Commercial and Industrial properties are valued based upon a combination of their income potential and market/cost analysis. These two classes of real property as well as personal property are taxed at the commercial rate that is higher than the residential rate.
Residential properties, including apartment buildings, are taxed at the residential rate. One to three family homes are typically valued based on sales of comparable properties while apartment buildings of four and more units are valued on their income potential as well as a cost/market analysis.
The market value of any such property will ordinarily be reflected in the sale price as long as it is an arms length (market) sale.
Assessments are a statistical measure of similar properties that are rented or sold during the assessment period resulting in a valuation that reflects market value of that class as of the assessment date.
All sales that take place during the assessment period are analyzed so that changes to values can be made for each class of property and assessed values can be kept current.
Marlborough adjusts its values each year so that it can fulfill the DOR (Department of Revenue) requirement that assessments be based on 100% of market value (+error factor) as of the first of the calendar year preceding the next fiscal year. This eliminates the resulting large difference in assessed values that could occur if more time lapses between updates.
The law mandates a complete re-certification of values every three years. Marlborough's next re-certification is fiscal year 2024.
If a property is sold during the assessment period and it is deemed to be a qualified sale (arms length), it is used as part of the statistical data set for the valuation period.
All owners of commercial/industrial and apartment properties are sent notices requiring them to submit income and expense levels for their property as of the assessment period.
All owners of business subject to personal property tax are sent a form of list, which must be returned listing all equipment within their establishments.
The resulting assessments could be higher or lower than the sale prices of individual properties depending on such things as the time period during the year that it sold as well as factors that influenced the sale.
Also, due to the fact that the assessment valuation process is a statistical model, there is an error factor that is allowed by the Commonwealth's Department of Revenue of + 10%. This can result in very similar properties having different assessed values. Those properties are deemed to be similarly assessed.
The sales price of a property cannot be targeted as the assessed value. That is known as spot assessing and is contrary to state law.
The appropriate rate, which is a mathematical computation based on the overall assessed values of each class of property and the amount of taxes to be raised, is then applied to the individual property assessments to arrive at the tax bill for each property.
The rate and assessment can change from year to year. The actual tax bill can change or stay the same depending on the amount of money that must be raised (tax levy) to satisfy budgetary requirements in any given fiscal year.
The assessment process is not utilized to raise or lower taxes paid by individuals, but to be sure that all owners of similar classes of properties are sharing the burden equitably.
The assessment does not raise or lower the tax bill of a property. That is a result of budgetary requirements.
In a recertification year, all values are updated and reviewed by the Department of Revenue and the process is certified as being statistically correct and properly implemented.