Medford Tax Classification Hearing FY 2024 Information

City of Medford Tax Classification Hearing Fiscal Year 2024 Ted Costigan, MPA, MAA Chief Assessor November 28, 2023

Purpose of the Hearing To adopt the City sTax Policy by allocating or classifying the tax levy among the property types

Action Required by the City Council 1. Vote for a single tax rate or maintainthe 175% shiftof the tax levy from the Residential class to the Commercial/Industrial and Personal Property classes 2. Vote whether to adopt aresidentialexemption 3. Vote whether to adopt a smallcommercial exemption

Property Assessment Review Arm s-length sales data from Calendar Year 2022 were used to establish the Fiscal Year 2024 Assessments MGL requires that Assessors value properties at a median assessment to sales (ASR) ratio of 90% to110% The Massachusetts Department of Revenue certified Medford s assessed values for real property and personal property on November 6, 2023

PropertyAssessmentReview(continued) Source: DLS LA15 Statistics

Property Assessment Review (continued) Percentage Change in Average Assessments by Property Type Property Type FY 23 Average FY 24 Average Percentage Change Single Family $718,458 $768,849 7.01% Condominium $519,120 $547,361 5.44% Two Family $865,750 $902,948 4.30% Three Family $987,872 $1,031,002 4.37% Commercial $1,609,262 $1,861,642 15.68% Apartments $6,030,522 $6,336,560 5.08% Industrial $1,688,567 $2,212,439 31.03% Personal Property $593,114 $659,244 11.15% *The percentage change is inclusive of new growth in each property type

FY 2024 Average Assessed Values in Surrounding Communities Municipality Single Family Condominiums Two Family Three Family Apartment Commercial Industrial Arlington $1,015,162 $599,859 $1,059,282 $1,124,170 $4,359,485 $1,280,371 $1,303,219 Cambridge $2,345,273 $910,418 $1,720,852 $2,005,419 $8,342,787 $14,998,507 $94,726,069 Everett $531,922 $332,744 $710,096 $853,662 $3,039,911 $1,938,512 $3,616,655 $768,849 Medford $547,361 $902,948 $1,031,002 $6,336,560 $1,861,642 $2,212,439 Somerville $1,074,198 $726,322 $1,109,398 $1,330,972 $3,657,866 $5,481,639 $4,820,694

Percent Change Fiscal Year 2023 to Fiscal Year 2024 of Assessed Values in Surrounding Communities Single Family Municipality Condominiums Two Family Three Family Apartment Commercial Industrial Arlington 11.26% 7.28% 4.58% 3.25% 9.31% 5.68% 7.73% Cambridge 8.55% 5.07% 6.73% 6.16% -0.05% 2.83% 7.97% Everett 5.65% 5.34% 5.69% 4.43% 23.28% 9.09% 3.47% Medford 7.01% 5.44% 4.30% 4.37% 5.07% 15.68% 31.02% Somerville 4.95% 1.92% 2.30% 0.09% 3.50% 23.10% 1.23%

New Growth New Growth is defined by the DOR as a dollar increase in the annual levy limit that reflects additions to the community s tax base since the last fiscal year New Growth was certified on November 6, 2023 at $245,417,840 in Assessed Value, or $2,852,160 in Tax Levy Growth (based on the FY23 tax rates) Residential new growth made up $1,325,341 while commercial, industrial and personal property new growth totaled $1,526,819

New Growth Property Class New Growth Valuation PY Tax Rate Tax Levy Growth SINGLE FAMILY (101) 36,399,800 CONDOMINIUM (102) 69,356,099 TWO & THREE FAMILY (104 & 105) 27,671,700 MULTI - FAMILY (111-125) 15,161,000 VACANT LAND (130-132 & 106) 4,209,700 ALL OTHERS (103, 109, 012-018) 420,300 TOTAL RESIDENTIAL 153,218,599 8.65 1,325,341 OPEN SPACE 0 OPEN SPACE - CHAPTER 61, 61A, 61B 0 TOTAL OPEN SPACE 0 COMMERCIAL 44,232,601 COMMERCIAL - CHAPTER 61, 61A, 61B 0 TOTAL COMMERCIAL 44,232,601 16.56 732,492 INDUSTRIAL 10,861,420 16.56 179,865 PERSONAL PROPERTY 37,105,220 16.56 614,462 TOTAL REAL & PERSONAL 245,417,840 2,852,160

New Growth Value Residential New Growth Value CIP New Growth Value $250,000,000.00 $200,000,000.00 $150,000,000.00 $100,000,000.00 $50,000,000.00 $- 2019 2020 2021 2022 2023 2024

Fiscal 2024 Value by Class Value Percentages Fiscal 2024 Class Value % of Value 1.76% 1.24% Residential $13,270,196,007 89.00% 8.00% Commercial $1,192,206,653 8.00% 89.00% Industrial $185,844,900 1.24% Personal Property $262,379,180 1.76% Residential Commercial Industrial Personal Property Total Value $14,910,626,740 100.00%

How the Tax Rate is Calculated* FY2024 Property Tax Levy ______________________ $139,985,669 ______________ =0.009388 FY2024 City Taxable Valuation $14,910,626,740 $9.39 per thousand dollars of assessed value if a uniform rate is selected The Full Shift of 175% will yield a $8.52 residential tax rate and a $16.43 Commercial/Industrial/Personal Property Tax Rate *All rates are estimates until Medford receives DOR approval for FY24

Historical Percent of Levy by Class Fiscal Year Residential Percentage of Levy CIP Percentage of Levy 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 79.27 78.95 80.01 80.68 81.52 81.98 81.64 82.16 82.05 80.75 20.73 21.05 19.99 19.32 18.48 18.02 18.36 17.84 17.95 19.25

Selection of Minimum Residential Factor A residential factor of 1 will result in the taxation of all property at the same rate (single tax rate) A residential factor of less than 1 increases the share of the levy raised by Commercial, Industrial and Personal Property (CIP) owners and reduces the share paid by residential property owners (split tax rate) The minimum residential factor for the City of Medford for Fiscal Year 2024 is .90729, as calculated by the Massachusetts Department of Revenue guidelines

Residential Factor/Split Rate* MGL Ch. 40 56 allows a shift of up to 1.75 of the tax burden between the classes of property Adoption of a Residential Factor(RF) of 1.0 results in a single tax rate Adoption of a RF of .90729 results in a maximum split tax rate The impact on the Property Class Rate is as follows: CIP Factor Residential CIP Residential Comm/Ind/PP 1.00 $9.39 $9.39 $124,584,212 $15,400,810 1.50 $8.81 $14.08 $116,883,807 $23,101,215 1.75 $8.52 $16.43 $113,033,604 $26,951,418 *All rates are estimates until Medford receives DOR approval for FY24

FY 24 Average Property Tax Bill Examples Single Tax Rate: Avg. Single Family House Value = $768,849 x $9.39/1000 = $7,219 Avg. Commercial Value = $1,861,642 x $9.39/1000 = $17,481 Tax Bill Split Rate with CIP 150%: Avg. Single Family House Value = $768,849 x $8.81/1000 = $6,774 Avg. Commercial Value = $1,861,642 x $14.08/1000 = $26,212 Tax Bill Split Rate with CIP 175%: Avg. Single Family House Value = $768,849 x $8.52/1000 = $6,551 Avg. Commercial Value = $1,861,642 x $16.43/1000 = $30,587 Tax Bill *Average Tax Bills are rounded **All rates are estimated until Medford receives DOR approval for FY24

Historical Recap of Average Single-Family Tax Bill Percentage Value Change YOY Average Single Family Tax Bill (Split Rate: CIP 175%) Average Single- Family Value Fiscal Year $ Change YOY % Change YOY 2015 2016 2017 2018 2019 2020 2021 $394,473 7.68% $4,615 $127 2.83% $424,189 7.53% $4,747 $132 2.86% $475,910 12.19% $5,026 $279 5.88% $508,238 6.79% $5,204 $178 3.54% $565,215 11.21% $5,426 $222 4.27% $615,010 8.81% $5,646 $220 4.05% $612,965 -0.33% $5,768 $122 2.16% 2022 $654,409 6.76% $5,903 $135 2.34% 2023 $718,458 9.79% $6,215 $312 5.29% 2024 $768,849 7.01% $6,551 $336 5.41%

This option must be established early in the fiscal year so that residents can apply prior to the setting of the tax rate Residential Exemption Must be owner-occupied, primary residence to qualify and must apply with an application The reduced value remains within the residential levy percent resulting in a higher residential tax rate Residential properties above the breakeven would see an increase in property taxes Using FY23 calculations and assumptions: The 35% Exemption had a breakeven of approximately $936,000 18 of 351 communities adopt a residential exemption: Barnstable, Boston, Brookline, Cambridge, Concord, Chelsea, Everett, Malden, Mashpee, Nantucket, Oak Bluffs, Provincetown, Somerville, Tisbury, Truro, Waltham, Watertown, Wellfleet

Granting a Small Commercial Exemption The City Council may adopt a small commercial exemption This exemption is for commercial parcels (property class three) occupied by businesses with an average annual employment of not more than (10) people during the previous calendar year and with assessed values of less than $1,000,000 The intent of the exemption is to give a tax reduction to small commercial property owners at the expense of the larger commercial and industrial parcels Council can choose an exemption that reduces the taxable valuation of each eligible parcel by a percentage of up to 10%

Classification Vote Summary 1. Selection of a Minimum Residential Factor A Factor of 1 yields a single rate and would result in a $9.39 rate A Factor of .90729 yields a split tax rate of $8.52 for residential and $16.43 for Commercial/Industrial/Personal Property 2. Vote on whether to adopt a Residential Exemption With a low number of non-owner-occupied properties, this shifts a portion of the residential levy from lower-valued residential properties to higher valued properties This decision must be made early in the fiscal year to allow for applications and tax rate setting 3. Vote on whether to adopt a Small Commercial Exemption This exemption is for commercial properties valued under $1 million and occupied by business(s) with less than ten employees This exemption benefits property owners, typically not small business tenants This shifts up to 10% of the value of those properties to other commercial and industrial properties This decision must be made early in the fiscal year to allow for applications and tax rate setting