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An interview with Saugus’s Deputy Assessor, Ronald Keohan, Jr., on the challenges of determining residential and commercial property values

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~ THE ADVOCATE ASKS ~

Editor’s Note: For this week, we sat down with Deputy Assessor Ronald J. Keohan, Jr. and asked him about the interesting trends he’s seen during his 12 years working for the Town of Saugus. Keohan, 65, is a lifelong Everett resident. A 1970 graduate of Pope John High School in Everett, he served four years in the U.S. Air Force, where he reached the rank of staff sergeant. He also served two years in the Massachusetts Air National Guard. Prior to working in Saugus town government, he worked as assistant assessor for the Town of Natick for two years and eight years as administrative assessor for the City of Everett. He worked as a part-time sales representative for ERA Andrew Realty, Inc. before his career in municipal government. He also worked for 13 years for Time Electronics in Peabody. He is a past president and member of the Massachusetts Association of Assessing Officers and an instructor for the association. He is a past president of the Middlesex County Association of Assessing Officers and a past president and member of the Essex County Association of Assessing Officers. Keohan is a member of St. Pius X 4th Degree, Knights of Columbus and a Past Grand Knight and member of the Knights of Columbus, Council #97. He is also a member of Lodge of Elks BPOE #642, Life Member of Disabled American Veterans Post 51 and Life Member of the American Legion. He has served as chairman of the Everett Planning Board and as a member of that city’s Board of Assessors. A widower, Keohan is the father of three grown sons.

Some highlights of this week’s interview follow.

 

Q: Okay, what is the most challenging aspect of your job in Saugus?

A: Probably the one that generates the least revenue – the motor vehicle excise. People don’t understand, unfortunately, what is required to get an abatement. They figure, “I cancelled my plates.” But you have to dispose of the vehicle also. That’s probably the most challenging in my mind.

Q: And how many plates in Saugus?

A: We issue around 29,000 motor vehicle excise bills a year.

Q: And out of that 29,000, how many abatements are sought?

A: About 1,000 a year.

Q: What about on real estate? How many abatements did you have this year?

A: We had 123 abatement applications this year, which is in line with everything, with the exception, we had a huge increase in values this year. Percentage wise, it’s not out of whack numerically, though.

Q: What do you normally have?

A: Fifty to sixty a year.

Q: So, you had like twice the average of abatement applications.

A: Twice the average, yes – most of them people not understanding how we determine value. If people had talked to us, for the most part, we can explain to them. And they’ll be okay. They’ll say they understand and they will leave. But if they don’t, they will file an abatement application. And I try to encourage them. I tell them, “I’m going to put as much time reviewing your abatement application as you put into filling it out.” So, if you are telling me, “I’m over-assessed,” and that’s it, I’ve already read it, so that’s all the time you get. I mean, you have got to give me a reason. And every abatement application requires an inspection of the property. That’s a board rule. If I don’t inspect it, you don’t get an abatement, regardless. When I inspect it, you may still not get an abatement. But now I know my data is accurate, so the computer, when we are analyzing, is analyzing it correctly.

Q: Are those all residential, the abatement applications? What’s the mix?

A: Probably about 85 percent of them were residential.

Q: Of the 120 [abatement applications], how many of them actually get an abatement?

A: About 50 percent, which is a typical year.

Q: In most of these cases, people feel like they ...

A: Yeah, they feel they pay too much in taxes. And I tell them, “Talk to me about value. All I care about is value. What you pay in taxes has nothing to do with me. Through a statistical analysis, I determine that your house is worth this. Talk to me about that.” If you think you’re paying too much in taxes, you need to talk to the selectmen or FinCom. I don’t set the budget.”

Q: In a lot of the cases, do you get comments like “Why are the commercial properties getting such a break?”

A: Yes. All of the time we hear that. We get that question all of the time. We get all of this commercial property. “So why, when the tax rate is $25.78 commercial vs. residential, which is $12.05,” they will ask, “why they are paying so much more and there’s so much more of it [commercial property].” But, when you look at the whole town of Saugus, it’s $4.2 billion in total value. And you’re talking almost $800 million is commercial. So, it’s not nearly as much as people think. It’s about 20 to 23 percent of the total value of the town. So you pay a bigger chunk.

Q: Like some officials have been complaining, Walmart is paying a lot less this year.

A: Well, with Walmart, there was a reason. There was a mistake. When they filed their information with us to help determine value, they submitted all kinds of stuff that wasn’t relative to establishing the value. That’s why there was a mistake. It was a brand-new building. When push came to shove and they sat down with us and talked about it, we were able to figure it out. Walmart’s value this year was $22 million. The year they got an abatement because of the bad information was 2016. It was about $185,000.

Q: That’s gotta be frustrating.

A: It is. But, if I got good information – and I have to assume the information I have is correct – I feel pretty confident. You know, there are about 10,000 parcels in town. I can’t be at every parcel. Although, we have to inspect every parcel every nine years. You know, to make sure I pick up the bathroom that they didn’t pull the permit for … that kind of thing. So, yes, it can be frustrating when I don’t have good information. But, it’s not my fault. It’s because I wasn’t supplied the information. It’s commercial, mainly. If I have a problem with the value, it’s because they didn’t supply the right information. Residential, it’s a lot easier, because it’s strictly … what do single family homes in this neighborhood sell for? And you calculate it out and adjust them accordingly. And the sales is a good indication of what the market will generate in value. Commercial is a little different, because that doesn’t sell all of the time.

Q: So, in the case of Walmart, it looked like they got a big tax break, but it was because of the misinformation?

A: Misinformation that was provided us – correct – not intentionally. I told them I need to know your costs for building the building. They gave me the costs to build the building. But there were certain things that don’t affect your value. But, it wasn’t broken out, so we didn’t know that.

Q: Of the abatement applications, what was the biggest change?

A: Well, we had such a major increase in residential values, specifically. You average value went up $50,000 to $60,000 this year. That was the biggest change. People think you can’t go up more than 2 ½ percent. Well, that’s not what Proposition 2 ½ says. What Proposition 2 ½ says – that if I raised $100 million in taxes last year, I can raise $102.5 million this year. So, once I determine a value, whatever it is, I have to calculate it out for each parcel.

Q: So an average increase of $50,000 to $60,000 for residential property values – is that huge compared to typical years?

A: Compared to normal years, yes. Well, the market is crazy. Look at your own newspaper and you’ll see that there is not a lot of inventory out there. So, therefore, that drives the prices up. You are back to 2003-2004 when you had bidding wars at open houses. We’re virtually at that right now here in Saugus.

Q: Normally, what would the residential values go up?

A: About five percent. The state requires us to assess at full and fair cash value. Now, once we do our statistical analysis, we have to be between 90 percent and 110 percent of what the statistics tell us is full and fair cash value. I have never, in all of my years, gone higher than 98 percent. I am generally at 95, 96 percent of what fair market value is. And as far as I can recall during my time here in Saugus, that’s the most it’s ever gone up – five percent. There are some years when it never went up. As assessors, we have to do the statistical analysis every year, whereas, back in the early 2000s, you did it once every three years. Like, 2018 is our revaluation year. It used to be, I did it in ’15 and now I’m doing it in ’18. For both the taxpayer and the town, it’s better to do it every year. You have a better idea of what your property potentially is worth. And if the value goes up, generally, the tax rate will come down if the budget didn’t change. Like last year, our residential tax rate went down 15 cents. Values went up; therefore, something came down. But the budget also went up. If we were raising the same figure last year as we were the year before, it would have gone down a lot more.

Q: And the valuation increases last year were the biggest in the time you have been here?

A: Yes. I don’t know what 2018 isn’t going to bring yet, because I haven’t started to analyze those yet. But the market is still crazy. Not just in Saugus either. It’s crazy all over. In my hometown [Everett], it’s insane what they’re doing, value-wise. If my house were here in Saugus, it would be worth $725,000, and there’s nothing spectacular about it – updated or anything. It’s a $420,000 value [in Everett]. My average value in single family homes in Saugus is $372,000. Where would you rather live, Saugus or Everett? To me, I certainly wouldn’t pay $420,000 for it. But that’s what the market generates.

Q: So, in Saugus, home valuations went up by an average of $50,000 to $60,000.

A: Yes. Some went up more. Some went up less. But, the average was $50,000 to $60,000.

Q: So a lot of people saw a tax increase.

A: They did. We’re in fiscal ’17 now and the abatement process is over. But, yes, hypothetically, the vast majority of people probably did see a substantial increase in their tax bill.

Q: How many properties are being inspected every year?

A: After this reval (2018), it will be 1,000 properties per year, which is the ongoing program – plus all building permits and all abatements. You could have probably 1,500 inspections a year, including permits and everything.

Q: So, how many people involved in inspecting the 1,500?

A: The 1,000 is Patriot Properties. Permits and everything for occupancies, that’s me. So, they’re [Patriot Properties] doing a thousand. And I’m doing 400 to 500.

Q: So, the revaluation begins in [fiscal] 2018.

A: Right. It starts July 1.

Q: How often will it be after that?

A: Five years. As co-chairman of the legislative committee for the assessors association, we pushed for five years. It used to be three years. But assessors are doing a better job because they are doing statistics and they are better educated. We’re better professionals than we were 10 to 15 years ago. So, we pushed and we got it to five years. So, the next one won’t be until 2023. And I’ll be retired then.

Q: How many years do you have left?

A: I am planning on two. I’ll stay through the abatements for fiscal ’19. I wouldn’t leave the town in the middle of something like that – so, roughly, June of ’19.

Q: What’s the most significant trend that you have seen during your time in Saugus?

A: A lot of people buying old beat-up homes and gutting them. A lot of people. And in a lot of cases, I would attribute that to where the zoning was changed a number of years ago, where you need 23,000 square feet for a buildable lot. If you got a house and redo what’s there, you can still build on that lot. And land is at a premium, I don’t care where you go. Not every lot can be 23,000 square feet. So, the big trend – I would say people buying and gutting – and doing great jobs, generating a nice value, which ultimately generates a nice tax bill.

Q: What about on the commercial side, any trends?

A: Route 1 is insane right now. They rezoned Route 1 so you can build residential and commercial together. The Hilltop as well as the miniature golf course: Two huge developments that are going to be mixed-use – partially commercial, partially residential. That’s a real, moving trend across the state.

Q: How long before the town feels the impact of what’s going on on Route 1?

A: The miniature golf, we’ve started to see because they started to pull permits. We’ve started to see revenues come in. As far as tax dollars, I would say, it will be about two years. You’ve got 250 hotel rooms. You’ve got roughly 250 apartment buildings, apartments plus the retail, and it’s basically the same up at the Hilltop. So I would say roughly two years. But we’ve already started to see dollars come in for building permits, which is pretty substantial, when you’re talking projects the size of $70 million to build.

Q: Any other trends you see on Route 1?

A: I hear Sears might be going out. That’s a parcel all its own. People think Macy’s, Sears and the mall is all one, but that’s three separate parcels – Sears, Macy’s and then the mall.

One trend: Restaurants come and go on Route 1 like crazy. I don’t know why, because there are some good restaurants. It’s the unsettling. Why does somebody open, and unfortunately, six to eight months or a few years later, they close up? Maybe on their part, they grew too fast. When you have a little restaurant and the quality of food is excellent and you sit 20 to 25 people, and, all of a sudden, you’ve got a place where you can sit 200. Something normally would suffer. And you have to assume that maybe the quality suffers a little. That’s a guess on my part.

Q: Have you done any analysis on that?

A: Just my experience through the years. I’ve got enough to do without charting losses. What goes away, I don’t chart that. Thank God I have never been asked to chart that. That would be a tough one to chart. It’s tough enough when they ask you to make projections going forward. But math is math.

Q: Any interesting projections that you are doing now?

A: Not really that I can say. There are a lot of projections going on, things that I’m not at liberty to talk about yet – not until the town manager releases it.

Q: So, on Route 1, we can expect to see it begin to impact the town as far as new revenues, in two to three years.

A: I would say you will see some substantial impact in two years. You’ve got the dinosaur. You’ve got the Hilltop. You got the Walmart. There’s another hotel going up there. There’s supposedly another one [hotel] going up where Weylu’s used to be. I don’t know how that is going to impact us yet because that’s part Revere and part Saugus. There’s probably $250 million to $300 million of construction going on if not more – right now – on Route 1. And that’s just with numbers that I know. It could be even higher than that.

Q: And that’s revenue for the town.

A: Yeah. And that kind of revenue – the more value you have on the commercial – gives you more revenue on the commercial side. But, it also helps to defray residential [taxes].

Q: Soften the tax bite for residents.

A: That’s right.

Q: So, do you perceive like in a couple of years that the property taxes will decrease?

A: You should see it soften. Yeah, it should. We’re the cheapest residential rate around, right now. When I do our hearing with the selectmen to establish the tax rate, you’ll see that.

Q: Next year or the year after?

A: You may start to see some this year. But you will see a lot more next year or the year after. For instance, the dinosaur, for example. There’s a structure up there. There’s going to be a big restaurant, a pizza place, Kane’s Donuts and 40 apartments.That building is under construction now. That would start. Come July 1, we’d make a determination. Okay, it’s 10 percent complete or whatever. And we’d start taxing.

Q: What’s been the biggest change since you began in Saugus?

A: I would say that the administration is much more friendly to work with, on the commercial side as well as the residential side. He [the town manager] seems to be more receptive. He might not agree with you, but he listens. That’s a huge change – when people feel they can ask a question. I’ve been in places where you ask a question and you never get an answer.

Q: You have a better working relationship with this administration compared to previous ones?

A: Absolutely. Much better – about 110 percent better – with this guy [Town Manager Scott Crabtree].

Q: Anything else that you would like to talk about?

A: The majority of things in this office is public information. Anybody can ask for it. But abatement applications are not public information, be it real estate, personal property or motor vehicle. Those are not. Information that the commercial people supply us to help determine a value – that is not public information. But, what are all the values? That’s all public information. What did we generate for taxes? Can you break it down? What did we generate for motor vehicle excise taxes or real estate? How much did you generate in residential vs. the commercial? All that. That’s all public information. That’s the good part. A majority of it is public information and I have to give it out. People will always ask once we finish the abatement period, “Who got abatements and who didn’t?” Well, I’m not quite finished on that. I’m still waiting for a few to finalize everything. Everything in this office is governed by state law.

Q: What was the biggest residential abatement that was given this year?

A: So far, it’s probably like 2,000 tax dollars. Our abatements in the office are complete. We’re waiting for taxpayers to accept offers. And from the day we voted for the offer, they’ve got 90 days to have us revisit it or whatever. Then, they have 90 days to appeal it to Boston. So, hypothetically, my process is done. But I have potentially 90 days to revisit with somebody who didn’t like their abatement or whatever. And, on the 91st day, I have to stop negotiating and then they have 90 days to file with the Appellate Tax Board. Once they file with the Appellate Tax Board, I can negotiate. We just finished with Verizon. There’s the biggest abatement that was granted this year: 130,000 in tax dollars. If it had gone the way it looked like it was going at the Appellate Tax Board, it was going to cost the town $1.1 million plus interest. Negotiating over the past year, we’ve given $130,000 back and no interest. And it’s done. So, I saved the town over $900,000. Just tax dollars. God only knows what the interest would be.

Q: Anything else that you would like to share as far as public education?

A: Unfortunately, people don’t understand how we determine values or how we determine assessments. If they don’t know or aren’t sure, call us. Call us so we can explain it. I teach it so much, I can explain it so a young kid can understand it. If you don’t ask, shame on you.

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