In Worcester, many people say it’s been hard to shop for groceries since several supermarkets closed. While city leaders respond that they’re trying to attract new grocery stores, business leaders and community advocates believe one factor works against those efforts: the city’s tax rate.
Worcester, New England’s second-largest city, taxes commercial properties $28.61 per $1,000 of assessed value. It’s more than double the rate of other communities in Central Massachusetts, and one of the highest in the state, exceeding rates in other large cities like Boston and Cambridge. Worcester city leaders have long kept the commercial tax relatively high in order to charge less in residential taxes.
During a vote Tuesday, the Worcester City Council continued that practice, setting the commercial rate for next year at $29.06. Councilors made the decision despite longstanding criticism that the city’s tax rate makes it too expensive for businesses like supermarkets to operate.
“Worcester has got a lot of things that benefit it and a lot of assets,” said Tim Murray, CEO of the Worcester Regional Chamber of Commerce. Still, he said the best way to attract companies is “to have an environment that’s user-friendly to businesses, to try to eliminate impediments.”
Serving Worcester residents without paying the tax rate
Even though some grocery stores have opened in recent years — like a Seabra Foods this summer — others have closed.
The loss of a Price Chopper on Cambridge Street and Stop & Shop in the Lincoln Village neighborhood have been especially detrimental. With no full-service supermarkets in those parts of the city, many residents who don’t own cars say they’ve been relying on family or community support, expensive Uber rides or long bus trips to find fresh bread, vegetables and seafood.
Where do some shoppers go? Across the border to the town of Shrewsbury, where the tax rate is less than half the rate of Worcester’s. There’s a Whole Foods, Market Basket and Trader Joe’s all clustered within about a mile of Worcester — none of the stores have locations in the city.
“I go to Trader Joe’s,” said Marie Nelson Tide, who lives around Lincoln Village in Worcester and rides the bus to go shopping. “They have good stuff and they are not expensive.”
Shrewsbury’s population is less than a quarter of Worcester’s. Shrewsbury Town Manager Kevin Mizikar said the community has attracted a variety of grocery stores partially because its proximity to Worcester allows them to serve many of the city’s residents without having to spend as much on taxes.
“Having a low tax rate definitely puts Shrewsbury at a distinct advantage because the less that [the stores are] paying in property taxes, the more opportunities they have to invest in other parts of their business,” Mizikar said.
Of course, taxes aren’t the only consideration. Mizikar and Murray noted that other factors also affect a supermarket’s decision whether to open a store — namely, the population density, income levels and car traffic around the proposed location for the store. The recent store closures in Worcester also aren’t unique. Supermarkets have been shuttering locations across the country amid economic uncertainty and more online shopping.
Still if the Trader Joe’s, Whole Foods or Market Basket in Shrewsbury operated in Worcester, their tax liabilities would be more than double what they pay now — a difference of hundreds of thousands of dollars.
“It’s not surprising,” Murray said. “Any entity doing their due diligence, doing their pro forma, crunching their numbers, that comes up.” He and other community advocates added that stores that do operate in Worcester could have to keep prices higher than they would otherwise to help cover the taxes.
Market Basket, Trader Joe’s and Whole Foods did not respond to questions from GBH News about why they don’t have locations in Worcester and whether taxes are a factor. The city of Worcester also declined interviews with GBH. But in an email, Worcester Chief Development Officer Peter Dunn agreed “a lower commercial tax rate would be more attractive to businesses.”
Possible ways around the high tax rate
Pushback against Worcester’s commercial tax rate is nothing new. The chamber of commerce has long argued that businesses are fleeing the city for other communities because the rate is too high.
Part of the dilemma for Worcester leaders is that if they significantly lower the rate for businesses, they would have to raise the residential rate to make up the difference. That’s politically risky with many residents already struggling to afford housing, and homelessness on the rise.
The city calculates tax liability by multiplying the tax rate by the assessed value of the property. Thanks in part to increasing property values, the Worcester City Council has been able to subtly lower the commercial rate in recent years without increasing the residential one.
But on Tuesday, councilors voted to raise both the residential and commercial tax rates to make up for increasing municipal expenses and shortfalls in state and federal financial assistance. The new rates mean residential property owners will pay an average of $5,446 in taxes and business owners will pay $37,602. Mayor Joseph Petty told councilors at the meeting he had concerns about how the rate increases would impact businesses.
“It’s important that we look at ways to bring down some of these rates [in the future],” he said. “We want to compete. We have to take this seriously. Because why not go to Auburn, why not go to Shrewsbury, why not go to Fitchburg and invest there?”
Despite the high tax rate, Worcester business leaders and community advocates say there are ways to expand access to grocery stores around the city.
For example, City Manager Eric Batista’s office says it’s in talks with a city resident who wants to open a new nonprofit, discount grocery store called Giving Grocer. That’s welcome news to Casey Burns, who directs Healthy Greater Worcester, a coalition of organizations helping the city address the shortage of markets. Burns said an advantage of a nonprofit-operated market is that nonprofits are exempt from paying property taxes and can therefore charge less for groceries.
Another option is for the city to offer tax breaks to supermarket operators that open a new store in Worcester. City officials have done something similar for housing developers as part of their tax increment financing, or TIF, program. But Dunn said the city usually does not offer TIFs to supermarkets partially because the policy requires that beneficiaries offer full-time, livable wage jobs.
“And certain supermarkets have a significant number of part-time jobs and minimum wage jobs,” Dunn said. “If the City was to consider a TIF for a supermarket or grocer, it would have to be the right type of employer and company.”
Still, business and food accessibility advocates stress that Worcester must do more to help grocery store operators manage costs. Otherwise they could experience what Lynn Cheney went through.
Cheney used to own the Worcester market Maker to Main. She wanted to open the store in Worcester because she lives in the city and thought residents would appreciate it.
Other towns wanted the store too, and even offered her a lot more financial help than Worcester to open it. But after a few years in operation, she closed the market because she couldn’t keep up with expenses, including taxes. Now, she questions her decision to turn down the other offers.
“In retrospect, I should have reconsidered some of that since I’m no longer in business,” Cheney said.
