April 2, 2018

Worcester, Sutton reap what they sow

In Worcester, the tax rate for commercial and industrial properties is $34.03 per $1,000 of valuation. In Sutton, the tax rate for all properties is $16.55.

Last November, the Sutton board of selectmen unanimously voted to keep the tax the same for residential and industrial properties, even though Massachusetts has allowed communities since 1984 to split rates for residential and commercial & industrial properties. While Sutton could have split and saved homeowners an average of $476 off their 2018 tax bill, that residential decrease would have meant a corollary jump for business properties of $2,895. The final unified rate they settled for was a 0.3-percent increase from the year before.

Last December, the Worcester city council decided to increase the gap between what residential and business property owners pay under the split tax rate. From 2011 to 2014, the council had followed the advice of the Worcester Regional Chamber of Commerce and narrowed the gap, with the goal of eventually dropping the split tax rate. For the last three years – despite the urging of the chamber and a Worcester Regional Research Bureau report showing the split rate is bad financial policy – the council increased the gap between business and residential property owners. The commercial tax rate the council set of $34.03 is a 3.3-percent increase from last year, while the residential rate of $18.91 was a 1.6-percent decrease.

Worcester manufacturer Primetals Technologies announced last week it will leave the city it has called home for 100 years to occupy a $28-million facility in Sutton. Now, the reasons for the move are many: Primetals wanting to consolidate its production, research & development, engineering and sales operations into one building; the company moving about 65 of its 340 jobs to Ohio; and Sutton giving the company a 67-percent reduction in its property tax bill through a 15-year tax-increment-financing agreement.

Before settling on Sutton, Primetals said it looked at multiple properties in Worcester and other communities in its two-year search for just the right fit. When comparing all those properties before making its final decision, the company would have factored in the increased tax expense in Worcester, which limits its ability to maximize its margin, compensate its employees and remain financially flexible in a changing global marketplace.

No doubt Worcester has a lot going for it, and that is not just new restaurants and its emergence as a regional cultural hub. The city has a chamber and a city manager determined to attract businesses; nine colleges adding a layer of innovation and a highly educated workforce; an entrepreneurial immigrant community; and positive momentum driving an economic revitalization. But the split tax rate remains a significant stumbling block. The more Worcester's commercial base relocates outside the city, the more pressure put on existing commercial & industrial property owners. This cycle will perpetuate itself until the city council follows Sutton's lead and heads toward a unified tax rate.


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