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Dual tax rate hurts Worcester.

Byline: Timothy P. Murray

When the business tax rate goes down, many think that this transfers a portion of the business community's tax liability to residents. Quite the contrary: For 29 years in Worcester, businesses have shouldered a large portion of the residential tax burden.

In fact, since Worcester adopted a dual rate in 1984, a total of $601 million has been shifted from residential property owners to business property owners. That shift has resulted in a 7 percent erosion of the business tax base.

In today's dollars, that equates to a loss of $210 million in business property valuations, which amounts to a loss of $6.5 million in tax revenue from the business community and an increased burden for all remaining property owners -- both business and residential.

Even with a split rate that shifts the burden to the business community, residents are now responsible for an additional $3.9 million of the levy.

Let's take the example of Worcester Restaurant Group, a local employer with 300 full-time staff and three popular restaurants -- the Sole Proprietor, One Eleven Chophouse, and Via Italian Table.

According to owner Robb Ahlquist, it used to be that Worcester's higher tax rate was offset by the presence of a strong business community that fills tables during the day and after hours.

As the Route 9 corridor pushes its way toward Worcester, those advantages have all but disappeared.

Mr. Ahlquist has run the numbers. If the company were to locate a new restaurant in the area east of Worcester, the tax savings alone would be significant.

In Westboro, the tax rate would save them $300,000; in Northboro, the savings jumps to $400,000; and just over the border in Shrewsbury, the annual property taxes would be an eye-popping $547,000 less than Worcester.

After the revaluation process a year and a half ago, Saint-Gobain saw its valuation increase more than 140 percent, with a corresponding rise in their tax bill from roughly $600,000 to $1.2 million.

Higher taxes, along with other recent significant increases in water and sewer bills combined with traditional high operating costs in Massachusetts -- such as unemployment, workers compensation, health care and snow removal -- reduce the amount of investment available for growing and improving the competitiveness of business.

The cost of doing business in Massachusetts is compared with other U.S. and global options. Continued increases in cost can limit additional investments in improving operations and growing good-paying manufacturing and technology jobs.

Higher property taxes dissuade businesses from choosing Worcester and, in fact, have been the reason that some have left.

The high rate also discourages business expansion, and can lead to a company's decision to reduce costs in other areas including payroll, personnel, infrastructure, and other investments that help to solidify their commitment to remain in a community.

Each year, the Worcester Regional Chamber of Commerce receives dozens of inquiries about business expansion and relocation. Worcester earns high marks on the quality of life, a trained and educated workforce, transportation, and infrastructure.

But for many companies, the high cost of property taxes is a deterrent.

We'd like to tell them that things are changing.

In Massachusetts, 241 municipalities tax both business and residential properties at a single rate, thereby sharing the tax burden equally. Of the nine communities that share a border with Worcester, only Auburn has a dual tax rate.

And the town of Auburn has made significant progress in its efforts to shift the levy back to a single rate. Over the last eight years, they have gone from a differential of 1.62 to 1.22. It's working: Their business tax base has grown, resulting in more property owners sharing the burden.

Worcester has the opportunity to create its own rising tide of both commercial and residential values to benefit the checkbooks of the entire community. Consumer spending and business development help to create a dynamic economic climate. Now it's up to the City Council to vote for a fair and equitable tax rate that truly does float all boats -- not just in the short term but for many years to come.

Timothy P. Murray is president and CEO of the Worcester Regional Chamber of Commerce.
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Title Annotation:Editorials
Author:Murray, Timothy P.
Publication:Telegram & Gazette (Worcester, MA)
Date:Dec 10, 2013
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