 per $1,000
So if you have a $1 million building that switches from commercial to residential, that is a drop of $33,330 in taxes to $15,210, a loss of $18,000. Multiply that for a small sample of $50 million, and you are talking almost a $1 million drop in collected taxes.
Impact of Non-Profit Organizations
The other thing that is happening is non-profit companies are buying up land and buildings, and instead of growing the tax base, it is shrinking. Yes, they may make payments in lieu of taxes (PILOT), but it doesn't make up for the loss of taxes and stunts further growth.
Examples of Non-Profit Purchases
81 Chatham Street bought by Teen Challenge of New England: In 2021, the City received almost $50,000 a year in taxes; now they get $0.
630 Plantation Street bought by Worcester Housing Authority: In 2021, the City received close to $180,000 in taxes; now they get $0.
520 Park Ave/111 Maywood Street bought by Clark University: Clark continues to pay taxes, but will they increase the payments if they put a building on this parcel?
This is the spiral that is happening as more and more companies pull out of Worcester due to high commercial tax rates and are replaced by non-profits and tax-exempt entities. After a while, all we will have left are homeowners to pay the tax bill.
As an owner of residential property in the City, please raise my taxes and lower the taxes of commercial properties so we can continue to have businesses in the City.
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