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This information is intended to provide the public with a better understanding of how the tax rate is set. A municipality’s tax rate is the amount of its annual property tax levy stated in terms of a unit of its tax base. It represents the amount per $1,000 of assessed valuation of taxable real and personal property that will generate the property tax levy for the year.
To set a tax rate, a municipality must submit a “Tax Rate Recapitulation Sheet” (the “recap”) to the Bureau of Accounts (BOA) in the Division of Local Services (DLS) in the Department of Revenue (DOR). The recap displays a municipality's entire budget plan for the fiscal year. It summarizes all anticipated expenditures. Expenditures include appropriations voted by the legislative body since the previous year's tax rate was set and other expenses that must be funded. Anticipated and actual sources of revenue other than property taxes, such as state aid, local non-tax revenues and reserves, are also identified. The difference between the expenditures and revenue from these sources must be raised through property taxes. This difference is the tax levy.
Tax rates are approved by DOR. This approval ensures that municipalities have balanced budgets and tax levies within the limits set by Proposition 2½.
BEFORE SETTING THE TAX RATE
Before the tax rate can be set, the municipality must (1) determine the maximum amount it can levy under Proposition 2½, (2) establish final values for all taxable real and personal property and (3) decide its property tax policy. Each of these actions is documented in forms that must be submitted to and approved by DOR.
CLASSIFICATION HEARING
The Town Council must hold a public hearing each year to consider the tax rate options available to the municipality under property tax classification. The hearing is held after the assessors have determined final values and classified all properties and approved by DOR. These values set parameters for the options the municipality may adopt. These tax levy-shifting tools will not change the overall tax levy or money that will be raised through property taxes; rather they allow the town to shift portions of the tax levy between classes of property and/or between property owners within certain property classes.
This public hearing shall comply with the requirements of the “Open Meeting Law”, and any local charter, by-law or ordinance provisions. In addition, local officials must provide notice of the hearing to all taxpayers by comprehensive public information released in a newspaper of general circulation in the community, as well as in any other appropriate news media. This release should provide information regarding the policy decisions available and should indicate how interested taxpayers may present oral or written information on their views.
When providing notice and when conducting the public hearing, local officials shall further the legislative intent to provide an open forum for the discussion of local property tax policy.
The assessors provide the council with the information necessary to make classifications decisions. This information should show the impact on the tax rate of the available tax policy options.
The Town Council conducts the classification hearing and votes on the available tax rate options. The vote may be taken at the hearing or a later meeting.
TAX POLICY DECISIONS
Municipalities have several options in distributing the tax levy among taxpayers under property tax classification. Use of these options results in multiple tax rates for different property classes because they change the components used to calculate the rate, i.e., the assessed valuation of or the amount of the tax levy being paid, by the class. The total tax levy remains the same.
SINGLE OR SPLIT RATE
Municipalities must decide whether to:
- Tax all classes of property at their full and fair cash valuation share of the tax levy, which results in a single tax rate
- Reduce the share of the tax levy paid by the residential and open space property owners and shift those taxes to commercial, industrial and personal property taxpayers, which results in a split tax rate.
CLASSIFICATION EXEMPTION OPTIONS
Municipalities may also consider whether to allow:
- An open space discount
- A residential exemption
- A small commercial exemption
SELECTION OF A RESIDENTIAL FACTOR
Town council must decide the percentages of the tax levy each class of real property and personal property will bear each year. To do so a residential factor is adopted. The residential factor governs the percentage of the tax levy to be paid by Class One: Residential and Class Two: Open Space properties. The difference is shifted to Class Three: Commercial, Class Four: Industrial and Personal properties. The adopted factor cannot be less than the minimum residential factor (MRF) calculated by the DOR. The MRF represents the maximum shift allowed in the tax levy for the year and establishes parameters for local decision-making.
The residential factor commonly referred to as the “Split Tax Rate” allows the Town Council to adopt different residential factors which ultimately determines the tax rates: one for residential property owners and one for commercial, industrial and personal property owners. If a factor of “1” was adopted, the tax rate would be the same for all classes. This rate is determined by dividing the tax levy by the total value of all taxable property in Bridgewater and then multiplying that result by 1000.
Please take a look at our 2026 Tax Classification Hearing Presentation
given year. The levy limit is based on the previous year's limit plus allowable increases.
These allowable increases include the annual 2½ percent increase, new growth and overrides.
The levy limit will always be below or at most equal to, the levy ceiling of 2½ percent of the
total full and fair cash value of the community's taxable real and personal property. A
community may also levy above the levy limit or ceiling through an exclusion.
levy limit above the community's levy ceiling. The levy ceiling is equal to 2½ percent of the
full and fair cash value of all taxable property in the community. When an override is passed
the levy limit for the year is calculated by including the amount of the override. The override
results in a permanent increase in the levy limit of the community. Overrides require a
majority vote of approval by the electorate. A community can also assess taxes in excess of
its levy limit or levy ceiling for the payment of certain capital projects and for the payment of
specified debt service costs called exclusions. An exclusion for the purpose of raising funds
for debt service costs is referred to as a debt exclusion, and an exclusion for the purpose of
raising funds for capital project costs is referred to as a capital outlay expenditure exclusion.
Both exclusions require voter approval with very limited exceptions. Unlike overrides,
exclusions do not become part of the base upon which the levy limit is calculated for future
years.
A majority vote of a community’s selectmen, or town or city council (with the mayor’s approval if required by law) allows an underride question to be placed on the ballot. An underride question may also be placed on the ballot by the people using a local initiative procedure, if one is provided by law. Underride questions must state a dollar amount and require a majority vote of approval by the electorate.
amount needed to be raised by taxation, and property assessments reflecting full and fair market value are finalized. The actual rate formula is the total levy divided by the total property value multiplied by 1,000.
by taxes, (2) property assessments decrease (market values decline), (3) overrides or
exclusions are passed, (4) new growth is added, (5) unused levy capacity from the previous
year is used in the current year, (6) decreases are made in the prior year tax base through the
abatement process.
By setting a timely tax rate the municipality can generate timely bills and improve the cash
flow in the community. Also, if the community does not send out tax bills in a timely
fashion, it can jeopardize its cash flow position. It may be forced to borrow, resulting in
unnecessary debt service. If it bills semiannually and elects to send out an estimated
preliminary bill, there are extra expenses generated from such bill processing.
tax burden from one class of property to another. A public hearing is called by the Town Council.
It must be held after the assessors have finalized assessments for the year and
before the tax rate can be set. Options presented include reallocating some of the tax
obligation (l) from the Residential and Open Space classes to the Commercial, Industrial,
Personal Property classes; (2) from Open Space to Residential; (3) within the Residential
class, to non-domiciled owners, and (4) within the Commercial and Industrial classes, to
more expensive properties with larger commercial businesses. Adopting one or more of
these choices result in multiple tax rate(s) for the community.
can vote on allocating the tax burden. This is required so that the minimum and maximum allowable
shifts can be accurately calculated, and the implication of the vote can be considered.
These are: Residential (R), Open Space (O), Commercial (C), Industrial (I), Personal
Property (P). The term “split” tax rate usually is used to refer to having two tax rates that
shift some of the tax burden from Residential and Open Space to Commercial, Industrial and
Personal Property classes. Under a single tax rate system, if residential and open space property
assessments are 80% of total value, then 80% of tax levy would come from the R and O classes (and 20% from the CIP). By “splitting” the tax rate, the law allows a city or town to increase the levy share raised from the CIP as much as 50% to reduce the tax burden on R and O. In this example then, the maximum shift allowed would result in 30% of the taxes being paid by the CIP classes, and 70% by R and O.
for the overlay. The amount of estimated receipts is determined by the official(s) responsible
for estimating receipts for budget purposes. Both amounts should be set with a great deal of
input from the other members of the financial team. The overlay is an amount raised to cover
abatements and exemptions granted by the assessors. An overlay worksheet, the OL-1, must accompany the tax recap submission. This form summarizes a 3-year history of this account. A reasonable projection for next year can be based on this information. Additional issues to be addressed include such factors as changes in laws governing abatements and exemptions, changes in demographics, in the economy, in assessment systems, as well as the stability of real estate values. Money in the overlay account that is not/will not be needed may be declared surplus. Estimated receipts projections are usually based on the previous year's actual revenues as certified by the accountant. To this information is added the financial team’s knowledge of relevant changes which may occur in the next year, such as one-time settlements, a change in fee structures, the rescheduling of data releases from the registry of motor vehicles, etc.
made without appropriation or to cover deficits. They are listed on page two of the recap and
include debt service payments, final court judgments, snow and ice removal deficits, state
and county charges, Cherry Sheet offset items, overlay allowance for abatement and exemptions, prior years’ overlay deficits and revenue deficits.
capacity to levy to the limit in future years. Before the tax rate is set, the full amount of the
levy limit is always available to the community, regardless of how much it chose to use in
previous years. Proposition 2½ allows a community to have excess levy capacity in one year
(i.e., not levy to its limit) and in the following year, to levy right up to the full amount of its
new limit. This increase results in an overall levy increase greater than 2½ percent.
Second, divide the result by the number of single-family parcels to obtain the average single-family value. Finally, multiply the average single-family value by the residential tax rate and divide the result by 1,000 to obtain the average single-family tax bill.
money to raise through taxation. Because Proposition 2½ regulates the levy limit rather than
the actual amount levied, taxpayers' bills may increase more than 2½ percent in a given year.
These increases often occur when in one year the community decides not to levy to its limit
and then in the following year levies right up to its limit. Also, new growth, voted overrides
and exclusions can all increase the amount levied. In addition, an individual tax bill may increase more than 2½ percent because of property revaluation. This increase may reflect an increased assessment due to new construction or a change in the real estate market that results in some properties increasing in value while others decrease.