The city council has been busy, busy, and it’s been hard to keep on top of everything! So, I am going to start with tax matters, and I’ll cover normal business in a separate post later. On Wednesday, 7 December, the Administration and Finance committee and the Committee of the Whole hosted a public hearing to discuss Tax Increment Financing (TIF) for the Lee Fort Terrace development. On Thursday, 8 December, the assessor’s office presented the data on the property rate tax levy, and the council voted to adopt the recommendations.
Tax Increment Financing (TIF)
Tax increment financing is an economic development tool that allows the cost of real estate improvements to be covered by the funds that would normally be spent on taxes. This is not a forever solution, as the name indicates, the developer does gradually pay taxes in part and ultimately in full. For this project, the proposal is a 15-year tax break on the increased property value, which would allow Beacon Communities to apply just under $3M to the Lee Fort development.
As the Salem News article points out, a lot of the public commentary was quite negative, with many of the comments focused on the Lee Fort project itself, and not the matter of the TIF. So, let’s spend a moment on what is happening at Lee Fort. Currently, Lee Fort has 50 one-bedroom units that are subsidized housing. The units are in a state of disrepair and in dire need of upgrading. The new development will have 124 units, and for the first 20 years, all of the units will be tied to project-based vouchers. This means that tenants who live in those units will pay 30% of their income. The units are not tied in any way to market-rates; they have nothing to do with area median income. One-hundred percent of the development…every single unit…is truly affordable housing. If a tenant moves, the unit will still be restricted; the voucher does not leave with the tenant. To qualify for a voucher, the applicant will need to make 50% of area median income or less. Also worth noting, the Salem Housing Authority will retain control of the original 50 units for 99 years. The contract for the additional 74 units is renewable.
Salem needs this. The list of people seeking affordable housing is far too long, and the Faircloth Amendment, which eliminated a city’s ability to create new public housing, means we have to get creative. The TIF will allow Beacon to procure the funding they need to expand the voucher program from 50 to 124 units.
The public hearing remains open and will continue on 5 January.
Tax Classification Hearing
The council voted on the assessors’ recommendation to set the residential factor at .857132 and split the tax rate with Commercial, Industrial, Personal Property (CIP) at 1.73. This determines the increase in your property tax, which again this year has been under the maximum allowed by state law. The City Council has no control over modifying the assessed value from which the tax rate is factored. There are a few important things to note when it comes to the tax increase: first, the assessments are roughly one-year to 18 months behind market rate (2021 assessments are informing the 2023 tax rates). Second, the city sets aside a portion of funding to offset expenses to reduce the burden on taxpayers. And finally, in Salem, the residents carry the lion’s share of the tax burden (~89%) and cities with higher a commercial base tend to have lower residential property tax.
The presentation was very thorough, and when I have the link to the PDF, I will certainly post it for those of you who want to do a deep dive into the data. There was a LOT of data. In the meantime, what you all want to know: the average increase for single-family households is $289/year ($24/month) based on an average assessment of $516K. Condo taxes will increase at $19/month on average. This is all based on statistical valuations, and 60% of homeowners will pay less than average. Comparatively, the neighboring city with the lowest average increase was Lynn at $131; the highest average increase was Ipswich at $662. If you look at the aggregate of tax increases year-on-year, Salem has maintained the second lowest tax increase in the region (Lynn is the lowest).
Councilor Stott (Riccardi) asked about personal tax exemptions and there are a lot out there! Programs exist to help widows, minors who own, the elderly, people with disabilities, veterans, gold star parents, low-income households, and many more. Please visit the assessors website to learn more about programs that may benefit you or someone you know.
Respectfully submitted,
Jen Lynch