HADLEY – While a decision will not be made until November, the Hadley Select Board and Finance Committee heard a presentation regarding the potential impacts of a single tax rate versus a split tax rate at a joint meeting on Sept. 1.

Assessor Dan Zdonek explained that the Board of Assessors has not made a recommendation on the tax rate as it is waiting for final property values to be set; the recommendation would be made at the tax classification hearing, which will take place in November. The presentation before the board was meant to be informational based on initial estimates and the figures would likely change “slightly” before the hearing, he added.

He also noted that splitting the tax rate would not increase revenue for the town, but merely shift the burden. “We’re going to take in the same amount of money whether we have a split rate or a single rate,” he stressed.

“Splitting the tax rate will keep the residential and commercial percentages about the same as they were in fiscal 2021,” Zdonek said. “If the rate is split, it could be changed in a future year when commercial values rebound to keep the tax payments stable.”

Residential and open space is estimated to make up 69.37 percent, or $730.6 million, of the town’s value in FY22 compared to commercial, industrial and personal property, which would account for roughly 30.63 percent, or $322.6 million.

In FY21, residential and open space percentage was 66.4185 – a total of nearly $700 million – and commercial, industrial and personal property was 33.5185 percent, representing slightly more than $352 million. Zdonek pointed out the past two fiscal years have seen an increase in residential and open space after the numbers had remained relatively stable at around 65 percent from FY09 to FY20.

“A lot of the larger box stores or larger commercial section got hit pretty hard last year on their rental income and the values are going to be dropping probably about 10 percent,” Zdonek explained. “That 10 percent that would have been paid by commercial is going to be shifted over to the residential class.”

In FY21, the town had a single tax rate of $12 per $100,000 valuation. The average residential tax bill was $4,202 while the average bill for commercial properties was $531,534.

With a single rate in FY22, the estimated tax rate would be $12.50 with an average residential tax bill of approximately $4,596, representing an average increase of $394. On the commercial side, with values for larger properties sliding, the average tax bill would decrease to around $466,971, or an average of $64,563.

If the tax rate were split with a 10 percent shift, the residential rate would be around $11.85 with an average bill of $4,357, an increase of $155. The commercial tax rate would be roughly $14 with an average bill of $520,487, an average decrease of $11,047 from the previous fiscal year. He also pointed out that the tax rate had dropped from $12.78 in FY20 to $12 in FY21, representing an average tax savings of 6.2 percent for commercial properties in the past year, meaning some of the increases to commercial tax bills are not as drastic when considering a two-year average.

While in either scenario there would be a variety of increases, decreases and status quo in tax bills, Zdonek said, “Splitting the tax rate on a temporary basis for [FY22] will make most of the tax payments stable. The split rate percentage could be reevaluated in [FY23] and potentially adjusted back to a single rate when commercial values rebound post-COVID.” He added that 2021 sales in both the residential and commercial sectors indicate such a rebound could occur as values have grown significantly.

Select Board Chair David Fill asked how many local municipalities split their rates, to which Zdonek explained that currently, no Hampshire County communities do so. He added that most communities that split their rate do so long-term. “They’re mostly cities that have a large commercial base,” he said, adding that Hadley is one of three municipalities in Hampshire County with more than 15 percent of its total property designated commercial, along with Northampton and Ware according to the Massachusetts Department of Revenue.

Hadley has by far the most at 35 percent commercial while the others reported 15 and 18 percent. “We’re really taking a bigger hit than most other communities around here. We’re having a large impact on our residential class because the commercial base is so large,” Zdonek said.

With that said, he also predicted during the meeting that more communities would consider adopting a split rate due to the impacts of COVID-19. He equated a temporary shift to a split rate to “filling a pothole.”

Select Board member Valerie Hood asked about the potential for pushback or lawsuits from commercial property owners if a split tax rate was enacted. Zdonek said that could present an issue if the switch was permanent.

Alexei Levine of the Finance Committee asked if small businesses would experience a greater impact than larger commercial enterprises. Zdonek said business owners who live in town will see a reduction in their residential bill that could offset the additional business costs. The “lion’s share” of the commercial property is larger parcels and the decrease in the values of those parcels is more problematic for the town, he added.

Select Board member John Waskiewicz opined adopting a split rate “is just looking for trouble.”

Finance Committee Chair Amy Fyden concurred.

“We have great intentions, like sometimes we take from stabilization and we’re going to put it back and we just don’t. So I’m afraid that if we go ahead and split and say, ‘OK, we’ll fix it later,’ an emergency or something else always comes up,” she said.