Ask the Assessor

“Why do I have to wait until late December to find out my new property valuation and the new property tax rate?”

Since the town’s fiscal year begins on July 1st, you might think that should be the time for you to know your new valuation and for the town to have a new property tax rate.  However, there are some very important financial data that will not be known for a few months until after the old fiscal year ends on June 30th.

First, the state legislature and the governor have to approve a budget for the new fiscal year that includes the amounts of state aid the town will be receiving.  Rarely in the last decade has the legislature sent a budget to the governor before June 30.  State aid reduces the amount of town spending being raised through property taxes.

Second, the town has to close its financial books for the just-ended fiscal year.  Until that process is completed, municipalities will not know the amount of funds that were budgeted but not spent and the amount fees that came in higher than anticipated during that just-ended fiscal year. 

Those two amounts are the chief components of what – in government financial-speak – is called “free cash.”  Not only does the town calculate it, but the Massachusetts Department of Revenue has to certify it.

“Free cash”  is usually allocated at a fall Town Meeting.  Municipalities usually put some of it away in their equivalent of savings accounts and use some of it to purchase expensive “capital” equipment or pay for expensive, one-time projects with it.  Knowing the amount of “free cash” and how it is being used is a necessary part of the annual budget process.

Towns may also spend money at their fall Town Meetings by “appropriating” or “raising” the funds through taxation.  When this happens, the total amount spent is added to the amount of the spending from the spring Annual Town Meeting in order to finish calculating the total town budget being raised through property taxes.

That sum – the total amount being raised through property taxes – is one-half of the calculation needed to set a new tax rate.  The other half – the total value of property in the town is calculated by the Assessor’s Office.   And, we can’t start to finish those calculations until after June 30th.

The end of June is the deadline we have for capturing “new growth” – another government financial-speak term which means the value of any new property built or added since June 30th of the previous year.  It’s an important number to have because the tax revenue from that growth can be spent outside of the 2.5% tax levy limit increase imposed by Proposition 2 ½.

The Massachusetts Department of Revenue (DOR) also certifies the total valuation and the amount of new growth, not to mention the tax rate.

Once you know the total amount to be raised through property taxes – known as the “tax levy” – and you know the total assessed valuation of all property in town, you simply divide the levy by the total valuation to calculate the property tax rate.

It usually takes until late November – or even early December – to get all the financial pieces in place.  By then, it’s time to print and mail property tax bills for the third and fourth quarters of the fiscal year (the first and second quarters of the new calendar year).

This year, in late October, the DOR certified the town’s total property value at $3,732,307,930.  The day before Thanksgiving, it certified the new tax rate at $15.06 per thousand dollars of valuation.

Next Month: “Why do I only have one month’s time to ask for an abatement on my property value?”

Kevin Rudden

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