LYNN – A law passed by the state Legislature last year allows Lynn GE to avoid paying taxes on $69 million worth of personal property on site ? mostly parts related to its aircraft engine manufacturing operation. The change, effective in fiscal 2010, has left the city’s tax collector with a $1.75 million revenue gap, a burden that will be spread to other commercial businesses in Lynn.
The effects of that legislation were particularly acute Tuesday, when the City Council voted to set the new residential and commercial tax rates. The commercial tax rate per $1,000 was increased from the fiscal 2009 level of $25.35 to the fiscal 2010 level of $31.05, among the North Shore’s highest.The residential tax rate was increased per $1,000 of assessed property value from $12.74 to $15.53.”A lot of the burden for 2010 was shifted over to the commercial side,” said City Assessor Peter Caron. “We lost a significant amount of value at GE in terms of personal property. The Legislature changed the statute and sent me a letter, so we had no recourse. Until then, we had been taxing them on $69 million in military replacement parts, and that amounted to $1.75 million in tax revenue.”According to Caron, GE was taxed locally because its assets were owned by a partnership, but the new law states than any entity which is not a corporation, but files its federal taxes as a corporation, is then treated as a corporation. “Corporations are not subject to local taxation for their inventories,” Caron explained. “The lost tax dollars from GE were redistributed among other city taxpayers and that has had a more pronounced impact on the commercial property owners. The law was a wild card and we had no control over it.”Leslie Gould, executive director of the Lynn Area Chamber of Commerce, asked the council to keep the commercial tax rate in check because many local businesses are suffering financially. She noted that the commercial tax rates in most surrounding communities are lower than Lynn’s, adding that Peabody, Saugus, Beverly and Revere all have commercial tax rates under $30 per $1,000 of assessed property value.The City Council also voted Tuesday to use only $350,000 of the $1 million municipal reserve fund to offset the fiscal 2010 tax rates. It was a compromise vote. Had councilors decided to use the entire account, the city would have been left unprotected against unforeseen expenses. Mayor-elect Judith Flanagan Kennedy said she favors not spending any dollars from the reserve account since it must be available for emergencies, such as a loss of state aid.Caron said the tax rate was also impacted by foreclosure prices, especially among multi-family structures. “Commercial and industrial properties in Lynn went down the least in value, far less than single-family homes, multi-family homes, condominiums and other kinds of property,” he said.In order the balance the budget, the City Council on Tuesday voted to use $4.6 million in a free-cash account. The free-cash account is comprised of revenues that came in higher than expected and surplus funds from city departments that spent less than expected during the year.The council’s compromise vote will increase the average $3,300 annual residential tax bill by about $149.
