Marblehead faces a delicate balancing act: How to build out the town’s tax bases and maintain its historic character. Town officials are turning to “new growth,” additional tax revenue from construction and property improvements.

For a largely built-out town like Marblehead, which aims to preserve its historic charm, this presents a challenge. Town leaders say addressing interconnected issues around capturing new growth has become a critical focus. They must find ways to boost new growth, retain experienced staff and modernize financial systems.

New growth is particularly important because it allows the town to expand its tax base beyond the limits set by Proposition 2 1/2, a Massachusetts law that caps annual property tax increases at 2.5% plus new growth.

The Massachusetts Division of Local Services reports that Marblehead’s new growth figures have fluctuated over the years. Those figures peaked at $622,843 in fiscal year 2006 but have since declined, typically hovering around $300,000 to $350,000 annually in recent years.

For fiscal year 2024, there’s a glimmer of improvement, says Town Administrator Thatcher Kezer. Marblehead captured $468,709 in new growth, pushing the town’s tax levy from $69,217,826 in FY 2023 to $71,416,980 in FY2024 when combined with the allowable 2.5% increase.

“That’s an improvement from recent years, but it’s still well below what comparable towns are achieving,” Kezer said. “Andover, with a population of about 35,000, had new growth of $1.9 million compared to our $468,000. Even Wayland, with 13,000 residents compared to our 20,000, saw $1.5 million in new growth.”

Select Board Chair Moses Grader explained the town’s position.

“Marblehead’s new growth has always been low relative to other communities mainly because of the density of our settlement and smaller commercial sector,” Grader said. “So it is all the more important to track and administer any new growth that we have.”

Why did the town’s new growth decline?

With over 95% of property taxes coming from residential sources, the town struggles to diversify its tax base. Factors like staffing issues, technological limitations and the impacts of the COVID-19 pandemic have hindered Marblehead’s ability to capture new growth, leading to missed opportunities highlighted by Finance Director Aleesha Nunley Benjamin.

“During COVID, many residents throughout the state updated their homes as many were now working from home,” she said. “These improvements, depending on type and value, could potentially be identified and recorded as new growth,” she said.

A resident approached the Finance Committee to express frustration about adding extra square footage to their home and wanting to insure it at a higher value. It took three years for the town to update their property record to reflect the improvements.

Grader elaborated on the impact: “There was substantial personnel turnover in the offices of the building inspector’s and assessors, which appears to have impacted the number of inspections, updates to the building card records and field assessments following up on the valuations of new construction.”

On Sept. 20, the Board of Assessors hired Todd Laramie of Marblehead to lead the town’s Assessor’s Office. This move comes after major property validation errors last year skewed tax bills and angered residents, leading to the firing of the previous assessor. Laramie plans to take a hands-on approach to capturing new growth, such as home additions, that may have been missed.

“It’s very important to go out and look at stuff,” Laramie explained, drawing from his experience in Hamilton-Wenham. He emphasized the importance of field work, stating, “We’d be hitting the streets pretty hard. You can look at 10 properties a day.” This active approach could help Marblehead more accurately assess and capture new growth, potentially boosting tax revenue without raising rates.

Technological limitations have compounded the challenges. Recent server upgrades exposed compatibility issues with older software in departments like the assessors’ office, leading to complications, as Kezer explained.

“What’s happened is it’s requiring a whole bunch of manual processing that then is fraught with errors,” said Kezer of the town’s software.

Override?

The town has faced structural deficits due to expenditures outpacing allowable tax increases under Proposition 2 1/2. Even with new growth, a general override may be needed.

“Simply put, Marblehead’s recurring general fund operating expenses have been growing at a rate that exceeds the allowable increases in property tax revenue under Proposition 2½, leading to a structural deficit,” said Alec Goolsby, chair of the Finance Committee. “An increase in new growth levels would be beneficial in mitigating or potentially eliminating the annual deficit.”

However, he acknowledged the challenges in achieving this given Marblehead’s limited commercial activity and built-out residential areas.

“In the absence of an operating budget override being placed on the warrant and successfully approved at both Town Meeting and the ballot box, if the overall annual property tax revenue increases continue to remain around 3% annually (consistent with the new growth levels captured in recent years), I anticipate further reductions in services in the future,” he said.

The work ahead

Recognizing the urgency of the situation, town officials are pursuing a multi-pronged approach to address the new growth shortfall.

“One, ensure we’re capturing everything that is already happening,” Kezer outlined the town’s priorities. “Two, find ways to encourage more positive development for the community. And I say positive meaning it fits the character of the community.”

The challenge also lies in finding development opportunities that complement the town’s historic character while expanding the tax base. Kezer outlined potential strategies for balanced development.

Benjamin added that the town has a new Planning and Community Development to “focus on economic growth and smart growth to support Marblehead’s future.” This new department is expected to play a crucial role in identifying and implementing strategies to boost new growth while preserving the town’s character.

For now, Grader emphasized the importance of execution and the town’s limited options.

“With the constraints presented by density, a small commercial sector and limited options for subdivisions, condominiums and other growth,” he said, “the lowest hanging fruit is to capture available growth accurately and completely.”

Leigh Blander contributed reporting.