Haverhill Economist Urges City Council to Favor Homeowners

Demet Haksever of Haverhill, who works as a senior economist for the New England Fishery Management Council of Newburyport, sent the letter below to Haverhill city councilors.

In the letter, Haksever disputes the contention a lower tax rate for businesses attracts more industry to the city and creates jobs. Instead, she argues business will be harmed if residents collectively lose between $1.5 and $2.7 million in purchasing power due to increased property tax burdens.

Haverhill city councilors decide tonight how much of a property tax increase homeowners and businesses will pay.

WHAV has reached out to past business community speakers for a response.

Dear Councillor,

I am sending this letter to express my concerns regarding the property tax classification for 2017 that will be decided at the meeting tonight. I will be unable to attend the Council meeting due to a work meeting in RI, so please accept my apologies for this rather lengthy email!

Just to be clear, my main concern is not so much about the increase in property taxes, but about fairness, affordability, and the potential impacts on the local economy. As you know, property taxes for an average single home owner increased by about $525 in the last 5 years since 2011, contributing each year to support our schools, fire and police departments and other services.

However, we can’t keep increasing the taxes on homeowners to give tax breaks especially to the large businesses in the CIP class. For example, an increase of taxes by about $150 (at a shift factor of 157%) for an average single family home (there are 10411 such units) would reduce the disposable income of residents by more than $1.5 million and probably more than $2.7 million when condos and other residential property are included. This cannot be good for the majority of businesses in Haverhill that thrive on local demand for their products and services.

I understand that the usual rationale for reducing industrial/commercial property (CIP) taxes is to bring more business to Haverhill and stimulate economic growth. It has been asserted that over the long-term that would reduce the property taxes for homeowners too.  But is there any cost-benefit analysis conducted for Haverhill supporting this claim? If there is, I appreciate if you could forward a copy.

Unless there is convincing evidence to the contrary, I have to disagree that reducing taxes for CIP while increasing it for the residents (i.e., customers) will help increase the number of jobs in Haverhill or stimulate economic development. According to a study I read recently about the impacts of property taxes, “..local business tax cuts are a poor strategy for promoting economic growth and creating jobs because taxes are a small fraction of the total cost of doing business. Tax cuts “work” by reducing business costs, in the hope that the reduction in costs will generate growth. But because the cost of state and local taxes are so small compared to other costs like labor, utilities, occupancy, and transportation, tax cuts are largely ineffective.” http://www.wvpolicy.org/wp-content/uploads/2015/10/PPT-policy-brief.pdf

In addition, for small business owners, for example with a commercial property value of $250,000 or less (more than half of the small businesses in Haverhill are in this category), the reduction in taxes would be very small to make any difference while the bulk of the tax cut would go to big businesses like Target and BJ’s. I think instead of getting marginal tax cuts, small businesses would benefit from having customers with more money in their pockets. In this respect, I was also wondering if there was an analysis conducted regarding differential impact of tax cuts on small versus large commercial/industrial properties?

In summary, I believe shifting the increase in property taxes to residents while reducing for the CIP would be bad for the local economy. It would be also unfair and unaffordable to many residents with fixed incomes. For these reasons, I urge you to vote for a shift larger than 160%  so that all classes of property owners contribute to the tax bill fairly. Residential property and homeowners need a break after the more than proportionate increase in their taxes (14.4% for single homes, but only 11.6% for the commercial property owners) in the last five years.

Thank you very much.

Demet Haksever