WILLIAMSTOWN, Mass. – Developer Michael Deep might be overestimating the tax benefits to the town of his proposed 120-dwelling-unit “country inn” proposal at the Waubeeka Golf Links, data from the town and the Williams Inn suggest. But it's hard to be sure because the developer has so far not provided information to the public about his calculations.
In advertisements on Facebook and the Time Warner cable system, and in written materials, Deep has asserted that “an estimated $500,000 per year in local tax revenue will be generated when the new facility is in operation.”
As a benchmark, the 128-room Williams Inn paid $64,388.92 in real-estate and personal property taxes in the last full reported tax year, according to figures provided to GreylockNews.com by Town Manager Jason Hoch. Those figures are based upon an assess value of $3,524,100 for the inn property.
The Williams Inn most recently paid $120,000-a-year in room taxes and $9,000 in food-and-beverage taxes to the state, according to Carl T. Faulkner, who co-owned and ran with his wife the Williams Inn until their retirement and sale to Williams College last year.
While there have been estimates from Deep that his project might cost $45 million, it’s not clear that figure would have the most significant bearing on the property taxes it pays, town officials say. More critical is its business success.
Williamstown assesses hotels and motels based on industry-standard methodology knows as the income-capitalization approach, according to Town Assessor William Barkin. “Which takes a property’s net income before debt service and converts it into an indicator of value.” (a complete description from Barkin of the method appears at the bottom of this blog post)
Given their similar size, and presuming similar levels of success, a Waubeeka project of the size suggested by Deep would pay a total of less than $200,000 in taxes on an apples-to-apples basis with the Williams Inn – and a percentage of the room taxes are retained by the state.
Deep and his attorney have not responded to a request for detail about methodology or assumptions for the $500,000 estimate. However, Deep is scheduled to appear May 9 before the Williamstown Finance Committee to explain the proposed project’s economic impact.
COMPARISON TO WILLIAMS COLLEGE PROPOSAL
Last week, Williams College official James Kolesar circulated to the public a “Q&A on the Williams Inn Project” – the college’s proposal to raze the current inn after constructing a new, 60-100-room hotel at the base of Spring Street. In his Q&A, Kolesar said “we estimate that the net effect will be an annual addition of $60,000 in property tax and another $50,000 in room tax, bring the net effect of the Williams Inn to approximately $125,000 a year in property taxes and approximately $260,000 a year in room and meal taxes (a portion of which goes to the state).
Here is the rest of assessor Barkin’s explanation of valuing hotels, as provided to GreylockNews.com:
“Briefly put, the appraisal consists of first ascertaining the potential gross income from all sources then subtracting out income loss due to vacancy; then all expenses, to arrive at a net operating income. This net operating figure is then divided by a mathematical factor known as the Capitalization Rate, which is the weighted cost of the invested capital that takes the form of mortgage debt and equity. The resulting figure is the estimate of value.
“For property tax purposes in Williamstown, all hotel/motel reported income and expense data is analyzed to produce an equalized “rate” schedule which is then applied to all of the hospitality properties. Individual business enterprise value or “good will” is eliminated from the analysis. This methodology preserves uniformity and consistency when assessing “like” properties. Thus, the town does not subsidizes establishments for poor management nor penalize those with superior management."