The average Peabody homeowner can expect to see a $95 increase in his or her tax bill under the new tax rates approved by the City Council Tuesday night. Meanwhile, the average commercial property owner can expect an increase of $743.
That's a 2.8 percent hike for residential and 2.4 percent for commercial, which translates into an average residential tax bill of $3,473 versus an average commercial bill of $32,098.
"I think this tax classification is mindful of the [economic] situation that's out there," said Mayor Ted Bettencourt.
"We're in some difficult financial times...people are struggling," he said, adding that at the time same time, the city needs to maintain services and be in good shape to take on some major capital projects on the horizon, such as a new middle school.
Additionally, the city will realize significant savings in the future under the health insurance deal with the city's unions, but that largely won't be reflected until next year's budget.
"Of course no one wants to raise taxes, but I think it will be balanced," Bettencourt said. "I think we've done something mindful of our seniors, people on fixed incomes and our business community."
Under the new rates, about 30 percent of homeowners will see a tax increase of only up to $50 -- 29 percent are actually guaranteed a decrease -- and overall 66 percent of residential taxpayers will be faced with a hike of $100 or less, according to a breakdown by city finance officials.
On the other side, about 50 percent of businesses are guaranteed a decrease while 15 percent will see an increase between $0 and $100.
The new residential rate of $11.98 per thousand of valuation coincides with the average single-family home valued at $307,200, as of Jan. 1, 2012, while the average owner-occupied home is at $289,900. Property values in both cases increased slightly over the year before.
City finance officials use the second value above in declaring an average increase of $95. That category includes one-, two- and three-family homes along with condos.
They also acknowledge the average figures for commercial, industrial and personal property (CIP) are skewed by the Northshore Mall and other larger commercial properties in Peabody and do not necessarily reflect the value of the city's smaller shops and stores. The average bill of $32,098 reflects an average value of $1.36 million at a rate now of $23.57 per thousand.
Finance officials asked the City Council to approve the shift in the tax burden so that commercial and industrial properties pick up 14 percent more of the levy and homeowners see a corresponding reduction. The split tax rate is allowed under state law, and generally speaking, only cities and towns with larger business communities utlitize the measure.
The council voted 9-2 in approving the new rates with Rico Mello lodging his time-honored vote against raising taxes -- he has also never supported a city budget -- and Anne Manning-Martin expressing dismay in what she considered an old and outdated formula.
Manning-Martin said she was hoping Bettencourt would have taken a fresh look at taxation and considered more options, particularly using city reserves more liberally to reduce the overall tax burden for both homeowners and businesses, than continuing the trend of moderate increases taxpayers have seen in recent years.
Bettencourt noted that with the middle school project, payments for the new regional vocational school and other capital efforts on the horizon, the city will need its reserves to maintain its high bond rating and borrow money at a favorable rate for those projects.
The lone resident to speak during Tuesday's hearing was Russ Donovan, once again reminding councilors retirees that such as himself live on fixed incomes and don't have the luxury of having their homes valued based on their income year-to-year as a business would.
Donovan said that by his analysis, the brunt of the tax increase falls on single-family homeowners and the mall, while everyone else gets a tax cut.
"As a homeowner, I'm getting tired of being taxed to death in Peabody or any city," he said. He'd rather see the city increase the tax shift further onto commercial properties.
In general, the tax increase covers a 1.8 percent larger city budget, and with a marginal increase in state aid and other local revenues relatively stagnant, the burden is again on taxpayers to make up the difference.
Councilors also approved Bettencourt's request Tuesday night to use $1 million from free cash to offset the tax burden, which would otherwise have saddled taxpayers with another $40 approximately on average.
Bettencourt told reporters earlier on Tuesday he felt comfortable using reserves because $1 million that was used for a similar purpose last year had been restored to the reserve account and he is ever "mindful that people are still struggling" financially.
A larger hike is also offset by about $1.1 million in new tax growth, 54 percent of which comes from commercial activity. Chief Assessor Fred Martini said much of that is reflected by growth at the Northshore Mall and along Route 114. The new growth also reflects the 10-year re-valuation of all city properties.
Finance officials said the slight uptick in value of residential properties is primarily due to the full re-valuation conducted this past year. The comprehensive survey of all properties in Peabody is required under state law every 10 years and generally captures home improvements and similar projects that may not have made it into city records.
All that being said, the city is still taxing well below its means and could levy another $6 million for the budget without ever having to worry about Proposition 2-1/2 limitations.
As a direct result, Peabody continued to have the third lowest average residential tax bill in Essex County last year and city officials expect that to continue into 2013.
"I take significant pride that of thirty-three communities in Essex County, Peabody is third from the bottom," Bettencourt said. "I intend to keep this city at the bottom of that list."
Fiscal Year Average Home Value Tax Rate Average Tax Bill 2008 $340,200 8.67 $2,949.53 2009 $323,800 9.30 $3,011.34 2010 $296,300 10.50 $3,111 2011 $285,700 11.58 $3,308.41 2012 $285,800 11.82 $3,378.16 2013 $289,900 11.98 $3,473