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Ruminations

I was a bit surprised at last month's Special Town Meeting to hear someone oppose spending $20,000 to hire a consultant to assist the Downtown Revitalization Committee in planning improvements to downtown Milford. The person's stated objection was that homeowners should not subsidize the better-off downtown landlords – the speaker's terminology – should be paying for.

Lest everyone forget, the exact opposite is true. The owners of commercial and industrial properties in Milford are subsidizing the homeowners of Milford by paying a much higher tax rate: Fifty-eight percent higher this fiscal year, to be exact.

If Milford had one tax rate, it would be $19.66 per $1,000 of value. Residential property would be paying for 78.63 percent of property taxes, and the commercial/industrial/personal property – in other words, business – share would be 21.37 percent.

At the single tax rate, an "average" single-family home assessed at $305,200 would owe $6,000.23 in property taxes. Instead, the residential rate is $16.56 and the taxes are $5,054.11. Remember, Milford has a dual tax rate, meaning the businesses in town are paying for the $946.12 difference between the actual tax bill and the artificially lowered bill the homeowner gets.

With the shifted rate, residential property drops to paying 66.24 percent of property taxes and businesses rise to 33.76 percent.

At the $19.66 single rate, the "average" commercial business valued at $815,600, would be paying $16,034.70. Instead, with the 158 percent shift to $31.06, that business is paying $25,332.54. That's $9,297.84 more!

And, that higher percentage the businesses pay has been creeping upward, from 150 percent few years ago to 153.7 percent last fiscal year, and now to 158 percent this fiscal year. Each time that percentage rises, the businesses have to pay more taxes to keep residential property taxes bills at an artificially lower level.

The misperception that somehow businesses are rolling in money reminds me of a story that a small business owner in Milford told me a few years ago. A woman came in and bought an item that cost about $10 and commented as she paid, "That's $1 for the government and $9 for you."

"No," the store owner replied. "That's $1 for the government, $3 for my landlord, $1 for National Grid, $1 for the gas company, $3 for my health insurance and maybe $1 left for me."

Sometimes, people don't understand the economics of running a business. At some point, if revenues don't keep pace with expenses, the business has to close. If property taxes rise, business landlords have to raise their rents just to stay even. If the rents are too much, businesses can't afford them, and commercial space stays unrented.

I wonder if the $20,000 consulting study will point out if that's one of the reasons why downtown Milford can't attract small businesses.

While the "big box" store chains might not mind paying higher property taxes, the shift definitely does affect small businesses in town – especially those who compete against businesses located in towns with a single tax rate. If their costs are lower, that means they can charge less than the Milford businesses whose costs are higher, and grab more sales.

The only solution to the problem in the long run is to lower the business shift and raise the residential rate. But, since there are more voting homeowners than voting business owners, what's the chance of that ever happening?




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