METHUEN — Residents and business owners will ring in the new year with higher property taxes. Exactly how much more will be determined by the City Council as early as Wednesday.
Starting Jan. 1, the average single-family homeowner can expect their annual tax bill to increase $137, under one proposal by Mayor Stephen Zanni and City Auditor Thomas Kelly.
But a group of city councilors has asked the mayor to come up with an alternate plan that will result in a $100 average residential tax hike — the amount Zanni originally projected when the council voted on the budget in June.
“We just want to see where the cuts would be made to get us closer to $100,” said Councilor Jamie Atkinson, who serves as chairman of the Methuen Finance Committee. “Give us an option.”
The Finance Committee, which is made up of Atkinson and councilors Lisa Ferry and Joyce Campagnone, met with Kelly last week and voted unanimously to request the alternate $100 proposal from the mayor.
Zanni told The Eagle-Tribune that such a proposal will require $700,000 in budget cuts.
“In order to look at $100, you’d have to make additional cuts,” said Zanni. “It’s up to (the council) if they want to cut police and fire and other departments to get it down.”
The council will set tax rates for residential and commercial property owners at an upcoming public hearing. The tax rates are for the current fiscal year ending June 30. The first bills to reflect the new rates will be mailed Jan. 1.
The average single-family homeowner paid $3,666 in property taxes in 2013 on a home assessed at $254,170 — a year-to-year tax increase of $163 that followed a $134 hike the year before that.
Under the city’s latest property assessments, the average single-family home value rose .6 percent to $255,624.
The city currently taxes $14.42 for every $1,000 of assessed value on residential properties and $23.98 per $1,000 on commercial properties. In all, 84 percent of Methuen’s tax base comes from residential properties.
The average commercial property owner paid $9,326 in property taxes this year, a $365 increase from 2012.
The council was originally scheduled to set the tax rates tomorrow night, but the public hearing was cancelled because the state Department of Revenue has not yet certified the city’s numbers for new real estate growth and property valuations.
The public hearing will be rescheduled once the numbers are certified and will be held no earlier than Wednesday.
When the operating budget was approved in June, Zanni anticipated a roughly $100 increase to the average single-family homeowner’s annual property tax bill. Kelly said he originally anticipated a $125 average increase.
But that estimate rose to $194 when state aid to the city came in $1 million lower than prior estimates. To reduce the $194 hike down to $137, Kelly is proposing the use of $250,000 in free cash along with a number of other budget transfers.
In the past, both Kelly and Zanni have urged councilors against tapping into reserves, which the city will rely on heavily in the coming years to finance the ongoing Methuen High School renovation and expansion project.
Using reserves to cover operating expenses also raises the risk of negatively impact the city’s bond rating.
The city currently has $2,156,819 in cash reserves, with an additional $550,000 expected by year end. The reserves are made up of the stabilization fund and general fund, which is also often referred to as free cash.
There is currently $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. The city also has $1,255,673 in free cash, Kelly said.
“The budget itself is in good shape,” said Kelly. “There’s some moves that have to be made.”
The City Council voted 7-2 in June to approve a $145,225,694 operating budget. Councilors cut just $189,848 — or .13 percent — from Zanni’s original budget proposal.
Zanni’s budget proposal represented a 5 percent or $6.5 million increase from the previous budget. Included in the budget is $1.8 million in municipal employee raises, which the mayor negotiated and the City Council approved last year.
Methuen’s biggest budgets went untouched by the council. Among them: $73.5 million in spending for the Methuen Public Schools and Zanni’s requests for the Police ($10.7 million), Fire ($9.1 million) and Public Works ($5.2 million) departments.
Voting against the approved budget were councilors Jeanne Pappalardo and Ron Marsan.