Posted on Saturday, 11th June 2011 by Blake James

The total worth of Boston’s taxable properties declined for the second straight year, though the drop was less than 1 percent and was mitigated by significant growth in the condominium markets and increased value of some office towers, according to a new study.

The city’s taxable property was $86.8 billion in the current fiscal year, a .5 percent drop from the previous year. In the 2010 fiscal year, the city’s taxable property values dropped by 3.5 percent.

The report from the Boston Municipal Research Bureau, a fiscal watchdog group funded by the city’s top businesses and nonprofits, provides mixed signals for those eager to see a city in economic revival.

On the downside, the report found a 2.2 percent drop in the total value of two- and three-family homes, an indicator of the ongoing foreclosure crisis. The total value of Boston’s business properties, including commercial buildings and industrial plants and equipment, also declined by 2.4 percent.

However, during the past year, the total value of all condominiums went up by 3.6 percent, largely because of a notable rise in the number of luxury condominium units in the Seaport and downtown districts, as well as continuing conversions of rental apartments into condo units. The expanding condo market meant total residential values citywide grew by .5 percent.

And while the total value of 50 tower buildings dropped 5.7 percent in the past fiscal year — leading the way were 99 Summer St. (down 15.4 percent) and 150 Federal St. (down 12.4 percent) — some relatively new office buildings gained taxable value. For instance, 1 Marina Park at Fan Pier and Atlantic Wharf, also known as Russia Wharf, together added $123.4 million in new value.

Samuel Tyler, the longtime president of the research bureau, said he found the study’s results a basis for cautious optimism.

“Given the economic climate, these results are not surprising,’’ he said. “But it also shows the importance of new growth.’’

The study offers a sobering reminder that city revenues are deeply tied to property values but is not meant as a snapshot of today’s market. Tax rolls are based on data collected roughly a year earlier; this report on the current fiscal year, which ends June 30, is based on values determined in January 2010.

The president of the Boston City Council, Stephen Murphy, said the study contains a number of encouraging signs, particularly in waterfront development. Both he and Tyler cited the recent decision by the Cambridge-based pharmaceutical company, Vertex, to relocate to Boston’s Fan Pier section.

“That’s the frontier,’’ Murphy said. “That’s the key to our financial viability.’’

The report offered a five-year retrospective of the tax rolls that was more uplifting: Since fiscal year 2006, residential property values climbed from $50.7 billion to $56.6 billion, a rise of 11.6 percent. And business property values rose from $24 billion to $30.2 billion, an increase of 25.7 percent.

Boston residents have much at stake with these fluctuating levels.

The city stands out among major urban areas in relying heavily on these taxes for its operating revenue: In the last fiscal year, 62.3 percent of the city’s operating income came from property taxes. Also, in Boston more than half of the land is off the tax rolls because it is the property of state and city governments or of the many tax-exempt institutions, such as major hospitals and universities.

Stephen Kidder, a taxation lawyer who headed a mayoral task force that proposed a uniform system by which Boston’s tax-exempt groups would contribute more cash and services to the city, said the latest figures from the research bureau show that Boston needs to establish alternate sources of revenue.

“It reinforces the challenge for the city when 52 percent of the real property is tax-exempt,’’ he said. “The burden falls on the 48 percent.’’

To help cover the cost of city services, Boston residential and business property taxpayers faced tax increases in fiscal 2011.

The residential tax rate is $12.79 per thousand dollars of value, an increase of 7.7 percent from the previous fiscal year. The average tax bill for a single-family home in Boston is $3,155 for fiscal 2011, a $220 increase.

For businesses, the tax rate is $31.04, an increase of 5.7 percent from the year before. This higher rate also accounts for a greater share of taxes paid to the city: Businesses represent 35 percent of the taxable value in the city, but pay 61 percent of the tax levy, according to the bureau’s report.

Kidder, who formerly worked as the state revenue commissioner, cautioned that the city’s economic recovery is likely to be very gradual, with uplifting figures offset by cautionary facts.

The bureau’s report, for instance, reveals one bright spot in the $829.3 million, or 3.6 percent, increase in the value of the total residential condo market. However, excluding condo values, total residential property values dropped by $545.1 million, or 1.6 percent. Total value of single-family homes declined .1 percent.

“It will take a few years for the rebound to occur in any meaningful fashion,’’ he said.

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