Thursday, April 25, 2024

High school interns apply a new Cambridge Local First decal on a business window in July 2017. (Photo: Cambridge Local First via Instagram)

A small tax break that small-business owners could see introduced in around a year was teased by city managers recently, along with an explanation of tax changes about to hit property owners citywide.

The tax break would let some 1,600 business owners in Cambridge hang onto another $275 annually – which struck some city councillors as unimpressively small, though it’s based on exempting $20,000 in property. And a representative of local businesses said every bit helps.

In the broader set of changes that will appear on the next tax bill – approved in a series of votes by city councillors Oct. 7 – the city is again putting millions of dollars into tax relief to protect property owners from soaring assessments. “Our values have gone up 10 percent annually over the last five years, and that has a dramatic impact on tax bills. If you don’t control the rate and you have those value increases – which the city has no control over; those are based on sales – the bills will go up dramatically,” City Manager Louis A. DePasquale said.

Setting the property tax rate

Councillors okayed spending $16.5 million ($14 million from free cash, $2.5 million from assessors fees) so that for the 15th consecutive year, most residential taxpayers would see a reduction, no change or an increase of less than $100 in their tax bill – a total of 61 percent of property owners on 13,388 parcels. Those seeing an increase of $500 or more represent just 13 percent of of property owners, on 2,871 parcels, finance officials said. The average change for owners of condos, which are 63 percent of the city’s residential parcels by use, would be 2.8 percent, or a bump of $43 to a median $1,605.

Without the tax relief, it would be one-fifth of homeowners seeing an increase of $500 or more,  the officials said. And last year, it was about 70 percent of property owners whose bills fell, stayed the same or rose by less than $100.

But the ongoing aid for homeowners drew scrutiny, especially in a city where renters struggle at least as urgently with significant annual increases and have little protections from being forced out by owners or developers. “We are protecting property owners with keeping their property taxes low, which I agree with [but] aren’t actually protecting our renters at the same rate,” councillor Alanna Mallon told the city managers. “How can we do a better job of protecting all of our residents?”

Taxes are going up this and in the next few years, DePasquale said, making it a hard time to talk about decreasing relief to anyone, but he agreed tentatively to meeting to talk about renter aid.

Help for business owners

About two-thirds of city taxes are paid by owners of commercial property, which is why DePasquale called it “incredibly important to keep the commercial development strong so they can help support” residential subsidies. By contrast, Boston is struggling because 90 percent of its new development is residential, according to Gayle Willett, the city’s director of assessment.

Giant real estate developers or biopharma companies are not the businesses being targeted for tax relief in the next fiscal year. As Willett described the proposed small-business personal property bill exemption, there are around 1,600 business owners citywide that would benefit from an exemption level set at $20,000 annually starting in fiscal year 2021 – to the tune of around $275.

In Boston, a similar exemption was put in place around 15 years ago, and Brookline has had one since 2009, Willett said.

“I’m sad to hear [that],” councillor Dennis Carlone said. “Council members, at least since I’ve been here, have been asking about different ways” to help small-business owners.

Carlone, in his sixth year as a councillor, acknowledged that “every little bit helps” but noted that the exemption Willett described would save a business owner less than $25 a month. “If we’re going to do this, let’s make it mean something – and not coffee money for six months,” he said.

Other places to look

Councillor Craig Kelley agreed the savings seemed relatively small, and hoped the city would look at a broader set of ways to help business owners – with advice from them – that might be packaged together in a home-rule petition to the state Legislature.  Vice mayor Jan Devereux seconded the idea of looking at additional forms of relief.

“I just haven’t heard from small businesses that that’s where they’re really feeling the pinch … my understanding is that the triple net is where they really get whacked,” Devereux said, referring to contracts in which tenants pay to their landlords everything from base rent and utilities, real estate taxes, building insurance and maintenance expenses – and then even a potentially rising percentage of their sales.

That there was a conversation around the topic at all came as good news to Frank Kramer, a board member for the Cambridge Local First small-business group and former owner of the Harvard Book Store. “As we know only too well, the city of Cambridge is losing its locally owned independent businesses at a rapid pace due to the untenable costs of occupying space in commercial buildings,” Kramer said. “As a former owner of a locally owned independent business, I am delighted to see that our city manager and city councillors recognize their plight and want to do something to relieve the costs.”

“I heartily applaud the concept of providing tax relief for these treasured businesses,” Kramer said.