"Real liberty is neither found in despotism or the extremes of democracy, but in moderate governments.
Alexander Hamilton

Wednesday, December 23, 2015

Lower Tax for Year Round Residents?

There are many interesting aspects in this piece from the NY Times and many similarities to Moultonboro. Dwindling winter population, gentrification, high median age, large seasonal property owners who pay taxes but cannot vote and an affordable housing pinch. Especially interesting is the plan for a tax exemption that would lower the property taxes on year-round residents,  while raising taxes on second-home owners who live here part-time.( Please don't take this post as an endorsement of this plan, just some food for thought and a peek at what other communities are doing to create sustainable communities. )

PROVINCETOWN, Mass. — This resort town at the tip of Cape Cod is such a popular destination, its promoters like to say, that even the Pilgrims landed here before they settled in Plymouth.
In the summer, Provincetown is still one of the most crowded vacation spots in New England. A historic art colony and a gay destination, it draws up to 65,000 people to the galleries on frenzied Commercial Street and the windswept dunes of the Cape Cod National Seashore. But come late fall, the beaches and bars mostly empty out. And it is not just tourists who decamp. Most second-home owners pack up, too. And, increasingly, so do people who once made Provincetown their home year-round. These days, just 2,800 hardy souls endure here through the winter.
“It’s like a Potemkin village,” Stephen Borkowski, 61, a freelance art historian and year-round resident, said the other day as he strolled down the middle of a deserted Commercial Street, where many shops were closed for the season. “There are the store facades and about five people.”
Provincetown, like many summer havens, is caught in a vicious cycle of economic and demographic change, with a widening divide between the haves and the have-nots that is threatening its future. The long-running invasion by second-home owners and investors, who now own 71 percent of the homes here, has jacked up the price of real estate. One 418-square-foot home, albeit with 30 feet of mesmerizing waterfront, is going for nearly $1.6 million.
As a result — with housing and year-round jobs increasingly scarce — Provincetown is hollowing out. The winter population dropped 14 percent between 2000 and 2010. Families have left or have avoided settling here in the first place. The high school closed a few years ago. And the dwindling population is graying. The median age of 54.3 is far above the national median of 37.4. And Provincetown is not even the oldest town on the Cape; that distinction belongs to nearby Wellfleet, where the median age is 62.2.
“Cape Cod is running a social experiment about whether you can have a society without children,” said Michael Goodman, the executive director of the Public Policy Center at the University of Massachusetts at Dartmouth.
“While the jury is still out, I’m skeptical,” he said. “The sustainability of these communities is a major challenge.”
On Tuesday night, the town selectmen here took a controversial step toward what they hope will halt the decline. They voted unanimously for a tax exemption that would lower the property taxes on year-round residents, some of whom are on fixed incomes, while raising these taxes on second-home owners who live here part-time. As provided for in state law, the exemption would shift the tax burden “away from certain lower valued, residential properties to higher valued homes, most apartment buildings and to second homeowners.”
The exemption is intended to make housing somewhat more affordable and to encourage year-round residency. The town’s board of assessors said that for a year-round resident here who owns a condominium with a value of $369,900, the annual property tax bill of $2,700 will go down by $685; for a part-time resident in a similar condo, the board said, the bill will go up by $144. Town officials estimate that 1,300 residential properties will have their taxes lowered, while 2,700 will pay more.
Such exemptions are becoming increasingly popular across the country, particularly in hot real estate markets, where gentrification is pricing longtime residents out of their homes. The State of Florida has had a homestead exemption for years. Thirteen other cities and towns in Massachusetts, including Boston, Cambridge and Nantucket, have enacted similar measures.
But David Panagore, the town manager here, said Provincetown was “the canary in the coal mine” because its problems were more extreme and, at just three square miles and surrounded by the national seashore, it had nowhere to expand.
A few second-home owners here supported the exemption. Tony Kushner, the Pulitzer Prize-winning playwright, who owns a weathered 1830 house here, said by telephone from New York that paying the new rate would not impose a hardship on him. He said he felt a responsibility to help those who keep the town functioning in winter.
“Provincetown is really struggling to maintain a kind of social coherence because it’s tremendously expensive to live there,” he said. “And if people can’t live there, that will be very much to the town’s detriment.”
But the exemption has inflamed passions and stirred resentment among many other second-home owners and investors, who pay 80 percent of the taxes. They say they already give much to the town and use its services for only a portion of the year. They also think the exemption will benefit some people who do not need it.
“For many of the seasonal residents, Provincetown is their emotional home,” said Steve Fossella, 58, an information technology project manager who lives in Quincy, in suburban Boston, and owns a second home in Provincetown, where he is the president of the town’s Part-Time Resident Taxpayers Association, which has 300 members.
“They serve on committees, volunteer at the soup kitchen, provide scholarships and give generously to the nonprofits,” he said. “We feel we’re part of the community, and to have this tax come along — it says we aren’t part of the community. It feels punitive.”
A particular grievance of seasonal homeowners is that they pay taxes but have no say in how their money is spent because they cannot vote in Provincetown — better known as taxation without representation.
Mr. Fossella said his association would join other seasonal homeowner groups in Massachusetts to seek to allow nonresident property owners to vote in budgetary matters. Such efforts raise thorny questions about whether one person should be able to vote in more than one place. But after a two-decade-old movement, several states now allow nonresident property owners to vote in certain circumstances.
In approving the tax exemption, the selectmen here bemoaned the divisiveness of the debate but said the housing crisis was so acute and the year-round population such an endangered species that it was worth a try.
Tom Donegan, the chairman of the board of selectmen, conceded that it was not perfect. “It doesn’t account for the vast appreciation in home values,” he said. “It may give a benefit to some who may not need it. But it’s the best thing we’ve got.” He said that generally, those who needed it the most would benefit most.
Still, it is not clear how much difference it will make in the long run. Full-time residents like Rik Ahlberg, 45, a writer and a renter, said he doubted it would address the winter absurdity of having 70 percent of the homes sit vacant — or, as he put it, “all this empty housing and nowhere to live.”
Mr. Goodman, of the University of Massachusetts at Dartmouth, said the exemption could provide some modest relief, but he also questioned whether it would solve fundamental problems like the housing pinch, the lack of well-paying jobs and the population drain.
As they mull these long-term challenges, town officials are faced with more immediate ones, like expanding water-delivery and sewage systems for 3,000 people in the winter to accommodate peak crowds of 65,000 in the summer.
Mr. Panagore, the town manager, said the tax exemption was forcing everyone to wrestle with existential questions.
“Not just who should bear the burden for the peak event,” he said. “But if we do nothing, is this a town where we turn out the lights in October and turn them back on in May? How long can we last when folks can’t afford to live here?”


BG said...

What would a change to the local tax code gain the town? The tax rate is already the lowest in the region and there are 17 homes for sale in town (according to Zillow.com) under $200,000, with an average of $143,000. Not cheap, but less expensive than averages in Sandwich or Center Harbor.

Non-resident tax payers already carry more than their share of the load, especially when factoring in the services received. Why risk killing the golden goose? An alternative approach would be to create a two tier tax rate, if allowed by law. One rate for the first $200,000 of property value and another one above that.

Attracting more low cost rental property would probably bring in more people, but it could take a lot of full-time rental units for supply to meet the demand. Without a plentiful supply, prices won’t be that attractive. How many people of working age does the town need to attract to meet its goals?

Joseph Cormier said...

"They voted unanimously for a tax exemption that would lower the property taxes on year-round residents, some of whom are on fixed incomes, while raising these taxes on second-home owners who live here part-time. As provided for in state law, the exemption would shift the tax burden “away from certain lower valued, residential properties to higher valued homes, most apartment buildings and to second homeowners.”

Massachusetts is not renown for sanity in its state laws! Maybe a discriminatory tax system should be taken up by the legal system. Are exemptions or tax rates or valuations being changed by a local board. This would almost guaranty a lawsuit in MoBo! Good that NH law doesn't allow local governance to act without statutory allowance.

"The exemption is intended to make housing somewhat more affordable and to encourage year-round residency." Absurd!

I seriously doubt the premise, or rationale, that shifting the tax burden would accomplish anything other than heighten the animosity of taxpayers who can't vote.

Why not change those laws? Prove you're paying taxes and be allowed to vote. Voting in two places a problem ... make it state/local elections only, and not Federal elections. Taxes are being paid to different legal entities, local, state, and federal. Out-of-state taxpayers get to "do it" to more than one local and state entity.

It would seem that increased local tax exemptions or tax credit, would attack the issue of low income, in relation to property ownership. Someone with long-held lakefront property that wants to stay, but can't afford the taxes, makes a decision to not accept multi-million offers for the property. Give THEM tax relief and ... get the tax, upon passing, to the descendants. Kind-a-like a 401k. You don't pay taxes till you start taking out money. You've got till age 70 and 1/2, and then you start drawing because of the MRD (Minimum Required Distribution)and pay taxes, like it or not. Save tax now, pay later!

Markets determine the price of properties. Market values aren't determined by taxes, solely.

The influx of revenue to the MoBo, is not from those that have been here for centuries, albeit they donate.

“While the jury is still out, I’m skeptical,” he said. “The sustainability of these communities is a major challenge.” Sustainability ... ??? Like gold-mine towns, in the gold-rush days?

Nationwide, demographic change is occurring, although we're reading about "issues, here, and there". It's good blogger raises awareness, as MoBo is a classic example. "Classic" in more ways than one.

Maybe reality is kicking-in, about the world has changed, and is changing.


Anonymous said...

Certain folks' dream Christmas! No taxes for year-round residents, unbridled spending while second home residents pay all the taxes with no voting rights! Sounds like a plan for creating a grease spot where there used to be a town.

Anonymous said...

T'is the Democratic way! SB2 anyone?

Anonymous said...

SB2 is dead. Keep it that way.

Anonymous said...

Taxation without representation...a short sighted plan

david panagore said...

Merry Christmas- The Internet is a wonderful thing.It’s interesting to hear how other communities are doing. Provincetown has a volunteer fire department, forty-five or so volunteer boards and commissions and a $26m dollar or so budget. The state legislature has been, due to uniformity of the system concerns, resistant to any changes to the tax code. This has meant that Provincetown, challenged for 20 years or so with the wealth transfer impact, has very limited choices. the wealth transfer of second home ownership means the median single family home price is roughly $850,000 but the median income is roughly $42,000. Provincetown like many communities struggles with its budget, and solutions that forego revenue won’t work. We are interested in new ideas and learning how other resort communities are approaching similar problems. From conversation I have had from Vermont to Maine and out to the Berkshires there are many communities at different stages facing similar challenges. We are interested in sharing ideas and solutions.

- David Panagore. Town Manager, Provincetown Ma

Joseph Cormier said...

Communication with other communities is a great way to educate and evaluate. Kudos!

I'm waiting for the ham to be finished, while I post this. Not this ham, the ham in the oven!

We've got a "new" town administrator that is learning the quirks of our town, but faces similar demographics, and the realities they produce.

Revenue:2014-2017(2016 budget,2017 estimate)
$23,918,802 --- $26,058,316

Property Taxes:$17,820,309 --- $19,685,798

Total expenditures:
2014 actual: $22,310,269
2015 actual: $23,465,913
2016 budget: $25,391,861
2017 estimate: $26,058,316

Finance page:

Home ... not MoBo's!


Population just 3,000

Joseph Cormier said...

Just noticed the NH Homestead Right goes to $120,000 on Jan. 1, 2016 (from $100,000).


Rick Heath said...

First of all, I hope that the commenter understands that the value of the 418 sq. ft building is in the water front land and view, not the building. And some one commented that markets determine prices. Actually, it is the other way around, sort of. While prices as individual decisions are determined by the markets, markets are trends of the collective prices of properties sold. Taxes are determined by budgets (spending causes taxes) while assessed values and tax rates are determined by a number of factors; but market values have a significant place in that mix.
I have, as a resident of Moultonborough, always opposed the "I should be able to vote here since I own property here but live elsewhere" attitude. To those who have argued strongly in that direction I have made two points. A) You bought here because you liked the water front, low taxes, or whatever, KNOWING it was going to be a vacation home and not your residence; voting here was NOT part of the P&S Agreement. That's part of the deal. B) They have the opportunity to become a resident if they are here enough of the time. Make one spouse a resident of your winter home and one spouse a resident of Moultonborough if it means that much to you. I know of many that have done just that. SB2 would help for those who live here, or have lived here and contributed for many years (decades for some) but now are retired and spend the colder months away and those who otherwise cannot make the day long effort (and frustration) of going to town/school meetings that are packed with town/school employees and all their relatives.
Establishing two tax rates will not solve the issue. The $685 saved by the (assumed) poorer group will not make that property owner stay, it will be other socio-economic factors if at all that makes him/her stay or leave. Nor will the $144 be punitive to the (assumed) wealthier group. What this WILL do is create a wider division of the two groups than exists today.
Markets will determine what properties values are, whether buying or selling, and at all levels. I have been to P-town and I have no inclination to return. Residential, commercial and rental buildings are shoulder to shoulder and many in poorer shape than they should be. The shops sell nothing more than one can find a lot closer to home and the water views, although nice to look at (as one peeks between the crowds and the jammed together buildings) are really saved for those who have built advantageously at great expense. I also recall an attitude from many of the residents (assumed, as they were selling their wares and driving the busses etc) didn't really want you there.
As for Moultonborough, the comparisons between us and P-town are limited to financial issues like low tax rates that attract buyers for waterfront homes and pay 75% (or in their case 80%) of the year rounder's tax bill. There are a lot of other contributing factors that influence one's want to own (at any level) and spend time in P-town that don't compare to Moultonborough.
Markets in change are always a source of pain. But Markets will settle the issue and drive the economy in various directions. Governments have never been able to change market trends by the wide spread implementation of socially driven laws and tax rates.