By Mike Kane, Economic Development & Public Policy Associate

Each year, the Worcester City Council faces a pivotal decision this budget season: continue an unsustainable tax trend that strains residents and businesses alike, or take decisive action to secure Worcester’s long-term economic future. The Worcester Regional Chamber of Commerce is urging the Council to continue narrowing the gap between residential and commercial property tax rates. We argue that a fairer tax structure isn’t simply “pro-business,” but essential to sustaining Worcester’s future growth and fiscal health.

For four decades, Worcester’s dual tax classification system, established in 1984 to shift more of the tax burden onto commercial and industrial properties, has produced the opposite effect of its original intent. At the time, those properties accounted for about 35 percent of the city’s total assessed value and nearly 46 percent of all property taxes. Today, they represent just 21 percent of total value and roughly 37 percent of property taxes, while the burden on homeowners has steadily increased.

The imbalance has made Worcester one of the most heavily taxed commercial markets in Massachusetts. For fiscal year 2025, the residential rate is $13.19 per $1,000 of assessed value, compared to $28.61 for commercial and industrial parcels. This wide gap discourages investment, redirects development to neighboring towns, and constrains opportunities for Worcester residents and workers.

The economic impact of this disparity is not theoretical; it’s visible across Worcester’s neighborhoods. Developers frequently cite the city’s high commercial rate as a reason for building in nearby communities that have a single, lower tax rate. This has tangible consequences:

Fewer Neighborhood Amenities: Grocery stores and other essential services are locating outside city limits. For instance, the property owner of the new Market Basket in Shrewsbury saves more than $220,000 annually thanks to that town’s single tax rate of $12.04 per $1,000.

Lost Hospitality Revenue: The absence of full-service hotels in Worcester limits the city’s ability to host major events such as NCAA basketball tournaments. Comparable cities have seen as much as $4 million in economic impact from such events, revenue that could otherwise boost local businesses and jobs.

Pressure on Small Businesses: Many Worcester entrepreneurs operate under triple-net leases, a commercial lease, where the lessee pays rent and utilities as well as the three other types of property expenses, insurance, maintenance, and taxes. Thus, any increase in property taxes is passed directly to them.

Manufacturing Disincentives: Manufacturers are doubly taxed, once on property, again on equipment, making relocation increasingly attractive.

A fairer tax structure would not represent a break for businesses but an investment in Worcester’s overall fiscal stability. Expanding the commercial tax base would help stabilize the city’s $893 million budget by distributing the levy more evenly, reducing volatility, and easing pressure on residential taxpayers. A stronger commercial sector also supports local employment, enhances neighborhood amenities, and generates new economic activity that benefits every resident.

Gradually narrowing the tax differential would align Worcester with peer communities that have already recognized the benefits of reform. Auburn and Clinton, among others, have begun reducing their disparities to encourage reinvestment and job creation.

A more balanced system would also create pathways for local workforce participation, particularly for Worcester’s growing population of new Americans and immigrants, while enabling the city to invest in the infrastructure needed for continued growth.

The Worcester Regional Chamber of Commerce continues to advocate for a ten-year plan to narrow the tax gap between residential and commercial rates. A measured, consistent approach would provide predictability for city budgets and confidence for investors, fostering the conditions needed for shared prosperity.

Worcester’s future depends on a tax structure that rewards growth, supports residents, and strengthens the foundation for long-term fiscal health. By voting to continue reducing the tax gap, the City Council can take a decisive step toward a more competitive, equitable, and sustainable economy, one that benefits all who live and work in the Heart of the Commonwealth.