METHUEN — The state said Methuen put too much tax burden on businesses, and as a result residents are slated to pay even more of a tax increase — $40 more on average — than was expected.
The City Council approved new tax rates on Dec. 7, but Mayor William Manzi is now recommending that councilors approve tax rates of $12 per $1,000 of property valuation for residents and $22.18 per $1,000 of valuation for businesses. The council had approved a residential rate of $11.86 per $1,000 of valuation, and a commercial rate of $22.99 per $1,000 of valuation.
"I think that, depending which side of the fence you sit on, some people would say they like it," Manzi said. "I think most residential folks would say they don't."
This is happening because the state Department of Revenue said the city was going to place too much burden on businesses with the tax rates that were initially approved, so city officials have to increase the amount that residents will pay, municipal appraiser John Cena said.
"They saw that that factor could not be used because residential values have dropped significantly from the previous year and so Massachusetts state law prohibits you from unequally distributing the burden from the levy to all classes," Cena said.
While commercial property values dropped, they didn't drop as much as residential values dropped, Cena said.
"I don't think anybody realized the drop of commercial value would not affect the split that much," he said.
Robert Bliss, spokesman for the Department of Revenue, said "at least a handful of communities" have run into this problem.
If councilors approve the new tax rates, the average residential taxpayer with a home worth $281,335 will see their real estate tax bill increase by $128 for a total annual bill of $3,376, according to Cena.
Last fiscal year, the average home in the city was worth $300,473. Residents paid a tax rate of 10.81 per $1,000 of valuation and the average yearly bill was $3,248, according to City Auditor Thomas Kelly.
If city councilors approve the new tax rates, this year's average residential tax increase will be $40 more than the $88 increase that officials said residents would pay with the rates that councilors approved Dec. 7.
The average business worth $397,600 this year would pay an annual tax bill of $8,818 with the new rate, an increase of $288. They would have seen an increase of $609 under the higher rate that councilors approved.
The average business was worth $410,700 last fiscal year and paid a tax rate of $20.77 per $1,000 of valuation for a total annual bill of $8,530.
The city will not collect any extra tax revenue because of the revised tax rates, Cena and Manzi asserted.
Councilors are scheduled to vote on the new tax rates at their meeting on Monday night at 7 in the Great Hall of City Hall.
"In these economic times when people are having a hard time making ends meet, I think we need to keep it (the tax rate) the same," said council Chairwoman Deborah Quinn.
Councilor Jeanne Pappalardo, the only councilor to vote against the tax rates the first time around, said she'll vote against the new rates as well.
"People have lost jobs," she said.
Pappalardo said the city should cut funding for consultants and stipends, cap longevity pay and reduce the number of vehicles that workers take home.
Tax bills will go out according to schedule if councilors approve the new rates on Monday, Manzi said.