Post Date:11/25/2024 2:44 PMThe City Council has set the property tax rates for the coming fiscal year which will be slightly higher than last year. The residential tax rate is increased to $9.80 and the commercial rate to $18.34, both per $1,000 in assessed property value. (Last year, the tax rates were slightly lower at $9.76 and $18.33 respectively.)
Assessed Values have Increased:
On the one hand, the City is only allowed to increase the total amount of money it raises through property taxes by 2.5% each year (net of New Growth) due to Proposition 2 ½ (unless voters approve an override).
On the other hand, Massachusetts General Laws mandate that assessed values represent “Full and Fair Cash Value” as of a particular date. For Fiscal Year 2025, the valuation date is January 1, 2024.
The increase (or decrease) in assessed values from the previous fiscal year does not impact the total tax increase that the City will raise. (The Mayor presents a budget to the City Council and the decision by the City Council on the budget determines whether the City increases the total amount of property taxes that we collect.)
But, the increase in assessed values in one class of properties (e.g., single family homes vs. commercial) does impact the amount that an individual property owner will pay.
Together, the total assessed valuation of all the properties in the City of Newton increased by 3.9%. This year, residential properties, which represent 91.92% of the City’s Total Assessed Valuation, increased by approximately 4.3%.
In contrast, commercial properties representing 8.08% of the total value decreased in value by 0.2%. This decrease in total commercial values is due to the fact that some properties that had been classified as completely commercial have been redeveloped and added a residential component and are now in the mixed-use classification, consequently making it appear that commercial values have decreased.
The “tax rate” is based on a mathematical formula:
Total Revenue Required from Taxes = Tax Rate
Total Assessed Valuation
An example might be helpful. The owner of a single-family home assessed at the median value in Newton of $1,418,800 as of January 1, 2024 will pay $561.16 more in property taxes for fiscal year 2025. The owner of a commercial property assessed at the median value in Newton of $1,135,700 will pay $250.76 more in property taxes.
How Do We Split the Taxes between Residential and Commercial Properties?
The City of Newton “splits” the tax rate. We choose to place a bigger burden on commercial property owners instead of setting a single rate which would have had residential and commercial owners paying the same rate per $1,000 of valuation.
Residential property values make up slightly less than 92% of the assessed taxable value of all properties in the City, while commercial property values make up slightly more than 8%. In November of each year when the tax rate is set, the City Council chooses to adopt a “Residential Factor” and votes to “split” the tax rate, resulting in an intended shift from the residential taxpayers onto the commercial, industrial, and personal property taxpayers.
The maximum allowable Residential Factor for the City of Newton under State Law is 175%, or 1.75 times the taxable value of all commercial properties. If a factor of 175% is adopted, the commercial class becomes responsible for 14.14% of the tax levy.
The City Council voted on Monday, Nov. 18, following our recommendation, to shift 175% (1.75) of the tax burden to the commercial sector. This decision means owners of commercial, industrial, and business personal property (whose property represents 8.08% of Newton’s taxable value) will be responsible for 14.14% of the total amount of taxes collected. Residential property owners (whose property represents 91.92% of Newton’s taxable value) will be responsible for 85.86% of the total taxes collected.
Still curious and want to learn more? Jim Shaughnessy, Newton’s Director of Assessment Administration, and his team put together a thorough booklet for the City Council prior to the property tax rate classification decision. Click here to link to it.
Sales Prices in Newton Continue Rising
Additional interesting data is in the booklet, including that median sales prices for residential properties in Newton continue to increase. For example, the median sale price for Newton’s single-family homes was $1 million dollars in 2015; it rose in the next five years to $1,296,500 in 2020 and again through 2023 to $1,720,000.
Across the City, the median sale prices for residential properties vary. In calendar year 2023, the most modest neighborhood in terms of median sale prices was in Nonantum at $608,750 and the highest was in West Newton Hill at $2,633,750. Only seven single family homes sold for less than $600,000 last year. Four hundred eighty-one (481) single family properties sold for more than $750,000 (96.01% of all sales) while 60.48% sold for more than $1.5 million. Return to full list >>
