FinCom, Select Board Debate Residential Tax Exemption; Working Group Convenes For First Time

CHATHAM – Even though a residential property tax exemption is not likely to be officially implemented until the fall, residents are already submitting applications for the relief.

 The assessing department had eight applications as of last Wednesday, April 1, Select Board Chair Dean Nicastro said during the inaugural meeting of the finance committee’s working group convened to investigate the impact and reasons behind the board’s planned residential tax exemption (RTE).

 Last fall the select board voted to support a 20 percent RTE. It won’t be official until approved by the board at a tax classification hearing in September to set a new tax rate.

The finance committee established the working group to gather information about the RTE prior to the May 11 annual town meeting. At that session, voters will address two articles related to the RTE: one sets aside $500,000 for the assessors’ overlay fund to address abatements due to the RTE; the second is an advisory article filed by the fincom asking the select board to delay the RTE for a year to provide more time to study the issue.

While the fincom supports taking steps to help year-round residents in need, members are concerned that the case has not been made for a broad measure such as the RTE, which would reduce property taxes for most year-round homeowners while raising them for nonresident owners, rather than a more targeted approach to help those who truly need assistance, said Chair Stephen Daniel.

 “The brush that it paints with is quite large, and it actually impacts people that probably don’t need help,” said finance committee member Eric Whiteley. There is no means test under the RTE, so that a year-round resident with a high income would get the same tax break as a struggling family. The only exception is that the way the RTE formula is structured, a year-round resident with an assessed property value of more than $3.5 million would not get the tax break.

 Who, specifically, the RTE is meant to benefit has been a recurring theme of fincom discussions, Daniel said.

 “I don’t look at it as needs based,” select board member Stuart Smith said. “I look at it as equity.” Second home owners are “pushing out the people who have lived here historically, who can’t afford it. This is one mechanism that we can make some impact to help people stay in the community.”

 “We’ve become almost more of an investment community than a real community,” added board member Jeffrey Dykens. He acknowledged that second homeowners “contribute mightily to the taxes of this town, I get it.” However, he added, “they’re not here year-round creating community.” Market forces, which escalated during the pandemic, “put our locals at a distinct disadvantage," he said.

 Smith said he was surprised at nonresident property owners’ opposition to the RTE.

 “I think it’s an opportunity for them to stand up and do the right thing,” he said. “Let’s face it, if they can afford a second home here, it’s probably not a huge financial impact.” The RTE, he added, is “helping their neighbor who would otherwise be pushed out of this community.”

 “This is not a charity effort. This is a fairness effort,” Smith said.

 Fincom members said they were concerned that owners of rental properties will pass the property tax increase on to tenants. A town meeting article that seeks to adopt a lease to locals program to provide financial incentives to owners who rent their homes to year-round residents could offset those concerns, select board members said. Several other town meeting articles seek to adopt or expand existing state programs that provide tax relief to year-round residents, especially the elderly and veterans. Nicastro, who opposes the RTE, said he’d favor expanding the taxation aid committee, adopted by town meeting last year to recommend tax relief for certain residents, to assist any year-round resident in need. “Then you’ve got a targeted approach,” he said. That would require approval of a home-rule petition by the state legislature.

 Select board members said they welcome other initiatives the finance committee might identify to help local folks stay in their homes. One possible model, said Daniel, is a private effort such as the COVID impact fund that helped pay bills for local residents during the pandemic. He noted that the average sale price of a home in Chatham in 2019, prior to the pandemic, was $547,000; by April 21 that had risen to $1.74 million.

 “How do you deal with that?” he asked. 

 Finance committee member Andrew Young wanted to know how to measure whether the RTE is successful in benefiting local residents. While Nicastro acknowledged that there isn’t a lot of hard data on the impact on the more than half a dozen towns on the Cape, as well as Nantucket, that have adopted the RTE, Dykens said a measure of success could be whether the number of students in the elementary school remains level or increases.

 None of the towns that have adopted the RTE have repealed it, he added.

Daniel said he anticipates the working group meeting several more times prior to town meeting. Finance and assessing officials are scheduled to meet with the group at its next session April 9 (today) to discuss data and demographics related to the RTE. A meeting is also being planned with the summer residents advisory committee, he said.