EagleTribune.com, North Andover, MA

December 17, 2013

Average tax hike $136 for Methuen homeowners

By Brian Messenger
bmessenger@eagletribune.com

---- — METHUEN — The average single-family homeowner will pay $136 more in property taxes under the tax plan approved last night by the City Council. The average commercial property owner will pay $268 more.

Councilors voted 5-4 to adjust the operating budget and approve the tax rates proposed by Mayor Stephen Zanni. In June, when councilors passed the budget, Zanni anticipated an average residential tax hike of $100.

The approved plan pulls $255,000 in free cash to cover operating expenses. But councilors last night chose against raiding the stabilization fund to defray the tax increases.

The first bills to reflect new tax rates will be mailed Jan. 1. The average single-family homeowner in Methuen will now pay $3,802 annually in property taxes. The $136 hike means taxes have gone up a collective $433 over the last three years for the owner of a home valued at $255,624 — the average value under the city’s latest property assessments.

The average commercial property owner will now pay $9,648 in annual property taxes — up from $9,380.

Under the new rates, the city will tax $14.85 for every $1,000 of assessed value on residential properties, up from $14.40. Commercial property owners will be taxed $24.81 per $1,000 of value, up from $24.12.

In all, 84 percent of Methuen’s tax base comes from residential properties.

Voting against the budget adjustments and tax rates were Councilors Jennifer Kannan, Michael Condon, Ron Marsan and Jeanne Pappalardo. Marsan and Pappalardo have pledged not to raise property taxes.

“I am still getting calls,” said Pappalardo. “The citizens are fed up with high taxes being raised every single solitary year.”

Kannan said she supported the use of the stabilization fund to defray the impact on taxpayers.

“It’s there for us to use,” said Kannan. “This will protect the taxpayers. ... If we can soften the blow, I’m for it.”

A $200,000 transfer from the stabilization fund into the operating budget would have reduced the average annual residential tax increase from $136 to $125. Similarly, a $400,000 transfer would have decreased the average tax hike to $114.

The city has $2,156,819 in cash reserves, with an additional $550,000 expected by year’s end. The reserves are made up of the stabilization fund and general fund, which is also often referred to as free cash.

There is $901,146 in the stabilization fund, which will continue to grow this year with additional meals tax revenue. The city already collected $189,000 from the local meals tax during the first quarter and anticipates $550,000 more by the close of the fiscal year, bringing the stabilization fund to $1.5 million. The city also has $1,255,673 in free cash.

The council approved the local meals tax last year. Patrons of Methuen restaurants, eateries and coffee shops now pay a .75 percent local surcharge in addition to a pre-existing 6.25 percent state sales tax on meals.

Both the mayor and City Auditor Thomas Kelly urged councilors not to tap into the stabilization fund.

Though councilors did not tap into the fund last year, in 2011 the previous council used $1.4 million in free cash and stabilization money to reduce tax increases.

“It’s been hit every year and if it continues like that, we’re going to get to a point where we shouldn’t be,” said Kelly, who has built a financing model for the Methuen High School renovation that relies heavily on the stabilization fund.

Zanni warned councilors that using the stabilization fund for operating expenses will negatively impact the city’s bond rating, increasing the cost of borrowing money. “I don’t think it’s a wise idea,” said Zanni.

Zanni also said Andover, North Andover and Haverhill all have higher taxes than Methuen.

The tax rate vote came five days later than anticipated. The council was expected to set tax rates last Wednesday night, but an unintentional vote by Councilor Joyce Campagnone cut the meeting short.

A motion to adjust the $145 million operating budget — which was supposed to be a precursor to a second vote on tax rates — was defeated, 5-4. After the tally, Campagnone said she mistakenly voted in the majority.