Why are Acton's property taxes so high? (Part 6 - Conclusion)

Thu, 2014-05-15

This was a fantastic series of articles. I asked a simple question and got many different perspectives in the answers received. I hope readers found it educational to hear what some of our current and former leaders had to say about Acton's property taxes.

As I thought about the question and how I would answer it, I've come up with a new idea for how we can analyze information when trying to answer questions like this. That will be done below. But before I delve into this, let me first thank our responders.

We asked four current and former leaders for their response, as well as two of Acton Forum's editors. We heard back from current Board of Selectmen Chair Janet Adachi, and former member Peter Ashton. We did not receive responses from Finance Committee Chair Pat Clifford or Acton-Boxborough Regional School Committee Chair Maria Neyland. We also got responses from Acton Forum editors Clint Seward and Charlie Kadlec. Links to all of their responses can be found at the end of this article. THANK YOU to all who participated. For those town leaders who chose not to respond, they are welcomed to submit their articles anytime for publication.

[NOTE: A response from FinCom Chair Pat Clifford appends this article. See http://www.actonforum.com/story/why-are-actons-property-taxes-so-high-pa... .]

So the question I asked was this: Why are Acton's property taxes so high?

This is a loaded question. There is an assumption within it that assumes they are high. Are they?

Peter Ashton (Part 4) does not think they are. But Ashton confuses cost with value. He argues that Acton's taxes are not too high because people are willing to pay them and we have a great school system into which we pour a lot of money. All that is true, but it is twisting the question. As an analogy, if I asked "Why are BMW cars so expensive" the answer is not "because people like the quality and they willingly buy them." The reason is that the parts cost more, they spend more time to make them, there is more engineering involved, etc.

Of course, if the cost of a BMW were the same as a Kia, we would not be asking the question. And Acton's taxes, by most measures, rank in the top 20 of cities and towns across the state.

In other words, my question wasn't about value. I didn't ask "Are Acton's high taxes worth it?" That is a different question with different answers.

So let me tackle my own question in two parts. Are the taxes high, and if so, why? This will be my usual lengthy article, but I hope you will bear with me because this first part is something new that may prove to be quite useful for future readers when a similar analysis is required.

Are Acton's property taxes high?

The answer is yes, and I hope to prove it.

I am going to use some statistical information from the Department of Revenue (DOR) which compiles census, financial, and tax information on all cities and towns in the Commonwealth.

Having high taxes can only be answered in comparison to other towns. We know Acton has high taxes in the state, but comparing us to poor communities isn't helpful. We need to define a peer group and then look at our tax burden in relationship to that group. This is easier said than done.

For years, town leaders have been trying to determine what towns Acton should compare itself to. Do we look at similarly sized communities? Ones with regional school systems? Proximity to Boston? Population? Income? Tax Rate? Average tax bill? You see the problem. Every group of towns chosen could be skewed, perhaps unintentionally, by the one choosing the peer group. There is no consensus on how this should be done but it is critical to answering this question.

I recall years ago the municipal staff were arguing for higher wages and they produced data showing they were underpaid. Their comparable communities included cities like Newton and Brookline. In other instances, I have seen us compared to towns like Maynard (a neighbor) or Easton (size and demographics similar to ours.) In the past, this has all been guesswork. At one point, there was even an "official list" that someone generated, but that was also without a firm foundation.

I believe the solution to this is question-specific. When asking about property taxes, one should compare Acton to communities that have similar property taxes. In this case, the metric that will be used is the property tax on the "Average Single Family" (ASF) home, which is a statistic measured by the state for all cities and towns. The data is available at the Dept. of Revenue website. I have downloaded the 2014 data in full (but will be using a subset as shown below). If you want to look at the raw data and do your own analysis, here is the file: http://actonforum.com/sites/default/files/2014_Acton_Comparative_Report.xls

There are other metrics besides the actual average property tax bill, but most people think of taxes in terms of what their annual tax bill is. They don't care so much about the tax rate (about $19.72 in Acton) or the average value of the home (about $505,000 in Acton). Personally, I think all of these factors are important and all could be used, but we will settle on the average tax bill for this discussion.

MAKING ACTON'S PROPERTY TAX THE MEDIAN OF ITS PEER GROUP

So how do we find Acton's comparable towns? The answer is we calculate Acton's rank from highest to lowest on the metric of the average single-family (ASF) tax bill. For all cities and towns across the state, Acton's ASF tax bill is 16th highest. And then we double the number of towns for our representative sample. Acton's property tax then becomes the median of this new group, and we can compare other factors to make a determination if our taxes are "high" or "low" relative to this similar peer group.

This is an important concept to understand, so let me make sure you are all with me on it. By making Acton's ASF tax bill the median, we essentially take this factor out of the equation. In this grouping of 32 towns, the number of tax bills higher than Acton equals the number that are lower. Therefore Acton's tax bill itself is no longer a factor. We can look at other data points to see how Acton differs in this group once the tax bill data has been equalized.

So the top 32 town file is here, ranked from highest to lowest in Average Single Family Tax Bill: http://actonforum.com/sites/default/files/2014_Acton_Top_32.xls

As promised above, Acton is #16, at $9,832 (see column 5 for bills and column 6 for rank which is in orange). A median is a type of average that doesn't get skewed by high or low numbers at either end of the scale (the average tax in this group is $10,487). Remember that these ranks are for all 351 cities and towns, although we are only showing the top 32. So unlike other metrics we will examine, the ranking of 351 cities and towns is exactly the same as the ranking for the top 32 on this metric.

Now we can look at other factors because Acton's property tax is average. How does Acton compare in other measurements like income and wealth? And if Acton is not average in these other areas, but average in tax bill, then we can draw conclusions about these other factors among our peers.

INCOME PER CAPITA

Income per capita (per person) is shown in column 7. The rank for all 351 cities and towns is in column 8, but the rank for the top 32 (by tax bill) is in column 9 (green).

Of all 351 cities and towns, Acton is 41st from the top in income per capita. We are almost in the top 10%. But when compared to our new peer group, Acton is 31st out of 32, in the bottom 10%, almost dead last. Our income per capita is very low, almost $30,000 less than Southborough's, which is the median on this metric. (You can see Southboro if you scroll down to row 29. It's median income per capita is $84,930.)

So if we are median in tax bill but near last in income, then our tax bill is high relative to our ability to pay.

Southboro, the median income per capita, has an ASF tax bill of $8,675, or $1,150 less per year than Acton's.

EQV PER CAPITA

EQV, or Equalized Valuations, is another measure of town wealth. It looks at the value of all properties in a town, commercial and residential. It then divides it by the population to get a "per capita" valuation. The three EQV columns are 10, 11, and 12. 10 shows the values, 11 shows the rank for all 351 cities and towns, and 12 (blue) shows the rank in the top 32 towns by tax bill.

By this measure, Acton is not as wealthy as many other towns. Out of the entire state, Acton ranks 110th in EQV. But in the top 32 by tax bill, we are at 28th, which is in the bottom 20%, fifth from the bottom. Our per-capita EQV is $60,000 less than Norwell, the median. So based on this yardstick, we have less wealth "per capita" than average.

Residents of Norwell, which has the median in EQV, pay on average $1,000 less per year than Actonians on their tax bill.

TAX LEVY AS PERCENT OF TOTAL INCOME

Thanks to Charlie Kadlec, I have one additional measurement to show, which is presented in a similar fashion as the previous data. It is on a different Excel worksheet in the same file. Click on the tab on the bottom of the Excel spreadsheet labeled "CK 5-14-14" to see this data.

"Income per capita" is the measurement the state uses, but how many people are in each household? This is a variable that we don't have an answer to. So to try to get some measure of total income compared to the residential tax rate, Charlie has pulled out some additional numbers from the DOR data, including population and the total money raised by residential property taxes for each town.

Here we have columns 8, 9, and 10 in yellow. Charlie has taken the per-capita income and multiplied it by the total population, to get the total income for each town in the top 32. Acton's total income is $1.2 billion.

Then we look at the total residential tax levy. This is the total amount of money raised from residential property taxes in Acton. This is shown in column 31, which is in purple. Acton's total residential property tax income is $63.1 million.

This means that 5% of our $1.2 billion in total income goes to pay for our residential taxes. This is in the top 7%, the second-highest in the group of 32, just below Sharon which is number one in this metric. So compared to its peers, Actonians pay a much higher percentage of their income in residential property taxes.

The median in this group is Hopkinton, which pays 3.68% of its total income for residential taxes. Acton residents pay 5% of their income, or 1.3% more of its total income.

Acton's ASF tax bill is $1,300 a year more than Hopkinton's.

For an additional metric showing Acton's high property tax, which looks at the average household income versus the average property tax bill, see http://www.actonforum.com/blogs/allenn/acton-ranks-1-thats-not-good-news.

SUMMARY

So when we equalize for the ASF tax bill, Acton's per-capita income is much lower than its peer group, so we make less money. Acton's per-capita EQV is also much lower, so we have less wealth. And Acton residents pays a higher percentage of their total income in property taxes.

Moreover, at the median of each metric, our tax bills would be $1,000 - $1,300 a year less than what they are now. This implies that we are being overtaxed each year by something in this range.

Therefore Acton's property taxes are high.

WHY ARE THEY SO HIGH?

I will break this article here because of length and continue in Part B.

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To read Part One (introduction): http://www.actonforum.com/blogs/allenn/acton-forum-launch-debate-propert...

To read Part Two (Clint Seward): http://www.actonforum.com/story/why-are-actons-property-taxes-so-high-pa...

To read Part Three (Janet Adachi): http://www.actonforum.com/story/why-are-actons-property-taxes-so-high-pa...

To read Part Four (Peter Ashton): http://www.actonforum.com/story/why-are-actons-property-taxes-so-high-pa...

To read Part Five (Charlie Kadlec): http://www.actonforum.com/story/why-are-actons-property-taxes-so-high-pa...

FOR A FOLLOW UP ARTICLE ON HOW HIGH OUR TAXES ARE, SEE http://www.actonforum.com/blogs/allenn/acton-ranks-1-thats-not-good-news

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Comments

Pat Clifford Responds

Hello, Allen,

As you probably know, the Finance Committee discussed your request. Their unanimous guidance, with which I concur, is to decline the opportunity to participate in this Acton Forum exercise.

There are two primary reasons for this decision. First, it has been the Committee’s practice for the past decade to speak with a single voice whether we are offering information about positions we formulate or responding to requests from officially sanctioned committees, task forces or other government related organizations. This practice insures maximum impact and clarity.

Second, as a Committee, we choose to deal in fact based decision making incorporating research and deliberation. Whatever we have to say, we say it in an open process that allows a full dialogue where misperceptions can be clarified. It is not our desire or intent to engage in speculation that could potentially be misunderstood.

You will be interested to know that at last Tuesday’s Finance Committee meeting we discussed an evaluation of our outreach objectives and strategies as part of our FY15 Work Plan. The conversation will be ongoing and you will hear more about our thoughts in the weeks ahead.

We appreciate your consideration,

Pat Clifford, outgoing Chair
Acton Finance Committee

Allen Nitschelm has lived in Acton since 1998 and writes about fiscal issues at the
local and state level. He is a former member of the town's Finance Committee
and publisher of the Acton Forum.