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Tax rates, levy ceiling, levy limits, oh my! Here's a quick guide to understanding Pittsfield tax season discussions

PITTSFIELD — Tonight, the City Council will vote on the approximately $94.7 million tax levy proposed by Mayor Linda Tyer. The levy would bring in about $2.9 million more to city coffers than the 2021 levy.

Tyer has said that rising residential property values has meant the city can lower its residential and commercial tax rate, but what does all of this really mean for property tax bills?

What should I expect on my tax bill?

If you are a residential property owner in Pittsfield, your annual tax bill likely will go up under the proposed tax levy. That's a function of two things: rising property values and a rising tax levy.

"We have a levy that has increased by $2.9 million this year," City Assessor Paula King said. "Taxes are going up because our levy has gone up."

What's a levy?

The levy is the amount of money a city raises through taxes every year. King said that, in Pittsfield, the levy covers about 50 percent of the money needed each year for the city's budget. The other 50 percent comes from state aid and local receipts — things like motor vehicle taxes, and service and rental fees.

But, the tax rate is decreasing, so my bill should decrease, right?

Not really. The tax rate — the tax taken per $1,000 in assessed value — is decided by how big the levy is each year.  

In a year when the tax levy stayed the same as the previous year and property values went down, a city would have to increase the tax rate in order to get the same amount of money from taxpayers as the year before.

In a year when the tax levy stayed the same as the previous year and property values went up, the tax rate would go down to achieve the same amount of taxes. 

"If your bill is going up, then your property value has increased from the prior calendar year," King said. "The tax is multiplied by your property value by $1,000 of value."

Financial Director Matt Kerwood said that if you are looking for a way to calculate your tax bill and see how it has changed, take the assessed value of your home, divide by 1,000 and multiply by the tax rate.

This year, property values across Pittsfield saw major increases, and the tax levy increased. The mayor is proposing lowering the residential and commercial tax rate because the rising property values compensate for the bigger levy.

But, my house looks the same as last year; why am I being assessed more?

King said it's not just your house or neighborhood that saw an increase in property values.

"We're seeing across-the-board property values of the residential class raise pretty equally," King said. "It's not like there's one section of town that's seen this huge increase; it's being spread throughout the whole community."

Property values are increasing because similarly classified homes in the area are selling for more money than they have in previous years.

Your home's assessed property value is its market value — or how much assessors believe your home would be bought for by an educated and reasonable buyer. 

I thought there were limits on how much the city could levy?

There are limits on what a city can levy — in fact, in Massachusetts, there is more than one constraint. Proposition 2½, which became law in 1980, created limits on how city levies were set, by establishing two kinds of limits. 

One is the levy ceiling, which is set by taking the total market value of all properties in the city and multiplying that value by 2.5 percent. That dollar amount is the highest amount the levy limit can be. For fiscal year 2022, Pittsfield's levy ceiling is about $102.4 million.

The levy limit is the other constraint; it's the maximum amount a city can set the tax levy at each year. The limit has to be less than or equal to the ceiling and is based on a standard increase over the previous year's limit, plus any new growth in the city.

This year, Pittsfield's levy limit calculation was less than its ceiling, meaning that the city had access to its full levying abilities, according to Kerwood. For the past six years, Pittsfield's levy limit — not the actual amount being raised through taxes — has hit up against the city's levy ceiling.

Kerwood said that's because for much of the early 2000s, properties in the city were decreasing in value. Since 2016, property values have been increasing incrementally. The major increases in the past year created more space between the levy limit and ceiling.

What do these limits mean for me?

Not much. "It doesn't have an impact on the individual taxpayer," Kerwood said. "It has an impact on the city's overall financial condition."

Meg Britton-Mehlisch can be reached at mbritton@berkshireeagle.com or 413- 496-6149.

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