How much could a split tax rate lower residential taxes in Lancaster?

 

Photo by Josh Appel on Unsplash

For January, everyone in Lancaster will receive a Quarter 3 Real Estate Tax bill that reflects your reassessed property value and a finalized FY2023 real estate tax rate.   Before that bill goes out the Select Board will need to hold a "Tax Classification Hearing" where they will approve a "CIP Shift" ratio that could shift the tax burden away from residential property.

Historically Lancaster has approved a "CIP Shift" ratio of 1.0 -- the effective tax rate for all property classes is the same.   The state would allow us to approve a "CIP Shift" as high as 1.5.

How would the average residential tax burden be affected if the Select Board approved a higher CIP Shift? 

Using our town's tax data for FY2022, which was the fiscal year that ended in June, I reproduced what the owner of a $350K residential property actually paid with a CIP Shift of 1.0, and what they would have paid with the maximum CIP shift ratio of 1.5.

In FY2022, our tax rate for all classes of property was $19.45 per $1000.   A $350k residential property would have been assessed $6,808.   For a sample commercial property, I picked J.C. Madigan on Old Union Turnpike which is valued at around $4.75 million.  The tax bill for a $4.75 million commercial property was $92,388. 

If our CIP shift in FY2022 had been the maximum allowed -- 1.5, it would have: 

• decreased the residential tax rate to $17.82 per $1000
• decreased the tax on the $350K residential property by $570 to $6238, an 8% decrease.
• increased the tax rate on Commercial, Industrial, and Personal Property to $29.17 per $1000
• increased the tax on the $4.75 million commercial property by $46,193 to $138,581, a 33% increase.

How would a smaller increase in the CIP shift impact taxes?

Using the same FY2022 data, a CIP shift of 1.10 would have reduced the Residential tax rate to $19.12  per $1000.  The $350K homeowner would have paid $113.99 less, a 1.5% decrease.  The $4.75 million commercial property would have paid $9,239 more, a 10% increase.

In Massachusetts, there are a number of cities and communities around Boston with a maxed-out CIP shift.   In our area, Ayer and Clinton use CIP shifts of 1.57 and 1.5 respectively.