Peabody to raise property taxes

PEABODY – Residents will have their turn at bearing the tax burden this coming year as city councilors approved Mayor Michael Bonfanti’s tax classification plan Thursday night.The new plan, based on property values from Jan. 1, 2008, will bring residential taxes up from $8.67 to $9.30 per $1,000. Homeowners will see an average yearly increase of $61, or roughly 2.1 percent.Commercial taxes will rise from $17.80 per $1,000 to $18.03, creating a 5.86 percent increase equivalent to $1,582 for the entire year.Mayor Michael Bonfanti and Finance Director Patricia Schaffer both agreed that the increase isn’t something they wished to do, but simply had to given the great drop in residential values and projected cuts in state funding.The average value of single-family homes dropped 4.1 percent citywide since last year. When combined with the falling values of 2 and 3-family homes, as well as condos, an even greater decrease was seen of 4.8 percent. Last year, the average home, as defined as an owner-occupied single, 2 or 3-family home or condo, was valued at $340,200. This year, however, that number has decreased to $323,800.Commercial property value, much to the city’s benefit, has remained relatively steady, allowing classification to be a viable option.”We’re fortunate to have that to rely on,” said Schaffer Thursday afternoon.A whopping 75 percent of the city’s new growth came from the commercial sector, mainly being the fast growing development over at the Northshore Mall. Only 25 percent of that taxable revenue came through residential developments.A lot of people may wonder why residential taxes are increasing when the values of their homes are dropping significantly.”We still have to make our budget,” said Bonfanti, explaining that the “tanked economy” and lack of funding hasn’t made it easy to do so. Declining property values, combined with a great reduction in revenue from excise taxes and hotel/motel taxes, had made it tough to maintain the city’s services.”We’re trying to keep the tax rate reasonable,” he said. “We’re all concerned because our options are being cut?It’s a difficult task.”Ultimately, the city had two choices to make, said Bonfanti: increase taxes or cut services and personnel. For now, they felt the moderate increase was the best option, although Bonfanti said that Peabody will probably “end up doing a combination of the two, reluctantly” in the future.Business owner and City Councilor Dave Gravel wasn’t particularly fond of the idea, calling the shift “substantial.””That could be the difference of being in business and out of business,” he said, explaining that many of the commercial taxpayers aren’t enterprises like the mall, but smaller businesses like carwashes or corner stores.Councilor Dave Gamache shared similar feelings, warning the city to be careful of how much it taxes the business community for fear of driving them to move elsewhere.”We have to be able to strike a balance,” he said.To help reduce the burden on all fronts, the city appropriated $500,000 from its free cash fund of roughly $14 million. The appropriation cut the annual residential tax by $20.Councilors Jim Liacos and Rico Mello were somewhat bothered by the large amount of cash reserves, given the tough financial times.”It’s almost like you’re hoarding cash,” said Liacos.Schaffer and Bonfanti later explained that the money technically isn’t “free,” but rather will be used for retroactive pay and outstanding lawsuits, as well as other unforeseen costs. The extra cash in the bank will also help the city maintain its high bond rating.